Last year, Pennsylvania adopted a set of alcohol reforms, among which freed up the Pennsylvania Liquor Control Board to negotiate lower prices with alcohol suppliers. Unfortunately, these reforms did not go so far as to fully privatize the state's government-run liquor stores. Now, according to Philly.com, the PCLB is using its negotiation leverage to warn alcohol suppliers that if they don't cut the prices they're charging the state-run liquor stores, the result will be higher prices for consumers:
"The Pennsylvania Liquor Control Board told some of its suppliers in a July 20 letter that they had until Monday to cut the prices they charge the agency that runs the state’s more than 600 wine and liquor outlets.
If the alcoholic beverage companies do not give in and reduce prices, the PLCB plans to increase prices to consumers on as many as 450 products by the end of August, according to the Pennsylvania Restaurant & Lodging Association...
The PLCB move is part of a series of negotiations that started last September after the agency was freed from its standard 30 percent markup on what it pays for products. That fixed increase had been in place since 1993. Under that regimen, the PLCB had no motivation to negotiate lower prices from suppliers because doing so would only mean less gross profit to the state (30 percent of $9 is less than 30 percent of $10).
Under the new so-called flexible-pricing model, which took effect Aug. 8 of last year, the gross margin could expand beyond 30 percent if the state used its buying power to get lower prices. The PLCB could also boost its margin by increasing prices to consumers..."
Read the rest here.
For more on what Pennsylvania's recent reforms did and did not accomplish, see here.