Initiative 1100 takes the state out of the retail liquor business. All but 11 states have survived the trauma.
Washington remains tethered to Prohibition (and its cousin, Repeal) for antiquated reasons that have taken root in 21st century commerce. Look not to the 2,000 or so state employees who work within the system; they are straw men. Look not to the 300 or so landlords who hold commercial leases on property used to sell spirits. They are pawns.
Instead, look to the self-evident trail of modern politics: follow the money. And the money, on the most cursory examination, is flavored with hops. .
Ignore or put aside for a moment the hysterical rhetoric about underage drinkers of liquor. Ignore the staged movies of earnest grape growers plodding through their vineyards, the wailing trauma-room nurses, even the occasional celebrity restaurateur with "No on 1100" signs in their well'stocked bars. They are all in the thrall--unwittingly, perhaps--of the beer industry.
Make no mistake, it's Beer, Beer and more Beer that wants to keep the state in the liquor business. Why? So that supermakets and convenience stores won't present an attractive alternative to canned and pasteurized six-packs.
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The beer guys take every opportunity to paint I-1100 as the "Costco" initiative, ignoring the fact that Safeway, Kroger (QFC & Fred Meyer), Albertson's and Walmart, along with hundreds of mom & pop stores, have just as much to gain. The I-1105 folks, in case you haven't noticed, would replace the Liquor Board's monopoly with their own duopoly, Young's Columbia (out of California) and Odon-Southern (Florida) would essentially take over the wholesale distribution of all alcoholic beverages.
But wait, wouldn't they also profit under I-1100? Sure, but remember that their biggest interest is in maintaining the status quo; their ideal outcome is the defeat of both measures. The wholesalers and distributors created 1105 as a diversion to confuse the public.
Distributors, the middlemen between manufacturers and retailers, were established in the days of Repeal, and have grown steadily in influence. Today, there are a few giants in the field nationally, who ensure their position the way the powerful have always done: campaign contributions, product for parties and gifts to lawmakers around the country. Distributors have become the dominant force in the alcohol selling business and fiercely defend that dominance. I-1105 would help them do that in WA state. They've hired powerhouse consultants from all parts of the political spectrum (Tim Ceis and Chritsian Sindelman from the democratic side, Chris Vance from the republican camp) to craft ads that scream "too risky." The money, millions of dollars according to public records, comes from the beer industry.
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Opponents of both initiatives weigh in on their putative effect on two institutions with "hero" status: the state's homegrown wine industry and its craft breweries. But their arguments--that wineries and craft brewers are universally opposed to elimination of state controls--are refuted by more thoughtful voices.
Paul Beveridge is an attorney who has turned his Madrona home into a boutique winery, Wilridge. More carefully than most, he has parsed the rhetoric of the initiatives and has come out in favor of 1100, opposed to 1105. "1100 will benefit wineries, breweries, restaurants, retailers, small distributors, and, most importantly, wine consumers," he says, while "1105 replaces the existing state monopoly on spirits with a middleman distributor monopoly." Worse, he points out that 1105 "eliminates the alcohol tax at great cost to the state, and does nothing for wineries or wine consumers."
Metropolitan Markets, the largest locally owned supermarket group, but with a smaller footprint than most Safeways, would have to "make room" for spirits. But, says spokesman Brad Halvorsen, "Whether either initiative is passed or not, we remain supportive of small Washington wineries and doing all we can to give them prominence in our stores and high visibility with our customers." Met Markets understand that their customers look for more than low prices, "They have a real affinity with local businesses who take the time and effort to provide good flavors and ingredients....We will be focused on supporting the small wineries and breweries and will not lose sight of them."
John Bell, a former Boeing engineer who now operates the well-regarded Willis Hall winery, points out that there's always been tension between big wineries, distributed by the big wholesalers (Ste. Michelle, Columbia, Hogue) and small wineries (almost everybody else) who fight to get distribution. The problem, as much as anything is the outmoded set of tied-house restrict the ability to offer volume discounts and extend credit, They date back to Prohibition and were crafted to curtail financial bullying of small pubs by large breweries (which would coerce the pubs to carry only one brewer's product. But, says Bell, "There's no need for these onerous and restrictive laws today because, over the years, a whole body of anti-trust and commerce laws have been put into place that make such anti-competitive behavior illegal."
There's no guarantee that every one of the 3,700 retail licensees in Washington (any place that currently sells beer or wine) would automatically add take-out booze to their menu. For one thing, that would require a separate license costing $1,000. But that's just the start. Staff would have to undergo manadatory training, as bartenders do currently. Sales space would have to be reconfigured, a big issue for smaller stores. What do you bump? Wine or canned tomatoes? Wine maker Brian Carter says he's fought hard for the shelf space he gets--three or four facings when he's lucky--and he's afraid of losing a slot or two to higher-margin spirits. Fair enough, but unlikely, given most retailers' interest in providing customers with choices.
Manufacturers of alcoholic beverages (brewers, wineries, distilleries) should be allowed to conduct business in the marketplace just like all other forms of commerce, Bell says, with special attention paid to their sale and use (which is where the Liquor Board's power to regulate and enforce should be exercised).The craft brewers are worried that they'd be forced to extend credit in order to get "tap space" at retails outlets, and would have trouble collecting from notoriously short-of-cash bars and restaurants. Again, a straw man.
Cost Plus World Markets, which does a big business in wine, tried adding premium spirits in California, but changed its plans when it ran into an unforeseen problem: theft. "The problem wasn't kids coming in with fake ID to buy booze," says spokesman Henry Alvidres. "It was adult customers swiping bottles of product."
One of the big points on both sides of the debate involve the Liquor Board's role in "enforcement."The figure that the Board is most proud of: is its so-called "compliance" rate.
The Board sends 18 to 20-year-old "investigative aides" into each of its stores twice a year. They do not carry fake ID and they do not lie about their age (they're "allowed to be evasive," however). In 19 out of 20 cases, they get turned down, but one out of 20 minors succeeds in purchasing alcohol from a trained state clerk. (Hence the state brags of a 94 percent compliance rate.) There used to be comparable, random checks at the 14,000 premises of private licensees (bars and restaurants); the result was that one successful attempt in four by underage "investigative aides" to purchase liquor would end in a sale. (A 76 percent compliance rate.) But that program, says WSLCB spokesman Brian Smith, was suspended two years ago for budgetary reasons.
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It's safe to say you've never been into the largest-grossing liquor store in the state, a windowless, one-story warehouse at 7th and Bell in the no-man's land between Westlake and South Lake Union. But this is where Class H licensees (restaurants and bars) pick up over $20 million a year worth of booze, more than any other outlet in Washington. For individuals, sales top out at $7.5 million at University Village (all those hard-drinking professors and frat boys). Statewide, 27 percent of liquor sales are to holders of Class H licenses, and they'd love to be able to buy on credit, or get volume discounts. The largest single buyer of booze in the state, by the way, according to records furnished by the WSLCB, is an umbrella account for the Port of Seattle's concessionaire, Host International; there's a lot of vodka in those Sky-High Double Bloody Marys. The Indian casinos aren't far behind. Peso's on Lower Queen Anne (and its sister restaurant, Toulouse Petit) buys more than any Seattle bar.
In the end, though, neither initiative is really about spirits; that's less than a billion dollars worth of business a year in Washington State. The state's own projections estimate the annual market for all alcoholic beverages is $20 billion, 80 percent of which is beer.
The state owns or manages about 300 stores around the state with but one purpose: to sell spirits. (By comparison: Starbucks has three times that number of stores, each selling dozens of products.) The state sells virtually no beer, and clings to an 8 percent share of wine sales.
And here's the part the state doesn't tell you: as a result of the Liquor Board's "control" function, liquor consumption in Washington has plummeted. It's now half the level of 30 years ago. (The figures are buried inside this report, known as the Board's "Strategic Business Plan.")
Assuming you can think back to 1980, per capita consumption of spirits was 3.4 gallons, which sounds scary, but in fact works out to just over an ounce per adult per day. Were the streets full of reeling drunks in 1980? The ERs filled with mangled bodies? The landscape littered with abandoned vineyards? Of course not.
If Washington drinkers were to return tomorrow to the drinking levels of 1980, the state would collect about half a billion dollars in additional revenue at current rates of taxation. (The rates wouldn't change under I-1100). Alas, the Liquor Board can't do that within the narrow confines of its own, antiquated system; it doesn't even have the computer capability for contract stores to place and track an order. It would take private-sector marketing, logistics and retail know-how.
If the state is serious about solving its budget woes, it could balance the budget tomorrow on the thirst of its citizens. You might hear squeals from the big brewers, but the beer trucks have room inside for cases of Jack and Stoli, nestled up against the kegs of Bud. Squeals of delight, in the end.
And by the way, if 1100 passes and 1105 fails, the distributors will still be your friends. Have a beer, have a drink.
Cornichon gratefullly acknowledges the research assistance of Seattle blogger (and attorney) Shalini Gujavarty, known as Seadevi at CHTriangle.blogspot.com.
Costco poster, photo courtesy of Paul Hughes.