Brushing aside pleas for delay, the State Liquor & Lottery Commission voted 3-2 Tuesday to press ahead with plans to hike the price of 770 low-end liquors this fall.
Hardest hit in terms of percentage are the cheapest 50-milliliter bottles of spirits known as nips, which will see their price tags go up from 99 cents to $1.49 on Oct. 1.
“By any name, folks, that’s known as price gouging,” said Gerry Reid, a former director of the Bureau of Alcoholic Beverages and Lottery Operations who now works for the Sazerac Co., a Louisiana-based firm that owns a bottling plant in Lewiston that churns out many of the nips sold in Maine.
It is unclear whether the price increases pushed through over Sazerac’s strong objection will have any impact on the company’s plans for a $1 million expansion and creating another 30 jobs at its 126-employee facility.
For Dolly Bois of M.S. Walker, a liquor supplier, the price hikes, which are intended to bring in more profits for state coffers, are “a regressive tax” that will slam those least able to afford to pay more.
“A dollar means something to these people,” she told commissioners.
Edmond Bearor, an attorney for Sazerac, said the new price for nips basically imposes a 50 percent tax “on the members of our population who can least afford that.”
But Gregory Mineo, director of BABLO, said the state has to take steps to ensure profits rise along with sales, something that hasn’t been happening since a broad new pricing arrangement took effect in Feb. 2016.
Mineo said value brands make up about half the overall sales, but only bring in a third of the profits the state has earmarked to pay back bonds sold three years ago to cover Maine’s debts to hospitals.
“We’re just not making the profits on the value brands,” he said.
Reid said, though, an across-the-board hike would be more equitable because it would require all liquor buyers to help raise additional revenue instead of only low-end consumers.
He said a 50 percent increase in the cheapest liquor options — the 99-cent nips — ought to bring gasps rather than support.
Sazerac warned that hiking prices will lead consumers to switch to wine or beer. Others will simply go to New Hampshire to pay less, its representatives said.
Mineo said that isn’t likely.
“We don’t anticipate much of a loss at all,” he said.
Randy Barnhart, vice president of Southern Glazer’s Wine and Spirits of New England, said Maine already has the highest taxes on distilled spirits in the region and also socks consumers for sales taxes and deposits.
He said he’s concerned that raising prices “will have the unintended consequence of giving back the gains” that Maine has made in the last several years in its bid to become more competitive with neighboring New Hampshire.
Under the new pricing, 258 nips will see 50 percent price hikes. Another 512 products will see increases ranging from 20 cents to $1.
One of the reasons Mineo sought to push the price of nips higher is that they now cost less per milliliter than larger sizes. He said it is “just common business sense” that the price per milliliter should be cheaper as the volume of the bottle rises.
Mineo said he opted not to raise the price of anything more than $1, but indicated that many value bottles that would have seen larger increases may wind up costing more in the future.
He said he capped the hike for about 400 items “as a concession so we can move forward with this” since most suppliers and brokers were willing to live with a relatively small hike. The decision sliced about $2 million off the anticipated profits from raising prices more, Mineo said.
Sazerac complained that officials ignored better options.
Reid said raking in so much money from those buying the cheapest spirits available is “far beyond justified.”
In July, the state saw sales go up by 6.5 percent — more than $1 million above last year’s tally for the same month.
It’s up 8.9 percent during the past three months, with Oxford, Androscoggin and York counties all posting double-digit sales gains, thanks mostly to a growing number of retailers. Patricia Rice, a liquor board member, said a lot of the growth officials have seen is the result of a larger pipeline for reaching customers. One new Rooper’s outlet alone accounted for an additional 1,294 cases sold, Mineo said.
The growing sales highlight the lagging profits, however.
The July sales numbers were 107 percent of the budgeted figure, Mineo said, but state profits on them only reached 97 percent of what the spending plan called for.
It’s the relatively flat growth in profits that Mineo said spurred consideration of how best to bring in more money.
He said that after analyzing options and talking extensively with people in the business, including Sazerac’s president, the bureau settled on a new pricing arrangement for a newly expanded value category whose offerings have lagged furthest behind in producing profits.
Mineo said the state could not wait to take action. “We don’t have the luxury of time,” he said.
Two of the commissioners voted against imposing the suggested price hikes — Julie Sheehan and Betsy Fitzgerald. But the rest of the five-person panel backed Mineo’s position.