When The Laws Of The State Meet The Laws Of Economics

One of the by-products of the COVID-19 pandemic is that people are consuming more alcohol. Both the medical community and the popular press have noted that. In North Carolina, you can buy beer and wine at many outlets including grocery stores. However, if you want to buy hard alcohol or spirits, you must go to the ABC store run by the local alcohol beverage control board. North Carolina is what is referred to as a “control state”.

The Charlotte Observer notes:

Mecklenburg County ABC Board data shows March sales to businesses have already sold 65% of the bottles sold last year and retails sales have more than doubled over last years sales, the board and N.C. Spirits Association said in a news release Friday.

Last year during pandemic shutdowns, ABC stores saw a nearly 30% jump in sales compared to 2019 as more people stocked up at home, the Observer previously reported. But as more restaurants and bars have reopened, demand is up for spirits.

Recent reports coming out of Charlotte, the state’s largest city, indicate people were indeed buying a lot of liquor at the ABC stores and now it is impacting the supply available for bars and restaurants. It is also impacting what is available on the shelves in ABC stores themselves.

Supply and demand is the first law of economics. In this case there isn’t enough supply to meet the demand. In an uncontrolled system, prices would rise as a result of the shortage. However, prices in North Carolina are set by the state. The advantage to the consumer is that that bottle of Maker’s Mark is the same price in Murphy as it is in Manteo.

Individuals in Charlotte seeking their Tito’s Vodka or a specific brand of tequila have an easy option. They can just cross the border into South Carolina where liquor sales are not state run.

But Drew Podrebarac, the owner of Southern Spirits, said across the border in South Carolina, currently, they’re fully stocked.

“Definitely in North Carolina, just because the way they do their liquor, I know they’ve had tons of problems but that’s part of the reason that they come to South Carolina to buy the liquor,” said Podrebarac…

“Right now, North Carolina currently has about 500-700 available liquors in stock. We currently have at Southern Spirits almost 6,000 different liquors, so when people actually say, ‘Wow, there’s a lot more available,’ people just kept coming and started telling their friends and it definitely boosted sales and customer numbers,” said Podrebarac. 

However, North Carolina bars and restaurants don’t have that option as their license requires them to buy only from the ABC stores. Moreover, they have to pay a $2-3 premium per bottle compared to what the consumer pays in the store.

By interfering with the law of supply and demand, the laws of the state of North Carolina have created a situation where businesses who struggled to survive the pandemic cannot obtain the raw material for one of their most profitable items – cocktails. By contrast, South Carolina doesn’t have a supply shortage and does have many more choices. If there was ever an argument about privatizing the ABC System, this is it.

One thought on “When The Laws Of The State Meet The Laws Of Economics”

  1. With all the evidence in favor of privatization, I don’t understand how any states haven’t. It isn’t easy to find a decent analysis of the issue so seems to me that those opposed are effectively temperance crusaders. Even here in Washington we managed to privatize. The only problem was that the big box stores managed to influence the writing of the citizen’s initiative so that it massively favored them. The state also managed to get a huge extra tax on top of that, so liquor became even more expensive. Then the government unions who ran the state liquor stores campaigned against privatization on the grounds that it would raise prices. Which it did when it passed anyway.

    Gah! Sometimes even when you win you lose.

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