For the ninth consecutive year, StateWays presents its annual overview of the financial progress being made throughout the control states, including a general picture of the beverage alcohol business as well as separate reports from the 19 control jurisdictions. As always, we are grateful to all the control state agencies (and their personnel) that have provided extensive information to help us compile this yearly feature. Included in the report are gross dollar sales, revenue contribution, distilled spirits and wine sales volume (where applicable), operating expenses and the numbers and types of outlets and employees in the system. The states have also included projected gross dollar sales and projected revenue contributions for fiscal year 2006. We have also included state rankings based on total sales. This year, for the first time, we were able to gather information from every jurisdiction. Because of that, we were able to completely update 2004 and 2005 statistics in order to present a complete picture of the beverage alcohol business — and its growth — throughout the control states.

And the growth has been noteworthy.

Total gross dollar sales throughout the control states reached $6.772 billion in FY 2005, exceeding the revised FY 2004 total of $6.219 billion by about $553 million, representing a hefty 8.9% increase. We had to rub our eyes when we saw this, and check our numbers thoroughly several times, because this is the largest percentage increase in revenues we’ve seen since we began our Fiscal Year Reviews. By comparison, the percentage increase for Fiscal 2004 versus Fiscal 2003 that we published last year was 4.7%. Meanwhile, overall revenue contribution by the control states similarly rose in Fiscal 2005, up a more modest 4.8%, while distilled spirits case sales grew by 6.7%. That outpaced last year’s published case sales gains of 5.2%. Overall, these figures compare favorably versus national sales trends in 2004 (the last year for which we have full-year statistics): Nationally, spirits case sales rose slightly under 4.1% while national distilled spirits dollar sales increased 8.7%.

Clearly, control state beverage alcohol operations continue to benefit from the national trend toward superpremium sales, which brings in more revenues at higher margins. Obviously, many challenges still remain, yet the recovering economy seems to have loosened the reins, however slightly, on the financial stranglehold of the past few years. In general, the issues are specific to the control state. For example, Mississippi has already seen a slowdown in spirits sales and revenues, a consequence of the devastation reeked upon the coastal areas by Hurricane Katrina, where casinos and tourism recently flourished. That sales and revenue slowdown will certainly continue, in the near term at least.

For Fiscal 2005, 13 control jurisdictions added either agencies, state stores or retail outlets, while five states remained the same and only one state decreased in those areas. And a majority of the control states (11) added staff to their operations, a sure sign of optimism. Five control states kept the same number of people in place, while only three decreased staff.

As we’ve said here before, the general trend in the control states is positive, driven by the modernization that has been progressing since the mid-1990s within the wholesaling and retailing segments as well as within the agencies’ headquarters. Utilizing the latest best business practices and an ongoing commitment to the control and regulatory functions mandated by state governments, control state agencies have become more and more successful at delivering revenues as well as spearheading and assisting in educational programs and enforcement to decrease the illegal use and abuse of alcohol products.

As noted earlier, the overall control state system figures in FY 2005 saw increases in several areas compared to FY 2004. The gross sales increases previously cited include gains in every control jurisdiction. As has been the case for several years now, some states showed modest rises, but several others posted sizable gross dollar increases. For example, Pennsylvania boosted sales by a staggering $77 million in FY ’05, a huge gain over the previous year, bringing the state’s total to approximately $1.465 billion. Second-ranked Michigan saw sales growth of about $19 million in FY ’05, reaching an estimated $833 million. And third-ranked Washington added almost $38 million in sales, for a total of $647 million. Fourth-ranked Ohio had sales jump by about $35 million to more than $587 million, while North Carolina posted a gain of approximately $34 million, to more than $554 million. Virginia recorded an even more impressive gain of about $42 million in sales in FY ’05, to just under $533 million, while New Hampshire saw sales increase by $22 million, to more than $395 million. Indeed, throughout the control system, several other states posted notable sales growth.

The combined revenue contributions to state coffers increased in FY ’05 by about $103 million compared to FY ’04, for a 4.8% gain. As last year, most of the states showed modest increases. A few contributed less, a result of state- and budgeting-specific circumstances, while others were able to contribute much larger amounts to the state government than the year before.

About 2.45 million more cases of distilled spirits were sold throughout the control states in fiscal year 2005 than in the previous fiscal year. The total of approximately 39.31 million cases represents a 6.7% increase over FY ’04 totals.

Total operational expenses increased a hefty 13.6% in FY 2005, representing a $105 million increase system-wide over FY 2004 costs. The simple answer is that when you hire more staff and open more stores, your costs increase. Still, as we’ve stated for the past few years, these expenditures are also often funds needed for long overdue improvements, whether it be for updated facilities or for new technologies. Interestingly, there were a few states that actually cut operational costs. For example Iowa slashed more than $1 million through a series of clever efficiency initiatives that promise to continue saving money, while Mississippi spent almost $4 million less in FY 2005, a result of previous expenditures for a huge warehouse upgrade project.

The following, then, represents the individual statistics for each of the control states responding to our 2005 Fiscal Year in Review.


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