Hennessy Cognac, Liquor at Center of 'Bootlegging' Allegations, Was N.H.'s Top Seller Last Year

Mar 14, 2018

It may not be every New Hampshire reveler’s go-to drink order, but Hennessy cognac was the top selling spirit by volume at state-run liquor stores in 2017, accounting for nearly 5 percent of total sales that year.

 

Hennessy also happens to be the liquor at the center of bootlegging allegations made last month by Executive Councilor Andru Volinsky, who is calling for an investigation into how the New Hampshire Liquor Commission handles large all-cash sales made by out-of-state residents.

 

According to data from the National Alcohol Beverage Control Association, a trade group for the 17 states -- including New Hampshire -- that manage liquor sales, 104,173 cases of Hennessy VS were sold in 2017. That accounts for roughly 4.3 percent of total case sales for the state.

 

The next highest case sales by volume were for Tito’s Vodka, at 96,118 cases, Captain Morgan Spiced Rum, at 93,587 cases, and Absolut Vodka, at just over 60,000 cases.

 

Last month, Volinsky said he witnessed two customers purchase $24,000 worth of Hennessy at the Keene liquor store. (The employee who completed the sale has since been fired.) In a letter to Governor Chris Sununu and Attorney General Gordon MacDonald, Volinsky said the customers divided the transaction up at the register into smaller sales to avoid triggering IRS reporting requirements, a violation of federal rules.

 

Hennessy cognac represented nearly 5 percent of total sales, by volume, by New Hampshire state liquor stores in 2017.
Credit Lauren Chooljian/NHPR

  New Hampshire-purchased Hennessy cognac has been at the center of several high-profile bootlegging arrests in recent years, including criminal cases in New York, Vermont and Massachusetts. New Hampshire’s relatively lower prices, as compared to neighboring states and New York, have long drawn customers into the state.

“Former employees who have contacted me since this story broke have indicated that the State Liquor Commission uses the strategy of cash bulk sales or ‘bootlegging’ to a greater extent than was used in the past,” Volinsky said. “The fact that Hennessy was the top selling brand by case in New Hampshire in 2017 underscores just how reliant on bootlegging the Commission has become in its efforts to continue to boost sales.”

As an Executive Councilor, Volinksy said he is concerned that this practice “may not be legal and is not sustainable” and he called for “proper authorities in the state [to] look into the matter.”

The state Attorney General’s office said it is still reviewing Volinsky’s documents, and can’t yet comment.

The New Hampshire Liquor Commission has denied that it is improperly handling large all-cash sales, and said it has policies in place to ensure that employees follow state and federal laws. It has criticized Volinsky for his “sting operation.”

In a statement, a spokesman for the Commission said “it should come as no surprise that NHLC sells significant amounts of wines and spirits. Our vast selection of over 11,000 products and our competitive prices are why more than 11 million annual consumers from around the country shop at our 79 NH Liquor & Wine Outlet locations and spent $700 million with us last year.”

In a state with no income or sales tax, the Liquor Commission is an important source of revenue, accounting for roughly 6 percent of the state’s general fund last year. However, the state’s monthly revenue reports show that for the last three months, the Commission has been running short of its predicted revenue totals. So far this year, the Commission is about $3.2 million behind where they planned to be, according to state numbers. It is unclear what caused the shortfall in Liquor Commission revenues to the general fund. The Commission declined to comment.

Inventories of Hennessy, however, remain high at retail stores located near the state’s borders. As of publication of this story, the NHLC website accounted for 3,000 200ml bottles of Hennessy at the Keene location, nearly 1,200 in Nashua, with 860 bottles of the same size available for sale in Salem.

New Hampshire has long relied on out-of-state customers for a large share of liquor sales. According to a spokesman for the Liquor Commission, the Commission is, in fact, required to spend 80 percent of its media ad buy budget in out-of-state markets. Last fiscal year, nearly 60 percent of total sales were made to non-New Hampshire residents.

There will likely be lots of customers, both locals and those from afar, shopping at New Hampshire’s state-run liquor stores in the coming days. Through March 28th, the Liquor Commission is again running its promotional card giveaway, where a $150 purchase is rewarded with a $25 gift card. According to Volinsky’s letter, the Commission also has a “VIP” gift card available, which returns $250 for every $1,500 worth of transactions.

Volinsky said he’s learned that “lines of bulk sales customers form outside the stores” when the promotions are in place.