Here’s the thing: I would love to have the state out of the liquor retail and distribution business. I really would. Maybe it’s the California kid in me who moved here 20 years ago and was confounded when I walked into a grocery store for the first time and didn’t see the spirits section. And for a number of other reasons. For the purposes of this post, however, I’ll focus on the fact that I think our control system has resulted in high prices, low selection, and terrible availability (short hours, limited Sunday stores…). It’s gotten better, especially at some of the more adventurous state stores, but it’s far from ideal.
Because of all of that, I was in favor of last year’s Initiative 1100. And when I heard there was a new privatization initiative coming along, I thought I would almost certainly be in favor of that, too. And then I read the initiative. And I read it again. And again… What I realized is that I-1183, as it’s written, will only address the “terrible availability” problem. Prices will still be high–if you’re hoping for a California-like drop in prices, this initiative isn’t going to provide that–and selection, believe it or not, is almost certain to get even worse!
Why? Simple.
Price
To its credit, 1183 is designed to be revenue neutral or even provide a net revenue increase to the state. Because of this, all existing taxes will remain in place. Fair. But there will also be a liquor distribution fee of 10% and a retailer fee of 17%, both of which will certainly be passed on to the consumer. Add that to the standard store mark-up, and most evaluations of price under the new system show that prices will be close to the same or slightly higher.
My best prediction is that the large brands might show a slight decrease in price, mostly due to the volume discounts those producers can afford to provide in exchange for volume. The harder-to-find and craft spirits, however? They will almost certainly be slightly more expensive. If you can find them. Which brings us to…
Selection
Because of the stipulation in the initiative limiting liquor retail (with some exception, mostly in rural areas) to stores of 10,000 square feet or more, there will only really be a couple of types of stores that will have distilled spirits for sale: Costco (and other warehouse stores) and large grocery stores. Costco, as you surely know if you’ve ever shopped there, isn’t interested in selection. They’re interested in carrying a few large national and international brands that they can sell in quantity. Grocery stores will be more interested, perhaps, in carrying better selection. That said, grocery stores have finite shelf space. They simply don’t have the room to add a wide array of local, specialty, and hard-to-find products to their already-full shelves. And there you are: limited selection. Quite likely, as hard as it is to believe, under 1183, we’ll have an even more limited selection than the current system.
In the interest of fairness, I should mention that 1183 does allow for a one-time auction of the existing liquor stores and the rights to operate private liquor stores on those premises. To me, this is the wildcard of the proposed system. Who buys these stores? What will their business model(s) be? Will they choose to operate them as liquor stores? There is a lot of uncertainty here, but it does at least provide a potential place for stores interested in filling the selection gap.
In addition to being a business owner, I am a cocktail and spirits enthusiast. I like to have obscure amari and vermouths and spirits and so-on in my home bar. Not to mention that Seattle has a truly great and growing cocktail scene featuring some of the most talented and respected bartenders in the country. I worry about how limited spirits selection will affect all of this.
How I-1183 affects Letterpress and other craft distilleries
It’s all up in the air, but there’s one thing I know: as a business, we will adapt to whatever happens and make the business successful. Of that, I am certain.
Of course, it’s not all black and white. There will be some small things about 1183 that will be beneficial to the craft distilling business. And I firmly believe that this industry in this region where we so love our specialty beverages is bound to be successful. On balance, though, I believe there will be more that will be difficult than beneficial.
Like I said, I wanted to like this bill. Unfortunately, as a small producer, there is going to be limited space on shelves or interest in craft distillery products by the large retailers. Certainly, there will be a few local stores looking to carry local products–not to mention those existing stores that become private liquor stores (wildcard!)–and restaurant and bar business will still be there (although more complicated to distribute to; this will be our primary audience), but, on the retail side, the logistics of being a small producer in a state where only large retailers are allowed to carry your products are going to be more complicated. As I said, we’ll adapt and succeed, focus on bars and restaurants and the private liquor stores. The demand will be there, so it’s all about sorting out the logistics, and that, especially in the near term, is going to be harder on the growing industry of small distilleries that are popping up around the city and state.
That is my breakdown. I’m voting no. And that kills me because I think the “No on 1183″ campaign has been extraordinarily manipulative and dishonest.
Do with it what you will, but whatever you choose, please go vote!
I already voted NO for the exact reasons you have stated here. Also, I don’t want spirits to be sold in grocery stores. I don’t think they have the security to keep kids (and others) from stealing.
I think you’re too short-sighted. First, the licensing fees go down after two years, so prices should come down.
Second, and more importantly, Things might have to get worse in some ways before they can get better. Our legislature has been completely unwilling to relinquish control of liquor and we have no reason to believe it will anytime soon. The flaws in 1183 can be fixed later; it’s getting over that initial hump that we *must* do now.
Think what you will of Costco’s motives, I believe they put forth an initiative that had the best chances of passage. Yes, the 10K square foot limit is stupid, but it was necessary for political reasons not for Costco’s self-serving reasons.
Please reconsider…once we have privatized liquor in Washington, it will be much easier to improve our liquor laws. While we are held captive by a government monopoly, there’s not much we can do.
Hi Chris–
Thanks for your response. Your points are good ones, and ones I’ve considered.
I should point out that I am in no way anti-Costco. I simply point out here that their business model does not encourage selection and specialty. I have nothing against that business model, it just doesn’t fit me as a small liquor producer or as a consumer of hard-to-find and specialty products.
On price: Yes, fees will drop after the first two years. That said, there isn’t any certainty that prices will drop equally as a result. Perhaps partially. However, if a retailer is selling a bottle for $30 and has attracted a customer base that is willing to pay $30 for that bottle, what is there incentive to drop the price? Second, the affect of this fee reduction will be a relatively small part of the total of taxes and fees that go into the bottle. We will never see California prices. I wish that we would, but the tax/fee structure simply won’t allow for that.
Like I said a few times here: I really do like privatization. I voted for 1100. I just don’t like this iteration of it.
Thanks again for your well-considered thoughts!