Friday, April 10, 2015

Retailer Charges Outrageous 148% Markup

Do You Know How Your Liquor Monopoly Prices Things?


This is a very Ontario-centric article, but the same is likely true in any state with a government run monopoly that sells any one particular product. Everyone knows monopoly's are bad and hurt consumers... except so many seem to be tolerated.


Many of us see stickers at the gas pump that explain the makeup of prices, but do you really know why alcohol costs what it does?

Consider the following, from the very informative LCBO Pricing Structure presentation


So, $6.11 goes to the supplier, but the price is $27.45. While any retailer is going to charge a markup from the manufacturer, a government monopoly that charges a 140+% markup is realistically like a tax than paying a .markup to a retailer.

If you don't like whiskey, here's the markup example for beer (from the same document), it's a little more complex:




Comparing Duty Free Express' price Knob Creek Kentucky Straight Bourbon - 1L is $28 USD.
Looking at the LCBO, it's $46.95 CAD, for 750mL, or $62.60 CAD for 1L. So clearly, there's a lot of tax going on here.

Even crazier than that, if Duty Free Express sold a 750mL bottle it would be $21, this is actually lower than the "floor pricing" referred to in footnote 1, which is in place to protect you from yourself.

Conclusion and Best Practice

Best practice is to convert your alcohol consumption to spirits which have higher density, and are more easily purchased at duty free airport stores.

When you buy alcohol under a government monopoly, you are voluntarily paying more taxes.

At the very least, when you're at a duty free store, use your smartphone to see how ridculous the prices are at home, and try to comparison shop when you can escape from the monopoly.

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