Street Liquor Economics

What does one of the country’s best selling beers have in common with a label of vodka so obscure it barely registers two dozens mentions in Google? Turns out, judging by the large number of empty containers on the street, they’re both top sellers in my neighborhood.

After its launch in 1997, Steel Reserve High Gravity Lager (actually a malt liquor) has seen a meteoric rise to the top of the discount malt liquor world. For the launch the Ramones completed three short songs to use as advertisement and the company kicked up a controversy with billboards in New York City showing animals copulating. Today the Ramones tunes are still available to download today on the brand’s nearly text-free website.

Steel Reserve has been flying off shelves every since. In 2005 the beer ranked #7 among all beers in supermarket sales, ahead of nearly every major beer including Coors Light, Blue Moon, Miller Lite, and Heineken. According to this source, the company sold the rough equivalent of 225 million 24 ounce cans that year. The stunned author of a beer blog reported it was “the only malt liquor to break into the top 50 best selling beer brands in grocery stores in over twenty years,” commenting the company was “moving juice.” Although the beer had slipped to #25 on the 2006 rankings, it was still ahead of such established brands as Beck’s and Coors Light. Plus, who buys malt liquor at a supermarket, anyway?

This malt hotshot drew the attention of one of the world’s largest beer companies. The SABMiller company (formed after South African Breweries purchased Miller in 2002) purchased the Steel Reserve High Gravity brand for $215 million in cash, crowing to investors the brand was the leading malt liquor in the U.S. and had boasted 35% annual sales growth between 2003 and 2005.

Velicoff Vodka, on the other hand, is relatively obscure, registering just 24 mentions on the web according to Google. It seems to be a big seller in the nation’s capital: a 2006 Washington Post story called it “the alcoholics’ choice,” and three of the four photos mentioning the brand on Flickr were taken in D.C. (Including this shot by Flickr user Terecico) The bottle’s label provides little information — there’s almost nothing on the web about the bottler, Grosscurth Distillers Company located in the tiny town of Bardstown, Kentucky. While perhaps a greater story exists behind this enigmatic spirit, today I’ll consider these two beverages wild popularity.

As the reader might guess, I quickly discovered they were among the cheapest forms of alcohol for sale at my corner liquor store. At $1.35 for a 24 ounce can, Steel Reserve High Gravity was hands down the cheapest form of alcohol. At $2, the Velicoff was more expensive than many of the 24 ounce cans, and the same price as the always-popular Wild Irish Rose wine. However, when its stronger proof is taken into consideration, the liquor falls to the third cheapest per ounce of pure alcohol among the random variety of products I sampled in my unscientific study. Here’s the full table:

Readers will note that Everclear is cheaper per ounce of alcohol than Velicoff — but then again, so are a host of keg beers. No doubt sales are depressed by its undrinkability and high price.

This brings us, finally, to the question of why Steel Reserve High Gravity is a major brand worth millions and you’ve never heard of Velicoff Vodka. I suspect the difference may have something to do with the true cost of the stuff. As Kihm Winship explains in his thorough history of malt liquor, “unlike lager beer, [malt liquor] uses smaller amounts of the more expensive ingredients, malted barley and hops, and larger amounts of the less expensive ingredients, corn grits and sugar,” making it less expensive to make than beer. On the other hand, there’s plenty of vodkas selling at very low unit cost, albeit in larger quantities. Is the glass bottle more expensive than a can? Are the profit margins on cheap, small-size vodka too low to interest a corporation, or is this an undiscovered niche? Without further research or an industry source, we can only guess.

More
> The Cautionary Tale of Malt Liquor
> Wall Street Journal: Malt Liquor’s Moment
> Reviews of Steel Reserve High Gravity on BeerPal.com
> Wikipedia: Steel Reserve

The New Puritainism: The Politics of Alcohol in DC

Since 2001, the regulation of the manufacture and sale of alcoholic beverages in the District has been controlled by the Alcoholic Beverage Regulation Administration, a seven-member regulatory body of city government. ABRA issues licenses to all types of sellers of alcohol in the city, monitors compliance with city law, and has the power to issue new regulations related to the manufacture and sale of alcoholic beverages. According to statistics on their website ABRA keeps up a brisk business: in fiscal year 2006 they issued 1,254 licenses and permits to sell alcohol and conducted 2,255 inspections.

The agency’s meetings are also the primary battleground between sellers of alcohol and the opponents of alcohol sales. Ranging from Advisory Neighborhood Commissions, Condo Associations, churches, and other citizen groups (in most cases property owners), these group’s complaints can include noisy bars, loitering, liquor stores selling drug paraphernalia, and a host of others. After receiving complaints ABRA encourages the complainants and the licensee to attempt to negotiate detailed Cooperative Agreements which become legally enforceable conditions of the liquor license. These agreements can contain passages requiring no loitering signs, instructing the liquor store to call police if they see people loitering, restrictions on pay telephones, restricting the percentage of window space that can be covered by advertisements, and even passages regarding “upgrading of merchandise” requiring the selling of “quality wines in corked bottles … milk, juice, fresh bakery bread and bagels …”

In response to vigorous neighborhood activism opposing virtually all types of alcohol sale ABRA has issued complete moratoriums for new licenses in five zones in the city including Adams Morgan, Georgetown, Glover Park, and two in Dupont Circle. In these areas no new licenses can be issued, effectively placing a cap on the number and type of bars, restaurants, and clubs able to sell alcohol. Think about this the next time you find yourself in an overcrowded Adams Morgan, Georgetown, or Dupont Circle bar.

In order to better understand the geography of alcohol in the city I have created a series of maps illustrating the locations and types of liquor licenses in the city utilizing city GIS data. These maps show most bars and restaurants in the city are clustered downtown and on major thoroughfares in upper northwest, and northeast and southeast washington have very few restaurants with liquor licenses. I have also made a map for the Shaw/Logan Circle neighborhood. In addition to the maps visible here, I created this map of central DC. If anyone is curious what other neighborhoods look like in more detail please leave a comment and I will consider creating more maps.

Shaw Restaurant Update

Long story short: two new, locally-owned restaurants in my neighborhood (Vegetate and Queen of Sheba) have been unable to get a liquor license due to the activism of a neighborhood church with a mostly suburban congregation. Now at urging of Vegetate owners Dominic and Jennifer Redd, a city council member has introduced a bill which would overturn the quirk in the city’s liquor laws that allows liquor stores to open near schools but prevents fine vegetarian or Ethiopian restaurants from serving alcohol. (Within the 400-foot limit there’s already both a liquor store and Giant supermarket which sells beer and wine.)

Sounds reasonable, right? The DC Council’s Committee on Consumer & Regulatory Affairs will be holding a hearing on the bill this Friday, June 23, at 10:00 a.m. in Room 412 of the John A. Wilson building. Here’s more information about the hearing and how to submit testimony:

Councilmember Jim Graham, Chairperson of the Committee on Consumer and Regulatory Affairs, will convene a public hearing on Bill 16-696, the “On-Premises Retailer’s License Act of 2006”. This notice is abbreviated to allow a public hearing on this legislation

Bill 16-696 would amend section 25-314(b) of the District of Columbia Official Code to allow consideration of on-premises licenses to establishments within 400 feet of a public, private, or parochial primary, elementary, or high school; college or university; or recreation area operated by the D.C. Department of Recreation.

The Committee invites the public to testify or to submit written testimony, which will be made a part of the official record. Those who wish to testify should contact John Adams at (202) 724-8198 before 5 p.m. on Wednesday, June 21, 2006. Individual public witnesses will be permitted 3 minutes for oral presentation. Organizational representatives will be permitted 5 minutes. Witnesses should bring 16 copies of their testimony to the public hearing.

If you are unable to testify at the public hearing, written statements are encouraged and will be made part of the official record. Copies of written statements should be submitted to John Adams, Committee on Consumer and Regulatory Affairs, Room 112, 1350 Pennsylvania Avenue, NW, Washington, DC, 20004, by 5 p.m. on Friday, June 23, 2006.

Neighborhood blog In Shaw posted the letter she’ll be submitting to the Council. My motivations on this one are purely selfish: if the bill becomes a law I think it will help these businesses succeed, improving the neighborhood economy and giving local residents more local options for dining or drinks. While alcoholism is a problem, I’m not sure a vegetarian restaurant serving $5+ drinks will do anything more than a liquor store stocked with 40s.

Help Town Hall Open in Glover Park

Town
Hall, a new restaurant to open in Glover Park, needs the ANC 3B to
approve a “Stipulated License� to allow them to serve alcohol until 2
a.m. on weekdays and 3 a.m. on weekends. The city gave them the liquor
license from the restaurant formerly in the space, but they need the
ANC’s blessing to extend the time. They want the later hours to help
their bottom line and are worried they won’t be able to pay the space’s
high rent without the late night sales.

Since the location is
up the street from a pizza place open until 4 a.m. and two strip club
on a busy stretch of Wisconsin Avenue, I hope they get their license!

Below is a message from the owners and the meeting announcement.

To all concerned,

We
would like to begin by thanking all those who have emailed us, either
offering their support or raising concerns so that we could address
them. This Thursday the ANC will be discussing the issue of TownHall
and our request for standard operating hours. At this Thursday’s
meeting, the ANC will be considering whether or not to give its
blessing to our request to extend these hours to the standard operating
hours (2AM during the week and 3AM on the weekend). Ultimately, our
goal is to provide a warm, friendly dining experience featuring an
exceptional menu, while incorporating a neighborhood bar atmosphere
that all Glover Park residents will feel comfortable frequenting. Our
ability to provide this atmosphere will be severly impacted if we are
forced to kick people out the doors by 11:30 every night. We feel that
there is a large population in Glover Park that doesn’t necessarily
follow a 9-5 schedule and enjoy’s having the option of dining late or
grabbing a cocktail later in the evening. There will be residents
attending that are opposed to our request, and we would hate for their
voices to be the only voices heard, and thus affect the happenings in
Glover Park. In any event, we would like to invite all interested
parties to attend
this Thursday’s meeting, whether you favor our request or would care to
address any concerns of your own. Thank you for your interest in this
concern and we hope to see some friendly faces on Thursday.

Paul Holder
Jeremy Carman
Hank Shields
Tim Walsh
Darrell Green

Meeting:

PUBLIC MEETING

Thursday, July 14th, 2005, 7 p.m.
Guy Mason Recreation Center
3600 Calvert Street, N.W.

2nd DISTRICT POLICE REPORT

OLD BUSINESS

– Town Hall, Status of Liquor License and Request for Stipulated License

NEW BUSINESS

– Glover Park Documentary Screening, Anne Savage and Sandra Biasillo
– My Bakery & Cafe, 2233 Wisconsin Avenue, NW, George Guitierrez and David Escobar
– Request for Curb Cut at 2407 37th Street, NW, Don DeFranceaux

ADMINISTRATIVE

– Treasurer’s Report
– Approval of June 2005 Minutes

OPEN FORUM

NEXT MEETING: Thursday, September 8th, 2005 at 7:00 p.m.

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