Please note: The information below was issued December 3, 2014, and reflects updates to items addressed in the original Nov. 17 news release.
On Dec. 3, 2014, the Virginia ABC Board made minor adjustments to the “round-up” plan announced Nov. 17, and increased the “rounding to the nines” initiative by a penny. This slight change will ensure the Board is within its statutory authority on pricing, which specifically allows for rounding to multiples of five. At the request of industry representatives, implementation of that part of the agency’s revenue-enhancing initiatives will be delayed until Jan. 1, 2015, to avoid disruption of holiday sales and marketing campaigns already in place and to allow suppliers time to adjust their own pricing.
The Board also changed the implementation date for increasing the case handling fee and markup on miniature bottles to Dec. 16, allowing vendors more time to adjust their pricing. The Board had previously approved raising the case handling fee from $1 to $2 and increasing the markup on miniature bottles from 49 percent to 69 percent to bring it in line with all other distilled spirits.
“The revenue generated from these initiatives will do ABC’s part to help close the state’s budget deficit, but just as importantly, these funds will be used to modernize ABC’s aging infrastructure,” said ABC Chairman Jeffrey Painter.
Painter along with commissioners Judy Napier and Henry Marsh voted to increase the case handling fee from $1 to $2, a process that has not seen a fee increase since 1988 and comes closer to recovering the agency’s actual costs; raise the markup on miniature (50 milliliters) bottles from 49 percent to 69 percent to bring it in line with all other distilled spirits markups; and alter the current roundup from five cents to nine cents, an initiative called “rounding to the nines.” This measure will raise the price of a bottle of liquor that currently sells for $19.90 or $19.95 to $19.99.
The case handling fee and “rounding to the nines” initiative will raise the price of an average $15 bottle of liquor by approximately 24 to 29 cents. The markup increase on “minis” is expected to add approximately 15 cents to the top-selling miniature currently priced at $1.30.
The anticipated revenue generated from the adoption of these measures during the remainder of fiscal year 2015 is $5.4 million. Estimates show the revenue generated during fiscal year 2016 would be $9.5 million.
The adoption of these measures took into account feedback received from stakeholders who sent in comments on the proposed alcohol markup. Virginia ABC reached out to more than 300 vendors and licensees with a letter outlining various revenue-enhancing scenarios and invited their comments by Oct. 31. “This has been the most inclusive process we’ve ever had in determining a revenue enhancement,” said Painter.
In a presentation to the Board, Chief Operating Officer Travis Hill explained the need for replacement of aging information technology systems, including the agency’s financial management system which handles more than $1.8 billion worth of transactions each year, and its point-of-sale system, which tracks more than 28 million transactions. The cost to replace both of these systems is approximately $30 million.
The Board considered a number of proposed initiatives gathered by ABC staff and presented by Chief Communications and Research Officer Eddie Wirt, including an across-the-board markup of one to four percent, increasing licensing fees, raising the markup on special orders, opening new stores and expanding store hours of operation, some of which require General Assembly approval and therefore would not be eligible for implementation until July 1.
“We’ve made some tough decisions today, but they are sound business decisions. We are running a business and have obligations to the citizens of Virginia as well as our vendors and consumers to properly manage ABC and keep our business infrastructure and 350 statewide stores on firm operational and financial ground,” said Painter.
This is the Power Point Presentation (PDF) from the Nov. 17, 2014 ABC Board meeting. These options were outlined for consideration and discussion of possible revenue enhancement scenarios. The news release outlines what was voted upon and will be implemented Dec. 8, 2014.
The Virginia Department of Alcoholic Beverage Control (ABC) is a major source of revenue for the commonwealth, contributing more than $1.8 billion to the general fund in the last five years. The agency currently operates 350 state stores. Its Bureau of Law Enforcement oversees more than 16,000 ABC licensed establishments while the Hearings and Appeals Division considers more than 700 cases each year. The agency also provides alcohol education and prevention programs for people of all ages. Now celebrating its 80th anniversary, ABC remains committed to progress and innovation in carrying out its control, service and revenue mission.
ABC Board Approves Revenue Enhancements to Help Close State Budget Shortfall and Reinvest in Agency Business Systems