Expanding the sale of ready-to-drink (RTD) cocktails to additional retail outlets permitted to sell beverage alcohol could result in more than $184 million in tax revenue for Pennsylvania, according to a new analysis released today by the Distilled Spirits Council of the United States (DISCUS).
Currently, spirits-based RTDs must be sold through Pennsylvania Liquor Control Board (PLCB) stores and priced according to the PLCB’s mark-up formula. Malt- and wine-based RTDs are permitted to be sold at 18 times as many retail outlets in the state as spirits-based RTDs. In Pennsylvania, there are 0.6 spirits outlets per 10,000 people – well below the national average of 3.4 outlets per 10,000 people.
According to the analysis, the state could generate significant tax revenue if it also permitted private wholesalers to distribute the products to stores with Wine Expanded Permits (WEPs), which include grocery stores, convenience stores and local bars. These outlets already sell malt- and wine-based RTDs.
“Expanding the distribution channels of spirits-based RTDs will benefit adult consumers, the state, and suppliers of beer, wine and spirits,” said David Wojnar, Distilled Spirits Council of the United States Senior Vice President and Head of State Public Policy. “Updating the distribution and taxation laws will increase shopping convenience, allow consumers to enjoy spirits-based RTDs at more affordable prices, and generate millions of dollars in return for the commonwealth.”
The analysis is based on a model that allows private wholesalers to distribute spirits-based products having an ABV equal to or less than 14 percent; pricing them according to market conditions; and setting the excise tax rate at 18 percent (Johnstown Flood Tax) of the wholesale price.
Under this expansion model, spirit-based RTDs would be sold at 2,600 retail outlets — state stores, WEPs and home distributors — which is projected to generate sales of more than 11.7 million cases worth nearly $1 billion at retail. Including the 18 percent Johnstown Flood Tax applied at wholesale and Pennsylvania’s sales tax, spirits-based RTD sales would generate an estimated $153.3 to $184.1 million for the state treasury after a period of market adjustment projected to be within 3 years.
The pandemic has accelerated the growth of these spirits-based RTD products as adult consumers look to recreate the cocktail experience at home with convenient, canned cocktails made with premium spirits, fresh ingredients and low ABV options.
States are taking a closer look at this issue to provide consumers with the same equal access to wine-, malt-/beer- and spirits-based RTD products in the marketplace and to ensure spirits-based RTD products are being taxed fairly to support consumers and small businesses in their communities.