Tuesday, November 15, 2011

Who has the lowest liquor prices?

by Christie Scott


You may have heard some say that liquor is cheaper in California. The facts are that only a handful of products are significantly lower, while most products are very competitive. In fact, after you’ve added in the California sales tax, many popular products in Oregon are actually less expensive.

Many retail stores in states like California use a sales tactic called “loss leaders.” This is the practice of drastically marking down a few popular, fast-moving products to entice customers into coming into the store and purchasing other products. But then other products are likely marked higher to make up the cost difference.

The OLCC does not use these techniques to entice people into liquor stores. For public safety reasons, the state does not try to encourage alcohol sales or try to entice people into the stores.

The most common size bottle sold in Oregon is 750 ml also known as "fifths." Most people who purchase alcohol purchase this size - and this is the size where Oregon is the most competitive.

We took the advertised prices from a popular grocery chain and liquor store in California (including their sales tax) and compared them to Oregon. The price comparison showed that the final cost of a "fifth" of Smirnoff Vodka in Oregon was $12.95. In California, the final price (including sales tax) was $15.21. Another popular brand, Bailey’s Irish Cream, was $21.95 in Oregon - the average price, including tax, was $23.92 in California.

In a 2010 study, there were many brands in which the Oregon price was lower than California ’s: Bacardi, Jack Daniels, Seagrams, Jose Cuervo and Hennessy - just to name a few.

Many products were pretty comparable. For example, in Oregon you can buy a “fifth” of Captain Morgan for $18.48 - it’s $19.02 for the Captain south of the Oregon border. Skyy Vodka is currently $21.99 at Oregon liquor stores and you can buy it for about $19.57 in California.

So, for most prices Oregon is very competitive. However, there is one area where prices may be higher. Other states often price the half gallons/gallons of alcohol cheaper than they are here in Oregon. Oregon’s sales data shows that there aren’t as many people buying liquor in large sizes for their personal use. Oregon liquor stores do carry the larger sizes, but the most frequently purchased size remains the “fifth.”

Oregon will not compete for lower prices of the larger sized liquors. The Oregon Constitution has charged the state with “…the promotion of temperance in the use and consumption of alcoholic beverages, encourage the use and consumption of lighter beverages…”

24 comments:

  1. It is about time you guys made a blog about this. Because most Oregon citizens are sadly mistaken, assuming liquor will be "cheaper" if we privitize. They choose to not believe it coming from a liquor agent's mouth, but might actually listen and believe it, when it comes from the OLCC.
    THANK YOU!!!!
    Not to mention, it would be much more beneficial to have this printed in news papers across Oregon. Someone should have given Washington the "memo."
    And I must say, that after Costco's lil' "stunt" in Washington, they have forever lost my business. Went from ordering from them once a week, to switching to much more local and "specialty" distributors for my products and business supplies.
    As sad as it is...Costco is becoming a glorified Wal-Mart.
    It disgusts me.

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  2. Humm... it appears from your description you took pricing from only one popular chain. While that works in Oregon due to monopolistic pricing, the oligopoly model of California does allow for greater price distinction. Without doing a full field comparison, the model you suggest is only anecdotally accurate and carries no statistical conclusion on which to base your thesis.

    In other words, very poor marketing science.

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  3. Dann:
    The California average price data is the industry retail price survey of six major chains including grocery store, pharmacy and liquor store outlets.

    This is the out of pocket cost to the consumer - what the customer would expect to pay at the cash register.

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  4. If "temperance" is in the Constitution, then we need to amend it. Perhaps the people of the State of Oregon should watch the PBS documentary on Prohibition by Ken Burns.

    I moved from California to Oregon. I know my liquor purchases and without a doubt, Oregon is not only higher, but much higher. But I don't buy in Fifths, because I'm not trying to stick in my coat.

    Nor do I try to buy half gallons of liquor, another red herring thrown out by the original post.

    I know exactly why the study didnt address normal bottles of liquor. You know, the ones that single malt scotch or a nice bourbon comes in. Thats because Oregon's prices are so much higher than other states, including California with its sales tax.

    The idea, also, that we should somehow discount the fact that other retailers can have a discount on a bottle, because its a loss leader is nonsense. As a value shopper in all areas, I of course would buy the things I know I like when they are on sale. Its called choice, it might be nice for Oregon to have some.

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  5. As far as more basic items go, I would probably agree. With speciality items, it's incredibly hit-or-miss. Sometimes Oregon has them at a pretty steep discount or at least no more than what I'd pay to order them online. Other times they're 50-100% more expensive, in which case it's pretty hard to justify buying them locally, even if I would much rather support local retailers. So it goes, I guess.

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  6. With a 95% confidence level, the average price difference is between 11% to 19% higher on average in Oregon than California. Based on a reasonably rigorous analysis of pricing.

    This is EXACTLY as is expected based on both states taxes, fees, etc on liquor. CA pretty dramatically fails to recover much from liquor sales. OR does a much better job at recovering social externality costs.

    For it to be different from that, it would suggest a pretty significant market failure - so I was pretty satisfied to see that these numbers came out the way they did.

    OLCC claim is political spin, and I think unnecessary. OLCC does a good job at pricing, and shouldn't feel he need to artificially defend it. As much as can be said about the need to reform OLCC, liquor pricing really isn't at the top of that need. (and, prior to my study and a paper in December I wrote on this, I felt exactly the opposite).

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  7. I have to apologize for a bit of confusion from my comment posted on Nov. 17. We have a more comprehensive study from 2010 that shows many products are priced lower in Oregon than California - such as a fifth of Bushmills was $20.95 in Oregon and $24.37 in California. Wild Turkey in OR was $18.95 and in CA it was $24.24. These numbers came from six different major chains (liquor stores & grocery stores)

    When I wrote the comment, I had forgotten that we had pulled more recent data from a well-known grocery chain and large liquor store chain in California to create the blog. My comment was about the 2010 study. So, please accept my apology for any confusion this may have caused.

    The good news is... either set of numbers you use, they both show that Oregon has very competitive prices for fifths.

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  8. Gocery stores and Liquor stores. The two most expensive places to buy in Calif. Try price shopping the liquor barn or Costco. A 1/2 gallon jug of Jack is $28 with $2 in tax. Here is $44 plus. I have family bring me up Smirnoff vodka (which is 1/2 the price of what it is here) and Jack by the 1/2 gallon which lasts us 6 months until the next visit. As far as keeping your revenue up, cut the taxes and half and your consumption will go up. And no, the whole state wont be a bunch of drunken idiots. You think Californians somehow magically can handle the cheap prices and not get into trouble? Give me a break. These ridiculous laws and thought process is too outdated!

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  9. I will say that every time we go to California we shopl. Saying that Oregon is competative is a JOKE and its not just a few items. Even adding in sales tax it is still pretty close to half of the price of what we pay in Oregon. I take my receipts from our purchases and go into Oregon to compare and LOL! Whoever did your "comprehensive study" must have taste testing a little too much.

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  10. I will say that whoever did your comprehensive study must have been taste testing a little too much. California pricing is WAY lower than what you state even including tax. To say Oregon is competative is a joke. Most of what we buy is 50% cheaper. I take my receipts into Oregon stores after coming back and LOL. When we call our friends and family with price checks...they add on to their wish lists...get someone unbiased to do your study.

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  11. I am not going to nit pick your whole article but will point out that your comparison of Capt. Morgan is incorrect. The Oregon pricing is for a fifth whereas the California pricing that you used is for a half gallon. Please get your facts straight before posting.

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  12. Anonymous,
    The Captain Morgan prices you are disputing are from a 2010 shopping comparison. All of the prices listed were for "fifths" - not half gallons.

    This month (July 2012), the price for a fifth in Oregon is $18.95. In California, before taxes, a big box grocery store lists their price at $17.99; a popular discount liquor outlet prices it at $16.99.

    As noted in the blog, retailers in California can do loss leaders at any time. The 2010 survey actually came from industry data, with an average of prices from several retailers in a given month.

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  13. Umm... I moved to Oregon from Massachusetts (which has the priciest liquor in northeast excluding CT), and I've never seen liquor more expensive than it is here. Bacardi (which in this article they say is cheap in OR) sells for about $17 a handle (after tax) in MA, it sells for $30 a handle in OR. Russian Standard Platinum sells for $28 a handle in MA, while in OR regular Russian Standard Regular (much worse than Platinum) sells for $35 a handle. These prices are absurd. I have never paid more for alcohol in my life. Privatization of liquor makes liquor very cheap. I have no idea why it is so expensive here. In fact, I noticed that it is cheaper to buy liquor from MA and ship it to OR than it is to actually buy liquor in OR. These prices are absurd.

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  14. Umm... I moved to Oregon from Massachusetts (which has the priciest liquor in northeast excluding CT), and I've never seen liquor more expensive than it is here. Bacardi (which in this article they say is cheap in OR) sells for about $17 a handle (after tax) in MA, it sells for $30 a handle in OR. Russian Standard Platinum sells for $28 a handle in MA, while in OR regular Russian Standard Regular (much worse than Platinum) sells for $35 a handle. These prices are absurd. I have never paid more for alcohol in my life. Privatization of liquor makes liquor very cheap. I have no idea why it is so expensive here. In fact, I noticed that it is cheaper to buy liquor from MA and ship it to OR than it is to actually buy liquor in OR. These prices are absurd.

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  15. Joe,
    Hmmm....the current price in Oregon for a half-gallon of Bacardi is $24.95.

    I just checked several (online) sources and they show the average price for a half-gallon of Bacardi in MA is $24.99 - before tax. I'm sure you could find a store where it would be cheaper if you really shopped around, but then you are going to pay more for other products. If you include the sales tax and shipping costs, your final price would be even higher.

    And, fyi - having hard alcohol shipped from MA to Oregon is illegal.

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  16. I buy baileys all of the time. In fact just bought some tonight, It was $22.29. I used to live in California and would buy baileys all of the time and It was always 13.99. I just checked 4 places online in California and they were all between 13-14.99 for a fith. Its bull. The 1.00 Liters there are 20.49! so with tax, the exact same as the fifth I just bought tonight. Oh and costco has 1.75 L there for 29.00-34.00. The oregon liqor store I was at today it was 40.00. Im not trying to argue, thats just a fact, and why I rarley buy alcohol here. I just have my family bring it up when they visit.

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  17. I guess I'm in the minority. I very seldom buy liquor in anything except 1.75L with the exception of some special brands of high end liquor, flavored brandies for mixes, and such things as specialty bitters. Ounce-wise, 1.75L is a better deal in CA, where I live, and buying on sale amplifies the savings. I do not know too many people who just walk in any old time to buy, they buy on sale which is plenty frequent enough to be convenient. Does not seem so in Oregon. We NEVER buy liquor on our trips to this great state. We stock up, beforehand, and buy only beer or wine if we want it in Oregon.

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  18. This is all baloney. I'm just going to go with my favorite Rye, Bulleit. I rarely paid more than $20 for a 750ML bottle when I lived in Maryland. I was shocked when I moved to Bend (last Sunday)to find it offered at more than $30,a 50 percent mark-up even beyond everyone else's mark-up. That's kind of a rip-off. I commented on this at the store, allowing your smart aleck clerk to note that rice is 2 cents a bowl, but you're not in China. But even China doesn't have a state monopoly on rice. The liquor store in Hilt California, near the state line, sells it for under $20 a bottle, and even adding in the cost of gas for the round-trip, I can buy six bottles, save money and see a pretty section of Oregon on the way. When a state monopoly prices are this much out of whack, it is just arrogance, which was confirmed by your smirking clerk.

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  19. review this. When someone tries a pot that clearly refutes your blog, it doesn't get posted. That's another good reason to abolish the OLCC. Mine was the post about Bulleit Rye and the smart aleck store employee in Bend.

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  20. Bought multiple bottles of Jack Daniels during a road trip from Los Angeles to Portland at several Costco locations along the way. Prices varied between Costco's, but were all within 29-33 dollar range for 1.75L bottle. Sales tax also varied, being in the range of 7.75 to 9 percent. So in the worst case scenario, a bottle never exceed $36 after tax. Last time I bought one locally in Portland, it was $46 on sale.

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  21. This article is false, even 3 years down the line. While 'fifths' are more competitive, they are still generally not cheaper. Example, baileys at Total Wine, Costco, and BevMo retails at 17.04 (39.58 for 1.75l) WITH 10% tax, which isn’t even as high as what most of California pays. The OLCC has it advertised for 20.95 (42.95 for 1.75l). While not a large difference, it is still the opposite of what OLCC is telling us in this article. With harder liquors the prices seem to become much less competitive. Bulleit bourbon in California (averaging the same retail stores) is 22.29 (34.49 1.75l) WITH 10% tax while in Oregon the OLCC has it priced at 27.95 (52.95 1.75l). Basically the OLCC reams you for purchasing anything larger than a fifth, and still charges more on average for everything smaller. A 15.00 dollar plus difference for the same liquor is ridiculous, not to mention if you start adding multiple purchases. Its seems that the cheaper (crap) alcohol is closer in price to California (still a bit higher at times), but I don’t really understand why the OLCC would promote sales of crap spirits rather than high quality ones. Get with the times OLCC, prohibition is over, and Oregon is one of the beer and alcohol capitals of the US. I will continue to have visiting family and friends stock me up on their trips up from California like I have been for 4+ years rather that walk into a liquor store here and spend my money. Plus liquor store times here are horrible.

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  22. Prices in Oregon are extremely high. I like Bombay gin and in CA was able to purchase 1.75 bottle for as low as 14.99 and usually for 19.99 whereas in Oregon it is over $40.00. I have lived in several states and Oregon has the highest prices of any so far.

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  23. The issue not covered in the article nor comments is. Why is the state collecting another tax on alcoholic beverages? I have heard a few claims that it is to cover the cost of drunken damage to others and to property. But, a certain group of persons is singled out and taxed separately from other members of the state. What is that money used for? Does it benefit only those persons paying, or is it placed into general fund?
    About cost, I believe if the state is still going to collect the same income from the sale of liquor then Oregon prices will remain higher than in other states. Special taxes are like drugs to a governing body. Tobacco, liquor, lottery and other after our government becomes dependent on that income they cannot give it up. I expect little change in prices of liquor in Oregon no matter who sells it.

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  24. The issue not covered in the article nor comments is. Why is the state collecting another tax on alcoholic beverages? I have heard a few claims that it is to cover the cost of drunken damage to others and to property. But, a certain group of persons is singled out and taxed separately from other members of the state. What is that money used for? Does it benefit only those persons paying, or is it placed into general fund?
    About cost, I believe if the state is still going to collect the same income from the sale of liquor then Oregon prices will remain higher than in other states. Special taxes are like drugs to a governing body. Tobacco, liquor, lottery and other after our government becomes dependent on that income they cannot give it up. I expect little change in prices of liquor in Oregon no matter who sells it.

    ReplyDelete