Archive for October 21st, 2008

Alcohol wholesaling: Government control of the market and how it made the McCains wealthier.

Oct 21, 2008 in Booze & or Drugs, Politics

Via Sully, Reason’s article on anti-capitalist alcohol wholesalers:

For decades wholesalers have quietly added 18-25 percent to every bottle of beer, glass of wine, and shot of liquor you pour down your gullet. And there’s been little resistance to them, for a few reasons. First, wholesalers don’t interact with consumers. They take their markup between producer and retailer, out of the sight of the people whose money they’re ultimately taking. Second, they’re rather powerful. Alcohol wholesaling is a lucrative, concentrated industry that reaps enormous benefits from policies whose costs are spread out across the general public. Which brings up the third reason distribution laws aren’t frequently challenged: They haven’t had many obvious opponents. Until recently, the only people hurt by the three-tiered system were consumers, and again, the cost per consumer was too negligible, hidden, and entrenched for anyone to notice.

That’s changing. Bulk retailers like Costco and Wal-Mart have waged lawsuits against some of these laws, with mixed success. The popularity of microbrews, niche wineries, and the ability of both to reach consumers over the Internet has also put a dent in the distributors’ empire; wholesalers are among the leading advocates for banning alcohol sales over the web.

The article notes that Arizona features some of the most market-restrictive measures, and that the Anheuser-Busch empire (to which Cindy McCain belongs) owes millions upon millions to this.

The Hensley company provides a good example of how these laws can hurt consumers. Hensley is the fourth largest beer distributor in the country, one of the largest privately-held companies in Arizona, and holds a 60 percent market share in the parts of Arizona it serves. It also distributes Anheuser-Busch products exclusively. Beer-producing giant Busch began an incentive campaign in the late 1990s aimed at getting distributors to drop the products produced by its competitors. In those parts of the country where a given distributor has a huge, government-abetted market share, such arrangements put the squeeze on the variety of options available to consumers (Anheuser-Bush’s national market share rose five percent during the campaign, to 50 percent nationally).

Socialism!

But let’s get back to John McCain. What does the candidate lecturing Wall Street about greed think about the alcohol wholesaling industry? Is it fair? Should government be subsidizing (if not outright creating) an industry by forcing consumers to pay more for alcohol—for which they get little to no added value in return? And who’s greedier, the family who exploits that system to amass a small fortune, or the brokers and traders McCain derides for pursuing profits in a free market?

Oh, let the guy retire in Arizona in peace, wouldja?

-jb