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WHITE PAPER: Use of Coupons for Alcohol Purchases

May 3, 2017

 

Below is a White Paper that Total Wine and More submitted to the Alcohol Task Force recommending a common sense fix that will foster better relationships between alcohol retailers and their customers, all while saving those customers money: 

 

 

 

Dear Members of the Alcohol Task Force:

 

I am writing on behalf of Total Wine & More regarding the request by the Alcohol Task Force for input into certain laws, regulation s and practices concerning the alcohol beverage industry in the Commonwealth of Massachusetts.

 

Total Wine & More is America’s largest America's largest independent retailer of fine wine, beer and spirits with 170+ stores in 20 states by year's end. A four-time national retailer of the year award winner, the company's vast selection of products, combined with low everyday prices and expertly trained wine associates, provides a unique shopping experience for the customer. Since opening its first store in 1991, Total Wine & More has been committed to being the premier wine, beer and spirits retailer in every community that it serves.

 

We are proud to have just opened our fourth location in the Commonwealth of Massachusetts in Danvers on April 25, 20 17, following successful locations in Natick (November 2015), Everett (May 2016), and Shrewsbury (February 2016). Total Wine & More currently employs a total of 225 team members at our locations across Massachusetts. 

 

 

GOAL

 

Current statutes including 204 CMR 2.02 prohibit retailers from distributing coupons for the purchase of alcohol.

 

Total Wine & More is advocating for a change to the statute, along with corresponding regulations, to allow alcohol retailers to issue coupons for the purchase of alcoholic beverages in a retail establishment.

 

Retailer-backed coupons for both alcoholic and non-alcoholic products, subject to individual state laws and regulations, are permissible in most states around the nation. Allowing Massachusetts alcohol beverage retailers to issue coupons is a consumer-friendly measure that would allow customers to realize discounts when shopping at retail establishments in Massachusetts, and would generate increased economic activity and tax revenues in the Commonwealth.

 

In their analysis of traditional print coupons, Rosemary Avery of Cornell University and George Haynes of Montana State University demonstrate that coupons do indeed deliver meaningful material benefits for consumers. The use of coupons has been shown to save consumers an average of 4% to 7% on their weekly shopping bills, savings which could be further increased by allowing coupons to cover alcohol. In addition, the use of coupons increases consumer choices i n both products and price.

 

This benefit would be particularly significant in Massachusetts, as residents in higher cost cities such as Boston spend more than 50% more on alcohol compared to the nation at-large. In 2014, a report by Cape Cod Today estimated that Boston-area households spent an average of $813 per year on alcohol compared to the national average of $454 per year. In addition, the Tax Foundation has noted that Massachusetts' spirits excise tax rate of $4.05 per gallon is far higher than that of neighboring New Hampshire, which does not impose taxes on alcoholic beverages. By allowing retailers to issue coupons for alcoholic beverages, the Commonwealth would not only be empowering consumer choices, but reducing the burden of cost as well.

 

Avery and Haynes' research has also shown that the impact of coupons is also particularly beneficial for lower-income consumers. As a percentage of expenditures, lower-income shoppers who use coupons tend to realize average savings of upwards of 7% on their grocery bills.

Furthermore, the marginal value of each dollar as a percentage of income saved by coupons is highest for lower-income consumers relative to higher-income consumers.

 

In addition, according to Imke Riemers at Northeastern University and Chunying Xie at NERA Consulting, e-coupons have been shown to contribute to increased consumer activity in the near and mid-term, and a 6% increase in revenue while the e-coupon is valid. Given the already high levels of spending on alcohol and the relatively high costs of alcohol in Massachusetts, the opportunity for retailers to issue coupons would contribute to an uptick in economic activity, help Massachusetts become more competitive in the New England alcohol market, and pass along meaningful savings to consumers.

 

 

 

IMPLEMENTATION 

 

This recommendation would change the existing policy which makes it illegal for alcohol retailers to issue coupons to offer customers discounts on the price of alcoholic beverages.

 

Notably, Total Wine & More is not advocating that the use of coupons would allow retailers to sell below invoiced cost.

 

 

BUSINESS IMPACT

 

When a Massachusetts resident elects to redeem a retailer coupon for a purchase of an alcoholic beverage, Massachusetts benefits by increasing consumer savings and boosting economic activity in the Commonwealth.
 

Were coupons to increase alcohol sales by 6%, as estimated by the Northeastern University/NERA study by Riemers and Xie, the Commonwealth could expect to increase its excise tax revenue, which the Boston Globe projects to be $80 million per year, to nearly $85 million owing to increase coupon-driven economic activity.

 

This change would allow for alcohol retailers across Massachusetts to issue coupons to consumers to discount the price of alcohol purchases. These coupons present an opportunity to draw new customers to specified alcohol retail locations and reduce the cost of alcohol relative to neighboring states like New Hampshire, which does not levy a sales tax. This change, therefor, could have a particularly beneficial impact to retail alcohol beverage licensees in competition with New Hampshire-based outlets.

 

Thus, by allowing coupons to extend to alcohol purchases, Massachusetts has the opportunity to deliver broad benefits to consumers, retailers, and other stakeholders in the Commonwealth.

 

Thank you for your consideration of this issue. I look forward to your feedback, and to further discussion with the Alcohol Task Force.

 

Sincerely,

 

Edward Cooper

Vice President, Public Affairs & Community Relations

Total Wine & More

(301) 547-0807 (office)

(301) 219-6648 (mobile)

ecooper@totalwine.com

 

 

 

 

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