Competition, Rising Expenses Are Watering Down N.H. Liquor Profits

Jun 13, 2018

The new 20,000 square foot state-run liquor store in Rochester opened in March of this year.
Credit Todd Bookman/NHPR

The New Hampshire Liquor Commission is making a bet on itself. The state agency is investing heavily in refurbished outlets and supermarket-sized new facilities. It’s part of a long-term strategy to increase sales and ward off competition from other states.

Lawmakers who count on liquor profits to help fund state government are watching closely to see if these expensive projects pay off, with some concerned about the early results.

[Audio for this story will be available shortly]

Representative Lynn Ober is one of those concerned lawmakers. And like a double shot of Wild Turkey, she got right to the point during a State House hearing last month.

“Alright, ladies and gentlemen, the Liquor Commission has once again not been able to meet their revenue estimates,” Ober said.

She was chastising the Liquor Commission, which oversees the state’s 79 liquor stores, for failing to make as much money as the legislature was banking on. The Liquor Commission has, in fact, failed to reach the legislature’s targets in two of the last three fiscal years.

Ober, a Republican, says these failures have consequences for the rest of state government, in no small part because of how much the budget relies on liquor commission profits.

[Click here to read NHPR's previous coverage of the Liquor Commission, including stories about alleged bootlegging.]

“So if one agency such as the Liquor Commission does not meet its revenue, then what happens is the governor starts asking the other agencies to cut their spending,” she said.

It’s spending--a perceived overspending--by the Liquor Commission that Ober isn’t happy about. The agency has been sprucing up and building new stores across the state in recent years, and with that comes the associated costs.

“These renovation projects can’t be characterized as just a few tweaks here and there,” said Liquor Commission Chairman Joseph Mollica during a ribbon-cutting ceremony for the new Rochester store in April.

Liquor Commission Chairman Joseph Mollica speaking in Rochester earlier this year. (File photo)
Credit Todd Bookman/NHPR

“We are transforming the outlets across the state because the wine and spirits buying in New England, and I say New England, because that’s where our consumers come from, we are in a very competitive market,” he said.

That growing competition, along with the associated costs of new stores, is eating into Liquor Commission profits.

According to annual reports released by the Liquor Commission, since 2010, sales statewide have grown by a healthy 35%. Operating expenses during that same period, though, have grown at nearly twice that rate.

The Commission’s ultimate financial goal--transferring money into state coffers--has lagged well behind sales as a result, growing at less than 12% since 2010.

“It’s a great contributor to the general fund, but it is underperforming to its potential,” says former Liquor Commissioner Mark Bodi, who resigned in 2012.

Bodi is of the opinion that the wave of new stores is dragging down profitability.

“It provides a more pleasing selling environment, but at the same time, expenses have increased dramatically.”

The Liquor Commission declined to answer a list of questions for this story. But it did write in a statement that it is making “significant strategic capital investments to attract and retain more customers.”

Many of those customers, traditionally, have come from Massachusetts. They were like liquor pilgrims, heading north to escape strict prohibition-era blue laws.

That’s not so much the case any more.

“The landscape has changed significantly,” says Stephen V. Miller, a Massachusetts-based lawyer who represents retail and wholesale alcohol vendors. He says a steady relaxing of laws has opened the door for supermarkets and big box retailers to sell booze in Massachusetts.

“The lure of the lower prices in New Hampshire is not as great as it once was because of what’s going on here,” he says.

One of the biggest players is Total Wine, a national chain that sells deeply discounted wine and spirits. The competition in Massachusetts has created what Miller calls a “price war.”

That’s good for Massachusetts drinkers, but long term, it may only get harder for New Hampshire’s state-run stores to win over those coveted out-of-staters.

In the short-term Liquor Commission Chairman Mollica still has the confidence of his boss, Governor Chris Sununu. Sununu is well aware of the shifting liquor landscape.

“I think that at the end of the day, we are still going to maintain a very strong edge, competitively, as we always have, in terms of quality of product, quantity of product, cost competitiveness, better brand and better customer service,” says Sununu. “All those things really go into driving better experience when folks buy something at one of our liquor stores.”

Getting customers in the door may be easier with shiny, bright stores. But generating enough profits to help fund state government is harder than it once was.