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North Carolina’s Alcoholic Beverage Control Commission on Wednesday tabled a proposal to set a mandated minimum price for distilled spirits like whisky and vodka.
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Commission Chairman Hank Bauer said the decision needs further research on how the policy would affect bars and restaurants across the state. An official acknowledged that the study lacked data on potential financial impacts to that industry.
The commission has been studying the potential effects of setting a minimum-based price for spirits, particularly the impacts on public health and safety, the legality of imposing the price and how to implement it.
Ben Popkin, assistant agency general counsel, presented the study to a packed boardroom. He noted that the study does not have “significant data on assessing the financial condition of restaurants, bars and related businesses in our state.”
He said 60 regularly listed items out of the ABC’s 7,333 items would be affected by the price floor since those items would likely be priced below the proposed minimum.
Popkin said the study found that North Carolina sees more than 5,600 deaths per year attributable to alcohol, and that the “societal cost” of alcohol in the state, which takes lost productivity and healthcare costs into account, is $14.6 billion per year.
“That is the problem the policy is aimed at,” he said. “It is one of the charges of the commission to ensure and operate a system and do it in a socially responsible manner.”
North Carolinians had the chance to submit their comments on the potential price change. Several advocacy groups, North Carolina residents and bars and restaurants were opposed to the change because of potential increased costs.
Under current state law, the ABC Commission can set the prices of alcoholic beverages, which depend on distillery pricing and additional markups.
Bauer told The News & Observer that the study was commissioned due to public safety concerns.
He said that while he surveys local ABC stores, he sees “these people lined up as soon as the store opens.”
“They run in, they go directly to the inexpensive vodkas that are $4.65, and they’re picking it up,” he said. “I guarantee, if you came back the next day, it’s the same people standing in line.”
The study says a total of 97 items — 60 regularly listed products and 37 special orders — would be affected by the price floor. Those items amount to about 1.3% of North Carolina’s product filings, and at least 98% of products would remain unaffected, according to the study.
Popkin said the price increase would raise retail sales on those items by about $2 million per year, which, by state law, would provide about $613,000 in revenue for local ABC boards. The remaining $1.4 million would be distributed to local law enforcement, alcohol and substance abuse education, and the state’s general fund.
The study shows that the price increases would affect tequila the most; it accounts for 55.9% of the gain. The price floor for a 750 milliliter bottle, or a fifth, would increase to $10.95, and the floor for a 1 liter bottle would increase to $13.45.
For example, a 750 milliliter bottle of Dorado Gold Tequila currently sells in ABC stores for $7.45. The policy would increase the bottle’s price to $10.95.
While Popkin acknowledged a lack of data regarding how businesses like bars and restaurants would be affected, the study says that the impact is “expected to be limited, on the evidence available.”
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The study shows that among North Carolina’s top-selling brands, 14.4% of cases were sold to mixed-beverage permittees like bars and restaurants. The remaining 85.6% of cases were sold to retailers.
Business owners, advocacy groups and North Carolina residents have said that they oppose the change because it could increase liquor prices across the board and those costs could fall onto businesses and consumers.
The commission shared public comment submitted by citizens, business owners and representatives of the healthcare and hospitality industries. At the time of the study, 40 comments were submitted: 34 were in opposition, five were in support and one response from a local ABC board recommended more research before implementation.
Kim Hammer, the owner of Raleigh cocktail bars Bittersweet and Johnson Street Yacht Club, wrote that the hospitality industry has worked hard to overcome “unprecedented economic challenges. While business has improved, margins remain extremely tight.”
“Additional mandated cost increases make it harder for small businesses like mine to invest in employees, expand operations, and continue contributing to our local economy,” Hammer wrote. “ … Higher cocktail prices may seem insignificant individually, but collectively they discourage guests from dining out, reducing visits and spending throughout the hospitality industry.”
Karl Beil, who is listed as an individual consumer, wrote that the commission needs to “stop the clear and obvious grab for more money.”
“Government is not about profit,” Beil wrote. “Intentionally driving up the cost of anything, is not serving the public. It is serving the ABC system’s bank account.”
Bauer, in response to cash-grab accusations, told reporters that “the impact is small.”
“It was $2.1 million dollars going to the board, so it’s not huge, and it’s not a huge increase to the general fund that we already give back so much,” he said.
The Rev. Mark Creech, the director of government relations for Return America, an advocacy group that says it’s working to bring Judeo-Christian values to public policy, wrote that “exceptionally inexpensive spirituous liquor may encourage heavier consumption, make high-alcohol products readily available to vulnerable populations, and contribute to the social costs associated with alcohol abuse.”
“A reasonable minimum base price could help ensure that distilled spirits are not marketed primarily through unusually low prices that encourage volume consumption,” Creech wrote.
At Wednesday’s meeting, Allen Thomas, the president and CEO of the North Carolina Restaurant and Lodging Association, said he was committed to continuing to study and discuss the policy, and that “I think there’s a lot of good policy at the right time. This may not be the right time for this one.”
“So we’re talking about preserving jobs, keeping businesses that are on the brink,” he said. “… They love their customers. They love where they’re from, but they’re at that pushing point. So, we do not want this to be the final nail in the coffin for a lot of great businesses across North Carolina.”
Bauer said that misinformation has been spread about how many products the price floor would affect, and that the Restaurant and Lodging Association “made this a bigger deal than what it is.”
Bauer, alongside Commissioners David Sherlin and La’Tanta “LT” McCrimmon, voted to table the policy. Bauer said the additional research about impacts to bars and restaurants should take about a month or two to complete.
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