Cocktails & Spirits

Economics of the liquor trade


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Cocktails & Spirits 1

Economics of the liquor trade

ravchaz | May 8, 2009 02:00 PM

I am trying to understand the economics of the liquor trade.

I know that prices vary from state to state because of different tax structures and other legalities. Then of course there are the normal laws of economics like supply and demand, varying overhead costs, and so on.

Nevertheless certain things are baffling. I posted a couple of weeks ago that the BJ's store in Waterford, CT, just opened a liquor department (because of CT laws it is in the same building but physically separate, you don't have to be a BJ's member to shop there, and you can't take the liquor into the main store). The only bourbon they were carrying when I visited was Knob Creek which they were selling for $18 a 750 ml bottle, far cheaper than I had seen it anywhere else.

Today I went into two different liquor stores here in Norwich (about 10 miles from Waterford) in search of a cheaper bourbon for everyday drinking, mixing, and cooking. (My wife is from Kentucky and we use a lot of bourbon in cooking and I am too cheap to pour even $18 bourbon into a marinade or crock pot.) Out of curiosity I checked the prices on Knob Creek. One store had it for $38.99 and the other had it "on sale" for $35.99.

I am utterly baffled at the difference in prices. Can the local liquor store really be making $20 more a bottle than BJ's? Is BJ's paying the Beam company a lot less per bottle than the local independent liquor store? IS BJ's losing money on the Knob Creek just to lure people in the store? I took four semesters of econ. in college but this is just beyond me.

I wound up, by the way, with a 1.75 l bottle of Evan Williams Black for $24.99, which was quite satisfactory.

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