Mississippi lawmakers vote to contract alcohol distribution to outside 3PL, build new modern warehouse
THE LONG-OUTDATED ALCOHOLIC BEVERAGE CONTROL (ABC) WAREHOUSE WILL BE REPLACED WITH A NEW MODERN FACILITY.
In what is sure to be welcome news for alcohol retailers across Mississippi who have struggled to meet demand for the past two years, the Mississippi Legislature agreed on a bill which will result in the construction of a new alcohol distribution warehouse in the Jackson area.
Senate Bill 2844 passed with bipartisan support, although neither chamber of the legislature got entirely what they wanted. Representatives in the House pushed for the State to get out of the liquor business entirely, while the Senate was in favor of spending money on the new warehouse, but with the Mississippi Alcohol Beverage Control (ABC) continuing to run the warehouse.
In the end, the two chambers compromised, with SB2844 resulting in the issuance of $55 million in revenue bonds for construction of a new, modernized warehouse, while the day-to-day operation of the State’s liquor distribution will be run by an independent contractor hired by the state.
“Our position in the House was to privatize it, like Louisiana, and the Senate position was to maintain ownership, so what we arrived at was somewhere in the middle,” said Rep. Hank Zuber of Ocean Springs. “Neither one got 100% what they wanted, but the two things that kept coming up were how much would it cost to bring the warehouse operation up to today’s standards, and also, what do we do to be able to keep up with demand, because right now we’re not.
“Ultimately, we found a compromise. The state will retain ownership, but a third party administrator will come in and run it.”
Gov. Tate Reeves is expected to sign the bill later this month and it will go into effect July 1.
Currently, the ABC and it’s warehouse controls all distribution of alcohol in the state, distributing an estimated 3 million cases of wine and liquor each year, bringing in $100 million in revenue to the state in fiscal 2021, derived largely from the 27.5% markup required by state law on alcohol sold by the State to licensed retailers, who of course then pass that cost along to customers.
Like many of the laws the ABC is charged with enforcing, the ABC’s 211,000 square foot warehouse in the South Madison Industrical Park is old (built in 1983) and outdated and incapable of keeping up with demand from the roughly 1,250 licensed retailers across the state -- an issue exacerberated with the increased demand during the COVID-19 pandemic.
Zuber and his fellow legislators are hopeful the new warehouse, coupled with third party administration of the operation, will not only result in demand being met, but with greater revenues for the State.
“As I’ve said before, I wanted to see the state get out of the business of storing and distributing alcohol, but this is progress,” he said. “It’s a tremendous move forward in terms of trying to meet the demand and modernize the warehouse.
“Hopefully once everything is in place and the warehouse gets built, with the TPA, it will operate more smoothly, more efficiently and meet the demand, especially down here on the coast – and hopefully bring in more revenue than what we’re bringing in now.”
Under the provisions of SB2844, the $55 million will be funded largely through a $.25 per case shipping surcharge levied on distillers who store product in the state warehouse.
The third party administrator (TPA) hired by the state would be given a 4-year contract and be paid per case of alcoholic beverages sold, while the State would pay for maintenance of the warehouse.
Other provisions of SB2844 call for the new warehouse to be built on property within 50 miles of the Capitol building in Jackson, for the TPA to be consulted in the construction of the facility, and for the warehouse to be designed to “meet demand for the next 25 years,” an interesting point given the current warehouse is nearly 40 years old.
Zuber said he was unsure of the time frame for the new warehouse being built, noting that the project would have to go out for Requests for Proposals (RFP), “but I’m sure we’re going to want to move on this as quickly as possible.”
