I-1183. Some opinions from the beer industry

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If you already decided how to vote on Initiative 1183, it is unlikely that anyone can change your mind. Discussions have degraded to the point that they now sounds more like shouting matches than cogent debates. It is now more like a football rivalry than a political issue.

Some people are still undecided and have asked for my opinion. I suppose they think I know more about the issue than the regular Joe. That may or may not be true. I know this much, seemingly smart and informed people are entrenched on both sides of this issue. Below, I share some opinions from people in the beer business just in case you’re wondering what they think.

My opinion is just that. It is only my opinion. I want the state out of the liquor business but I do not want it done this way.

1) It should be done in a manner that best serves the citizens of Washington. The changes should be instigated by smart people, working for the best interests of the citizens of Washington, who truly understand the larger and more complex issues involved, and not by business entities that stand to make billions of dollars and can afford to wage a campaign in their favor. If we the people choose to write the laws in a way that benefits Costco and other big-box stores, that is fine. But Costco and other private interests should not be trusted to write the laws. (Honestly, I have nothing against Costco. It is just my opinion on this issue.)

2) The complete overhauling of our state’s liquor laws is way too complex and important to be managed by the voting public. Just as we will always vote for lower taxes regardless of the ramifications, we will always vote for the promise of cheaper liquor even if it is against our own self-interests. Sadly, we cannot be trusted with a decision of this magnitude. We are too easily lured.

3) This is really at the heart of the matter for me: I am sick and tired of the way our initiative process has been usurped by private interests. I have vowed to vote NO on all initiatives until the process is cleaned up.

Anyway, it really is not my intention to tell you how to vote. I am just sharing my opinion.  I should also state that I am a Husky fan. Vote YES on Huskies. Vote NO on Cougars.

Last week I put out a call to members of the beer industry asking them to email me their opinions. I received some great responses. I am a bit surprised that I didn’t get any “Yes on I-1183” statements from people in the beer business. I know they’re out there, right? Take that for what it’s worth.

For the most part, I’m going to preserve anonymity. The people who made these statements can comment and take credit if they so choose. Here are some of the things people in the beer biz told me.

From an owner of a beer and wine specialty store:

I think it’s bad for the little guys – from the distilleries to the wineries to the brewers (yes, beer is in there on page 37) and to the stores. What might have made more sense would have been for Costco to ask other folks to help get behind this. That is, rather than making the determination of who is allowed to sell [liquor] based on square footage (obviously leaning towards only big box stores), they should have based it on percentage of sales, much like how we are classified as a bottle shop. So in order to sell spirits, you need to have 95% + of your sales be from beer/wine, which would eliminate your gas stations and mini-marts, etc.

From an owner of a beer and wine specialty store:

Beer drinkers know top-notch breweries like Rogue Ales and Dogfish Head Craft Brewed Ales are getting into distilled products. And they’re asking their local shopkeepers for these spirits. However under current law, only state-run and stores contracted with the state can carry liquor. Will I-1183 allow these local businesses to offer a few shelves of spirits? No.

I-1183 prevents neighborhood wine and beer shops from carrying liquor. Initiative 1183 specific language that excludes most metropolitan and suburban shops from carrying liquor simply due to the size of their store and availability of liquor at nearby larger businesses. Stores, like [mine], are excluded from carrying full portfolios, limited only to beer, cider and wine offerings. The shop is 8,655 square feet too small to qualify to sell liquor, according to I-1183.

Why the 10,000 square foot store size requirement to sell liquor under I-1183? Does a smaller store make a business more irresponsible? Are they afraid of a little competition from smaller shops? Why the exclusion? Don’t exclude your local Mom & Pop shops; cast a vote against I-1183.

I’m for privatization of liquor, but I’m voting No on I-1183. I’m a small business owner. I’m for small business. I’m for the entrepreneurs. I’m for the community. I’m telling Costco No because I want laws that don’t just benefit big business.

From an owner of a Washington microbrewery. Greg Parker, of Iron Horse Brewing, explains his concerns in detail on his blog. Read it here.

As someone who has staked his entire future on the ability to make and sell beer profitably, I am going to be voting no on I-1183. While there are many arguments stated by the “no” community (some valid and others I find inflammatory), I will be outlining issues that are lesser known and meaningful only to me, my staff, other small breweries, small wineries, and small beer stores, and . . .  Okay, I am trying to be dramatic, when the truth is I only care about keeping my kids outfitted with Italian made shoes. Nonetheless, I will outline what I believe to be considerable concerns for the craft brewing industry in Washington state… Read it.

From an owner of a Washington microbrewery:

I voted *NO* on 1183 for the following reason: the origin and the majority of financial support for the initiative did not come from the “people.”  I realize corporations have every right to sponsor any sort of legislation they deem important but this is about money and not as much about process.  Process is what privatizing should be about, in my opinion.  So long as the laws are equitable, the money will sort itself out and the more enterprising group or groups will simply make more money.

Yes, the WSLCB should be in the booze business but only the enforcement side of things.  I say, let the free market prevail when it comes to booze but I want to see legislation that is equitable to all parties and mandates adequate enforcement standards in terms of allocated dollars and badges.

I have said before that kicking the State of Washington out of the booze business will not turn our craft-beer drinkers into yellow-beer drinkers and it will probably open up even more channels of distribution for craft breweries.  Overall, I think it’s a good thing but the initiative process has to be more reflective of and supported by the people it will directly affect and not simply the group with the biggest war chest.

From someone in the wholesale distribution business:

Here’s why I-1183 is a bad idea for craft beer fans.

First off, by legalizing volume discounts Costco will be able to negotiate much lower costs than mom and pop stores selling booze and wine.  This will put those suppliers in Costco (a very limited selection) at a large advantage vs. the rest of the suppliers on the market, making the big brands get bigger and hurting and potentially killing the small suppliers.  Why does this matter?  Costco has stated publically that if they win then they are going to go to neighboring states with similar initiatives and that beer is next.  If they are able to essentially overturn the 3-tier system then craft breweries are going to be at a huge disadvantage.  There’s a reason there’s basically only Coke or Pepsi in the soft drink world – those two suppliers are able to buy “shelf contracts” at grocery stores/on-premise to exclude competitor products.  If there’s no 3-tier system then ABI (Anheuser Busch Inbev) and MC (MillerCoors) will be able to “buy exclusive space” at the grocery store/tavern and put craft brewers at a severe disadvantage.  ABI and MC could buy business at bars and restaurants, keeping craft beer handles out of the up and down the street sorts of places.  Sure, there will always be a market for a “craft-beer” tavern/tasting room/bar, but the sort of mass availability of craft beer we have today would eventually be gone.

Second reason for voting NO is that by increasing massively the tax on booze in these tight budgetary times they will make the state look for the next place for revenue enhancement from the alcohol world – beer.  When the Federal tax was raised in 1991 that dramatically impacted beer sales, and WA raising taxes on beer (again after the June 2010 increase on large brewers) would really hurt the WA beer industry.

I’m not against WA getting out of the distribution and sales of booze in principal, just against I-1183 and before that I-1100.  The legislature should do it, with a more thoughtful approach than Costco has taken.

Vote YES or vote NO. Just make an informed, thoughtful decision. That’s all I ask.

 

 

 

19 Responses to I-1183. Some opinions from the beer industry
  1. Dikla
    November 2, 2011 | 10:53 am

    Great article Kendall! I wrote about this a couple weeks back from mostly the “craft” industry standpoint, again, similar responses from everyone I talked to. Already put my ballot in the mail — we’ll see what happens. Cheers!

  2. Nancy Rice
    November 2, 2011 | 11:22 am

    In the past weeks, I have done searches on the WA Liquor web site to find specific brands of booze. I was able to find stores carrying specific products. I bet when box stores start selling this stuff, I won’t be able to do this anymore.

    Will I have to get rum at Costco and scotch at Wal-Mart? I just don’t have confidence in how this is all going to work better for me, the consumer!!

  3. Kedamono
    November 2, 2011 | 11:27 am

    There is also the text about “trade zones”. What a trade zone covers is not defined. Wanna bet that CostCo lawyers are ready to file for licenses and cease and desist orders for Safeways and QFCs that happen to be in a CostCo trade zone? A trade zone may be defined such that only CostCo stores can sell liquor in most urban areas.

  4. Erika
    November 2, 2011 | 2:01 pm

    Thank you Kendall for writing a clear explanation. Everyone I’ve explained the details to is horrified by this initiative. Sadly the phrase, “if it’s too good to be true it’s probably not” applies here. I also think the state does not belong in the liquor business, but this is not the right way to make the change. If Costco wanted to buy the rights, maybe they should have simply applied the $22+ million dollars to an offer and bought it from the state like was done in Vermont. :-)

  5. jdw
    November 2, 2011 | 2:10 pm

    Costco with never sell Supplication or Duchesse. I will still go to my specialty beer stores for the goods, no matter how this law plays out.

  6. Jim
    November 2, 2011 | 2:39 pm

    Thanks for the info. I am all for the State being out of the business of selling liquor but didn’t realize what an advantageous position Costco was putting themselves in.
    However I am shocked that you would take a side on such a controversial topic. “Vote YES on Huskies. Vote NO on Cougars.” I realize washingtonbeerblog has a west of the mountains tilt but you risk alienating your Eastern Washington beer loving fans… Anyway keep up the good work!

  7. Heidi
    November 2, 2011 | 3:17 pm

    I voted no…….If this goes through, Costco is and will make millions…coorp greed…..enough said….

  8. Charles
    November 2, 2011 | 4:08 pm

    In #1 you say that “we the people” should write the law. In #2 you say it’s too complex for the voting public. This is a really simple issue for me. The state should do ONLY what the private sector can’t or won’t. I know that it’s not a popular opinion in light of the Occupy Movement, but free enterprise really does benefit the consumer.

  9. Jim
    November 2, 2011 | 6:19 pm

    Let’s get real folks. Selling liquor and spirits is NOT a core function of government. It would be great if the legislature would do something on this, but alas they’ve had 80 years to figure it out. Then again, maybe the East coast liquor distributor cartels and syndicates, who make anywhere from 54 to 75 percent of profits, lobby Olympia to assure the status quo. Vote YES!!

  10. Bill
    November 2, 2011 | 6:47 pm

    Who can trust a HUSKEY fan? If it’s good for COSTCO, it must be good for Washington. They are top notch marketing people, and have shown more leadership than any State run agency. Give the consumer a break, and vote yes to rid us of the antiquated ruse of the state telling us how much we HAVE to pay for goods.

  11. alan
    November 2, 2011 | 7:08 pm

    i agree that this proposed law is not the best way to privatize liquor sales. but washington’s legislature will NEVER do it. especially if the voters reject this. if it passes, they can alter it in the future. i am voting yes.

  12. Ryan
    November 2, 2011 | 9:54 pm

    This might not be the perfect solution. I also do not like that this was basically written and funded by Costco. But, as previous people have said, the WA legislation has had a long time to “figure this out” and have yet to do so… I believe they never will on their own. The PNW will always be a craft beer mecca so small breweries should not worry about losing out to big beers. I also believe beers shops like 99 Bottles are a niche that is much needed and they will always have a big enough customer base to keep them in business. I hear complaints that they wouldn’t be able to sell liquor because they’re not 10,000 sq ft, but they can’t right now anyway. Competitive pricing is NEEDED in this state desperately and the Gov’t needs to get out of liquor, period. Vote Yes!

  13. Dave
    November 3, 2011 | 12:01 am

    To those that complain that this law cuts out the little guy – we had an initiative last year (I-1100) that basically allowed all stores, large and small, to carry liquor. The potential “explosion” of liquor retailers was hammered relentlessly in the opposition’s ads and the initiative ultimately failed – probably because of that gross distortion. To respond to that concern, 1183 limits the number of stores that can carry liquor. Did Costco make sure it was one of the privileged class of retailers that was allowed to sell liquor? Of course it did. But that’s not a reason to vote No if you want to see liquor go private. As many have pointed out already, the legislature has had since Prohibition to fix this system and they’ve done nothing. And they will take the rejection of this initiative as an affirmation of the current system.

    This is a classic case of some people letting perfection be the enemy of the good. It would be far easier to expand liquor sales to smaller businesses once the system has been already privatized rather than just reject this out of hand and hope that a spineless legislature eventually takes action. If you want to get the ball rolling on private liquor, vote Yes.

  14. John
    November 3, 2011 | 7:47 am

    Well said, Dave.

  15. Dean Peterson
    November 3, 2011 | 2:08 pm

    Those that are afraid of selection should check out a Costco in a state like California or Nevada, they carry good selection of top shelf booze, some small distilleries as well as the Kirkland signature branded stuff, very good quality.
    I don’t see any lack of support for craft beers and wines in California.
    Vote Yes, let’s get started and the legislature can fix any major issues going forward with citizen support.

  16. Jim Parker
    November 4, 2011 | 9:58 pm

    as a once-and-future brewer, potential future distiller and 25-year veteran of the beverage alcohol business, I say thanks for laying out the concerns of those in the industry based more on passion than profits. Bottom line: Costco has not spent $22 million in order to benefit the drinking, brewing, winemaking and distilling communities. They did it to fatten their own wallet. We do need change, but we don’t need to swap a state monopoly for a corporate one.

  17. Lance
    November 5, 2011 | 3:24 pm

    And it is funny that much of the money that is going against 1183 is coming from distributors who would love for the legislature to continue to kick the can down the road and give support to the three tier system that locks them into massive profits. If you’re against corporate profiteering, welcome to the current world of distribution (and laws written to make sure you take home some serious dough acting only as a middleman). The reason distributors want it to stay in the legislature’s hands is because they have them in their back pocket.

    Costco isn’t the only one pumping millions of dollars into this election. Maybe you could look a little further into the money issue (or maybe people here should look beyond someone who is unwilling to vote for any initiative)?

    1100 was a better initiative but people didn’t like the fact that there would be liquor in gas stations and that it took revenue away from the state. Both those issues are fixed in this and it adds some price competition and gets rid of the state-mandated alcohol cartel.

  18. Colin L.
    November 6, 2011 | 8:44 am

    Well stated and written.

  19. Colin L.
    November 6, 2011 | 1:37 pm

    The article I mean :).