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Tuesday, February 24, 2009

Price Of Alcohol May Soon Increase by 2%

Posted by admin in Alcohol Industry, Featured Articles

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It seems like all alcohol consumers will be paying fairly more than what they are used to. Due to economic conditions and failing markets a new tax hike might be coming soon to raise liquor prices. If you read the alcohol facts that we compiled last week, you will see that more than half (approximately 51%) of what consumers pay for a bottle of spirit goes towards taxes and fees. If the tax hikes are implemented (which we are certain) it is said that New York plans to more than double its beer and wine tax and other states are considering the same to lower the deficit and balance out state budgets.

The US alcohol market has seen a steep decline in sales and the market has rose the least in the last eight years. Pretty alarming. Most states are looking directly to hit the alcohol industry and it is estimated that the retail price of alcoholic beverages might increase by as much as 2% . The alcohol industry however isn’t taking this situation lightly. More taxes means having to increase prices of their products which means consumers will end up paying more without businesses really making any profit. Looking at the current economic situation most consumers might limit their alcohol purchase which is going to hurt the comapnies directly and the economy as well.

The master distiller of Pernod’s Wild Turkey was so aggravated with this decision that he ended up pouring a bottle of bourbon in the State Capitol’s steps. Other companies aren’t taking this situation lightly either. Miller Coors spokesman Peter Marion said that increasing taxes during this economic condition isn’t a wise decision as it will hit the consumers and their purchase behavior will hurt the industry and the economy as a whole.

The alcohol industry has been hit pretty hard by the recession. Pernod, the Paris-based maker of Ballantine’s whiskey and Martell cognac says the first half sales fell 2% in the US and the US sales of Absolut Vodka fell 2% by volume. This tax hike will cause quite a stir among the distillers and as you see it already has. The last time the taxes were increased on alcohols during the last major recession, the volume declined as much as 6% .

The reason for the tax hike is to revive the failing economy and balance out state budgets. We don’t think this will help revive the overall economy by increasing taxes. According to Robertson Williams, senior fellow at the Tax Policy Center

Any federal increase that singled out alcohol producers would only depress demand and would not be consistent with trying to revive the economy

We agree. What do you think? Would you be willing to pay 2% more for your favorite drink? If you are willing to pay the higher prices would you be drinking as often? Please share your thoughts.

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