This is the twelfth straight year that StateWays is presenting its annual overview of the financial progress being made throughout the control states, which includes an overall picture of the beverage alcohol business as well as separate reports from the 19 control jurisdictions. As we’ve noted before, we are grateful to all the control state agencies (and their personnel), who have provided extensive information to help us compile this yearly feature. Our report details the state-by-state results of 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 2009. We have also included state rankings based on total sales. Once again, we were able to gather information from every jurisdiction. Where necessary, we’ve updated the 2007 fiscal year statistics in order to present a complete picture of the beverage alcohol business – and its growth – throughout the control states.
The current weakness in the macro economy may have some bearing on the FY 2008 statistics; however, most of the business was really done before the downturn had accelerated. Look for the effects to be more pronounced for next year’s fiscal results (FY 2009). That said, total gross dollar sales throughout the control states reached $8.227 billion in FY 2008, exceeding the FY 2007 total of $7.792 billion by about $435 million, representing a 5.5% increase. This rise was slightly below last year’s percentage increase in gross revenues (up 6.5%). Meanwhile, overall revenue contribution to the state coffers by the control jurisdictions similarly rose in Fiscal 2008, up 3.2%, to $2.799 billion, compared with $2.714 billion in FY 2007. Sales volume results for distilled spirits were once again solid, with case sales growing by 3.2% to 42.745 million in FY 2008 almost matching the 3.8% increase of FY 2007. Overall, these figures once again compare favorably versus national sales trends in 2007 (the last year for which we have full-year statistics): Nationally, spirits case sales rose about 2.8%. And, as had been the case for several years now, sales revenue nationally grew at about twice the rate of the volume increases.
These stats – sales revenue increasing faster than volume – continue to highlight one of the trends in the beverage alcohol industry today, in both open and control states: beverage alcohol operations continue to benefit from the increasing appeal of superpremium products, which bring in more dollars as a result of higher margins. This is a dynamic that should be closely watched as we enter a period of economic uncertainty. Indeed, early anecdotal evidence points to a slowing of not only overall spirits sales but sales of high-end merchandise.
For Fiscal 2008, 11 control jurisdictions added either agencies, state stores or retail outlets (compared to 12 in FY 2007), while four states showed a decrease in those retail numbers (compared to the same number in FY 2007). The remaining states maintained the same number of outlets as in FY 2007.
Regarding personnel matters, 13 control states added staff to their operations (compared to 12 that added staff last year), while only one state decreased staff (compared to six last year). The remaining five states kept their staff at about the same level (though it is sometimes difficult to determine exactly, especially when jurisdictions mix full- and part-time staff).
As we’ve repeated for several years, the overall trend in the control states has been positive, for at least two decades. Many control states are benefiting from the tremendous rise in efficiencies created by technological advances. In fact, control state agencies continue to update and modernized at a healthy pace – often depending upon how much and how often state legislatures made funds available – at just about every level of their operations, from headquarters to stores to warehouses and beyond, resulting in notable progress on many fronts. Indeed, control state agencies have become more and more successful at delivering revenues as well as spearheading a variety of programs meant to aid in the enforcement of beverage alcohol laws and in educating the public concerning the use and abuse of beverage alcohol products, among a variety of initiatives. The latest, in keeping with the entire country, are efforts in several control states to increase recycling and decrease their operations’ carbon footprint, programs that not only help the environment but also end up being cost-effective.
As previously stated, the total control state system figures in FY 2008 saw increases in several areas compared to FY 2007. The overall gross sales increases previously cited include gains in every control jurisdiction. Some states showed modest rises, but several others reported significant gross dollar increases. For example, the top-ranked control state, Pennsylvania, boosted its sales by about $80 million in FY ’08, bringing the state’s total to approximately $1.766 billion. Second-ranked Michigan saw revenue growth of about $32.0 million in FY ’08, reaching approximately $922.0 million. And third-ranked Washington added a noteworthy $50 million in revenues, for a total of $824.6 million. Fourth-ranked Ohio saw sales increase by about $25 million to $697.7 million, while North Carolina registered a gain of about $43 million, to $694 million. Virginia posted a significant gain of approximately $34 million in revenues in FY ’08, to $641.2 million, while New Hampshire saw sales increase by around $25 million, to $464.7 million. Indeed, throughout the control system, several other states posted notable sales growth.
The combined revenue contributions to state coffers increased in FY ’08 by more than $85 million which is considerably less than the increase shown in FY ’07. This can be explained by the activity in Pennsylvania – the state requested profit transfers of $150 million in FY ’07 compared to profit transfers of $80 million in FY ’08. Other than that, almost all jurisdictions showed increases in revenue transfers to their states. Most were modest to moderate increases.
Meanwhile, about 1.315 million more cases of distilled spirits were sold throughout the control states in fiscal year 2008 than in the previous fiscal year. In fact, all 19 control jurisdictions reported spirits case sales volume increases in FY 2008, contributing to the total of approximately 42.745 million cases.
Total operational expenses jumped by 6.3% in FY 2008, representing approximately a $64 million increase system-wide over FY 2007 costs. Last fiscal year, we saw a 5.9% increase in costs, so these results show only a slight gain in this category. Still, it is unlikely that operational costs will decrease much in the future. Besides the reality of ever-increasing basic costs, the fact is that when you open more stores, your costs increase. In addition, these expenditures are also often funds needed for long overdue improvements, whether it is for updated facilities or for new technologies. This year, two states (Oregon and Vermont) actually reported a decrease in costs, while all the others showed increases that were, for the most part, modest in size.
The following, then, represents the individual statistics for each of the control states responding to our 2008 Fiscal Year in Review.