By any business measure, Iowa’s government-run liquor wholesaling business is a phenomenal success.
New figures released by the Iowa Alcoholic Beverage Division report a 34.8 percent gross profit margin. That helped drive a record-setting $295.6 million in revenue, a 5 percent jump over last year.
Look back even farther to see how this government agency has succeeded in increasing Iowans’ alcohol consumption and liquor profits.
Since 2003, Iowans’ vodka consumption is up 63 percent to 1.2 million gallons. That doesn’t include another 240,707 gallons of flavored vodkas, a product that wasn’t on the market 10 years ago.
The state Alcoholic Beverage Division reports that per capita consumption – measured only by the adult population – has soared from 1.48 gallons annually in 2003 to 2.27 gallons this year. Beer, which is regulated by the state, but distributed privately, has dropped slightly, from 35.8 to 33.6 gallons in the past decade.
Unlike most states, Iowa retained government-run wholesale marketing and distribution of alcohol when it got out of the retail liquor business. Most states tax and regulate liquor. But in Iowa, state employees buy, market and ship every drop of hard liquor in the state. The arrangement provides big money to the state’s general fund. Liquor gross revenue of $285.6 million this year generated a record $119.5 million. Of that, $18 million was applied to substance abuse intervention.
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Those profits keep the state’s liquor business popular with legislators, even those who normally condemn government involvement in private sector businesses. In Iowa, government isn’t just involved with liquor. It IS the liquor business. Lawmakers helped out tremendously two years ago by changing the law to expand hard liquor sales to gas stations.
We welcome almost any new revenue for the state, and appreciate the ABD’s transparency through its annual reports. But we still struggle to understand how this particular business – run privately, taxed and regulated in most other states – remains a division of state government.