The Co-op Food Stores of New Hampshire and Vermont

added 08/27/08

by Don Kreis
Co-op Board President

June 4, 2008 was not a good day for the Hanover Consumer Cooperative Society at the State House in Concord.

Struggling against a projected budget deficit well in excess of $100 million, the Legislature on June 4 adopted Senate Bill 321. The Valley News called it the “Christmas tree bill,” because it contained a colorful assortment of revenue enhancement efforts.

Among them is an obscure provision originally introduced at the suggestion of the state Liquor Commission. It authorizes the state-owned liquor monopoly to cut the so-called “wholesale discount” for certain retailers in half, from 20 to 10 percent, for the next year. These retailers purchase wine and beer from the Liquor Commission at wholesale, since the Commission is the only legal source of such products in New Hampshire.

The change applies only to retailers that purchase more than $350,000 a year in beer and wine at wholesale. Commission Chairman Mark Bodi pitched this idea to a House committee by assuring legislators that this was a way to squeeze extra revenue out of supermarkets and other “big box” retailers without affecting neighborhood mom ’n’ pop stores (or, as it happens, the mega-retailer Costco, because it only has one store in New Hampshire).

What nobody mentioned at the hearing is that the Co-op had more than $2 million in wine and beer sales last year. Board Vice President Margaret Drye and I, who collectively cover a wide swath of the political spectrum, labored mightily to bring this issue to the attention of legislators, but it was too late. Chairman Bodi is now free to reduce the Co-op’s wholesale discount for wine and beer to 10 percent through July of 2009. He has announced he will start by reducing it to 15 percent initially.

With the difference between our wholesale price and the Liquor Commission’s retail price cut by as much as half, maintaining the Co-op’s wine and beer business will be a struggle. We will likely lose hundreds of thousands of dollars of what in industry terms is known as “margin,” and this will flow straight to the Co-op’s multiple bottom line. A year from now, after we have deducted from margin such expenses as labor costs, utility bills, and rent (more about which below), it will be that much tougher to offer favorable price terms to local food producers, a living wage to employees, assistance to emerging co-ops, and a patronage refund to members, among other things.

This is especially true because the Liquor Commission is not just our only source of wholesale beer and wine—it is a direct retail competitor, right next door to the Lebanon Co-op Food Store at Centerra Marketplace. Incidentally, the Liquor Commission recently negotiated a new lease with Centerra, at $16 per square foot a year. That’s approximately $8 less per square foot than the Co-op pays.

If, as Tip O’Neill famously observed, all politics is local, this was hardly evident in the case of Senate Bill 321. Most of our local legislators voted for the measure. In general, one party supported the bill and the other didn’t, which puts a stolidly non-partisan organization like the Co-op in a tough spot.

This saga yields two morals.

The first is that we need to do a better job telling our story to policymakers and, in general, the people of New Hampshire. If it is not obvious what separates our Co-op—and the 26,000 moms and pops who own the Co-op—from an investor-owned big-box retailer, we have some work to do.

The second is that everyone expects, and has a right to expect, their government to provide certain basic services. New Hampshire provides these services but opts not to tax itself accordingly. Until this problem is solved, state government’s unseemly pursuit of revenue, through monopolistic market mechanisms such as the one at issue here, can only grow worse.

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