Initiative 1100 – "The greatest threat the WA craft brewing industry in a decade"

In November you will be asked to vote on Initiative 1100. The Washington Beer Blog wants to get this conversation started early.

It is the opinion of this blog, as well as the Washington Brewers Guild, that you should vote NO ON INITIATIVE 1100. On the surface, it privatizes the sale of liquor. Yes, the state would finally shut down all of those liquor stores and leave the sale of distilled spirits to private retailers (grocery stores, Costco, etc), but that is not all it will do and that is not why this initiative has made it on to the ballot. Other regulatory changes introduced by Initiative 1100 threaten the Washington craft beer industry.

Don’t be fooled

Privatizing liquor sales is probably a very good idea BUT DON’T BE FOOLED! Initiative 1100 is a wolf in sheep’s clothing. While Initiative 1100 would privatize liquor sales, it would also bring about sweeping changes to other regulations. These regulatory changes negatively impact small businesses and especially the Washington craft beer industry. While we often feel suffocated by regulations and our state’s seemingly medieval liquor laws, some of them actually make sense and have an important role in maintaining a level playing field on which our local brewers can compete.

Perhaps the most disturbing changes proposed by Initiative 1100 are to the tied-house regulations. In general, tied-house rules regulate how alcohol is promoted and how manufacturers, wholesalers and retailers conduct business with each other. It was originally an English term that refer to a bar being “tied” by ownership or by contract to a specific beer or liquor manufacturer. Our existing tied-house regulations are intended to prevent “pay-to-play” and other unfair practices that give the largest producers, distributors and retailers an unfair advantage.

How effective the state enforces the existing tied-house regulations is a different subject, but eliminating the regulations altogether would create a massively unfair advantage for the behemoths in the beer industry.

sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor

And that’s why this initiative is on the ballot. Not because you and me want to privatize liquor sales; not because we want the Liquor Control Board to focus on enforcement and prevention instead of retails sales; not because we want the LCB to be a more effective tax collecting and revenue generating agency; but rather, Initiative 1100 is on the ballot because the largest players in the industry want to gain an advantage.

Shameless piggy-backers!

The framers of Initiative 1100 shamelessly piggy-backed regulatory changes onto a fundamentally good idea. They know that the majority of us want to see the state privatize liquor sales and they are sneaking in these other regulatory changes because they think we won’t pay close enough attention.

Even if you disagree with our opinion, please pay attention. Don’t let them fool you. Regardless of how you vote, be informed.

Do it for the children

Many of the other opponents to Initiative 1100 will be playing the morality card. They will argue that making liquor available in grocery stores will increase its availability to underage drinkers. They will ask you to vote NO ON INITIATIVE 1100 for the sake of our children. While we usually find ourselves in disagreement with people who use such limp, hollow, and ultimately meaningless arguments to support their cause, we find ourselves allied with them on this one issue. That being said, make no mistakes about it, we oppose this initiative because of the negative impact it will have on small businesses and our local craft beer industry.

While it is hard to understand all of the details of all of the regulations impacted, we stand by our position and we support the Washington Brewers Guild. That’s where we stand – firmly beside the Guild.

Here is what the Washington Brewers Guild has to say about it.

Vote NO on INITATIVE 1100

I-1100 is the greatest threat the Washington craft brewing industry has experienced in a decade.

  • Actively being promoted as modernizing liquor laws, by privatizing spirit sales.
  • Actually a sweeping proposal that repeals 39 State Laws, enabling the biggest retailers, distributors, and producers to own and give favorable pricing to each other, which would eliminate the level playing field small businesses need to grow and prosper in our state.

I-1100 negatively impacts the craft brewing industry.

Washington State is home to one of the most innovative and fastest growing craft brewing industries in the country. During the last 24 months, throughout the worst economic downturn in our lifetimes, the craft brewing industry in the State of Washington has grown more than in any 24 month period in history. Dozens of new craft breweries have opened, creating new employment opportunities for hundreds of state residents, and capitalizing on the creativity and innovation our state is known for.

What this means for YOU as a brewer:

The majority of the Washington craft brewing industry is small businesses. I-1100 would stunt the growth of our industry as breweries encounter more competition and pressure to give discounts, free product and services to obtain shelf space or handles at big box stores, chain restaurants, and other retailers. Long-term affect: A reduction of microbrew presence in the marketplace would have a disastrous effect on our burgeoning craft beer culture. Small breweries not capable of participating in the race to the bottom would close, eliminating jobs. Washington State ’s reputation as a destination for great craft beer would come to an end.

I-1100 deregulates a prospering, innovative industry.

The problems resulting from Federal deregulation of telecommunication, airline, and banking industries are well known. The affected industries now have reduced competition, less innovation, and benefit only the largest and wealthiest companies. I-1100 eliminates the level playing field that requires consistent pricing for all breweries.

What this means for YOU as a brewer:

I-1100 would legalize Tied-Houses moving Washington State towards the English Pub system, making it harder for small breweries to obtain handles. I-1100 allows beer and wine to be purchased on credit, creating a greater accounting burden as you track down customers with overdue balances. I-1100 legalizes Pay to Play, creating a sales system where money speaks louder than quality. I-1100 allows producers and distributors to give away free draught systems, product, mirrors, neons, store remodels, etc. Long-term affect: Those breweries not willing or able to compete with large producers’ deep pockets will be forced out of the marketplace and close their doors.

I-1100 takes away consumer choice.

The success of the craft brewing industry has been a huge success for the consumers of Washington State . Consumers have literally hundreds of choices of locally made, hand-crafted beers from across our state. I-1100 hurts consumer choice by giving volume pricing discounts to the largest companies, thereby reducing competition. Without the means to compete in the marketplace, small, neighborhood craft breweries will close and consumers will have less choice at their favorite establishments.

What this means for YOU as a brewer:

With a pay to play system, a brewery will be chosen based upon their ability to pay in goods or services instead of upon the merits of their beer. Washington state’s reputation as a destination for great craftbeer will cease to exist as more and more craft handles are replaced by big beer and breweries close their doors.

Vote NO on INITATIVE 1100



26 comments

  1. Why are you buying what the guild is selling, Kendall? Initiative 1100 would be great for the residents of Washington, most of whom enjoy alcohol responsibly, and for breweries, which would no longer be required to do business with the handful of gigantic beverage distributors that dominate and monopolize the industry. I-1100 just makes sense. It gets rid of a bizarre liquor distribution system that was designed in the 1930s, when many people still thought Prohibition was a good idea. 1-1100 is about giving consumers more affordable and accessible products. And if breweries would supposedly be so hurt by privatization, why do 32 other states — like California — have open liquor laws and their breweries are doing just fine?

  2. First, I am buying what the Guild is selling because they have a horse in this race. Comparatively, I do not.

    Second, I agree that we have archaic liquor laws that need to be rethought, revised, and in some cases abolished; however, I do not believe that the privatization of liquor sales, which is what everyone is standing up and cheering for, needs to be connected at the hip to the other issues involved.

    Finally, I believe that this is a very complicated issue and I do not want the general public to be tasked with rewriting the state’s liquor laws. What’s more, I don’t want Costco and Anheuser-Busch to rewrite our state’s liquor laws. We should not abandon the current system with the same lack of forethought with which we abandoned the Motor Vehicle Excise Tax with the passage of I-695. Some issues are too complex and too important to just stamp with a tag line like “$30 car tabs” or “privatized liquor sales” and then put to a public vote.

  3. Kendall, you may not want the public to rewrite our liquor laws, but I trust the free market and capitalism much more than the politicians and the political system. The more we can do to get closer to a free market, the better the system will work.

    I will vote FOR 1100.

  4. Harborguy, I will assume that you don’t mean to accuse me of NOT supporting a free market. I am not a communist. 🙂

    What we need is a law that affords only intelligent and informed people the right to vote.

  5. Kendall, you’re taking my comment in a direction I never imagined.

    I want less government, smaller government. Then, no matter who votes and who gets elected, the damage they can do to us is less. While on the surface your idea has merit I’m not quite ready to go there.

    I enjoy the Washington Beer Blog. Keep up the good work.

  6. I like craft beer, but their trade association is all wrong on this issue.

    I-1100 is good for consumers and good for the businesses who know how to win customers with superior products and service.

    I can’t conjure up any sympathy for businesspersons who believe the government can and should help them with protectionist regulations. Who do these guys think they need to be “protected” from, customers who prefer their competitors products?

    And is anybody seriously worried about the return of the abusive tied house? That might have been a problem in the economy that existed 100 years ago. But what are we afraid of now, a Budweiser Tied House? Such a thing couldn’t stay in business in today’s marketplace. It wouldn’t be able to find enough customers.

  7. Harborguy, I was being sarcastic. I am not a huge fan of the initiative process, I admit. It has its merits, for sure, but it can also be abused. We can agree to disagree. That’s cool by me. Doesn’t mean I don’t respect other opinions.

    PAnative is right. Don’t just have an opinion. Be informed. The links he provided are valuable. I should have included those links in the original post.

    With the exception of the state’s monopoly on retail hard liquor sales, I already see a free market. And therein lies my point. I don’t think that a wholesale gutting of the regs will make the market any freer. I fear it might do just the opposite from a consumers point of view. Apparently the Guild thinks it will create a less free market from the brewers’ perspective.

    I hope that this conversation (on this blog and on others) does not deteriorate into a Red vs. Blue volleyball match of meaningless rhetoric. A couple of times, I’ve felt myself starting to go there. We must resist the temptation to turn this into a meaningless talk radio conversation.

    Let’s not lose sight of the fact that we all want the same thing: meaningful, much-needed, revisions to WA liquor laws in a way that benefits all parties involved.

  8. I’m not always sure that what the brewers guild tells us brewers is really the best for us. You don’t think we already have a ton of competition with the big guys now? I mean really it’s a bunch of bull that this measure is going to make it harder to get into retail stores, bars and the like, it’s already hard. When even your own distributor wont push your product because their salesman don’t get the incentives like they get from InBev AB how can we really win? We win because people want a superior product that’s why! All the growth in the market for craft brewers has nothing to do with us getting an advantage in sales compared to the big guys, it has everything to do with people wanting our product. Go down to the grocery store and look at the beer section, when you start looking at all of the big guys stuff including the “pseudocraft” it doesn’t leave much room left for the craft guys, that’s not going to change under any law. I’d say less regulation is probably the best for us. I’ll have to take a good look at the law but next time don’t just regurgitate what the guild tells you please.

  9. In my own defense, I must say that I attended a recent meeting of the Brewers Guild, at which time it seemed quite clear that the organization (as represented by the members in attendance) had not yet formulated a cohesive opinion on this matter. When I saw that statement, I even went so far as to contact the Guild to confirm that it was the Guild’s position and not just the president’s position.

    As for me, I had my opinion before they issued their statement, but then I’m an individual and no consensus is necessary. I am keenly aware that individuals within the guild hold differing opinions.

    Reading the complete text helps and is easy to do. Understanding the ramification of the proposed changes to the RCW is a bit more tricky. My brain kind of swells when I read things like: “The historical total prohibition on ownership of an interest in one tier by a person with an ownership interest in another tier, as well as the historical restriction on financial and business relationships between tiers, is unduly restrictive.”

    And that’s just one example. It’s pretty intense stuff. I hope John Q. Public is able to determine whether or not the restrictions on financial and business relationships between tiers is unduly restrictive.

  10. I agree with Kendall and the Brewer’s Guild. Privatization of the State’s hard liquor monopoly is one thing. (It’s a terrible, terrible idea, but for other reasons.)

    Abolition of tied-house provisions is quite another entirely. Tied-house laws and the 3-tier system may seem like archaic relics from some fanciful and quaintly moralistic prohibition era, but the laws are written that way for very, very good reasons. Prior to Prohibition the majority of bars were owned or at least partly controlled by breweries. The big ones; your Pabsts, Millers, Bud, etc.. It wasn’t always direct ownership. Sometimes it would be something as simple as “How would you like a new bar-top, some stools, a big mirror maybe?” (“money’s worth” transactions) and the house was on the hook. The proprietor was ordered to sell the company’s beer, and ONLY the company’s beer, and to sell a certain quota of it. This led to serious problems with anti-trust and consumer choice issues, as well as major over-service and public drunkenness problems as the bars tried desperately to meet their quotas. Tied houses were specifically cited as one of the main problems with the alcohol industry in the push for Prohibition. Recognizing this, following the 21st Amendment every state has enacted anti-Tied-house laws to separate large producers from retail ownership.

    It’s one thing to say “Oh, let the free market decide!” but quite another when the nature of the industry leads to monopolization, collusion and anti-consumer practices. AB-InBev makes billions of dollars and sells half the beer in the country. The market doesn’t decide, AB-InBev does. And they don’t pull punches.

    If you do care about choice, you want independent bar owners to be able to choose which beers they want to sell, and to sell those that people want and are buying. That’s the “free market”, right? For serious, independent, hard-core beer bars this probably won’t be an issue either way. Coors isn’t going to buy out Beveridge Place any time soon. This is more about that lonely tap or two in more run of the mill bars and restaurants, of something that isn’t Bud/Mil/Coors, disappearing for good. Or becoming Shock-Top or Blue Moon. Always. Everywhere.

    Craft Beer as we know it benefits from, and frankly exists due to, what are essentially anti-capitalist structures in our laws that create a more level playing field in an otherwise monopolized business. Gutting the tied house laws, the only thing preventing vertical-integration of brewery to bar, will harm our local craft breweries. Period. There are many problems with the Three-Tier system, yes. It’s complex and confusing to most people. “Why can’t I just buy what I want, when I want it?” And the middle tier (Distributors) was designed to be a choke point where taxes could be easily collected and distribution controlled. Unfortunately they’ve become their own powerful monopoly, which has been a major barrier to entry for many craft breweries into new markets. The system isn’t perfect, and parts of it could certainly use some change. Widen the middle tier, for example, or allow for easier self-distribution for smaller breweries.

    But the laws are there for very good reasons. If you want to change it, fine. The legislature should be involved, thought and study applied, bills debated and votes cast. But an initiative, tied to “You could buy liquor by the gallon at Costco! Yeehaw!” isn’t the way to do this. The past abuses of the pre-Prohibition alcohol industry aren’t remembered, so the laws seem antiquated. Most people don’t even know the 3-Tier system exists. I’d like to think the Public will think about this, but I doubt it.

    The lure of cheap booze at 4AM on a Sunday in Safeway is just too tempting.

  11. My comment just posted on seattle beer news:

    I will be voting yes on this bill, look at California. In my opinion they have the best beer scene in the country. When the WA Brewers Guild says, “…small, neighborhood craft breweries will close and consumers will have less choice at their favorite establishments.” This is not true and is simply fear mongering in my opinion. They should be saying the places “may have to close” not “will close” and “will have less choice”. I have been critical of the guild in the past and the arguments they made for a no vote on 1100 have not convinced me.

    The only thing that scares me about 1100 passing is the state will try and raise taxes elsewhere to make up for the revenue they lost from the liquor sales. The state made $230 million from liquor sales in 2009. Can anyone say new taxes…or better yet can anyone say legalize cannabis and let the state tax it!!!!!!!!

  12. Thanks for your thoughtful comments everyone!

    Russell, thank you for discussing the nature and purpose of tied-house rules. It is a very important thing to understand when formulating an opinion on this issue. It’s tricky business, for sure.

    Several people (on this forum and others) have pointed to California as an example of a great, vibrant craft brewing scene. No doubt there is a lot of delicious and creative beer coming to Washington from California’s many excellent craft breweries. It’s impressive, no doubt.

    I am a shameless defender of the Washington’s beer scene, so I have to point out something. As I understand it, they have 250 breweries in California. Wow, that’s a lot of breweries. They also have 39 million people in California. According to the Liquor Control Board, there are 132 licensed microbreweries in Washington. More realistically, the number is something like 116 breweries producing beer on a measurable scale. There are only 6.5 million people in Washington. When compared to California, Washington has about 6 times as many craft breweries per capita.

    If we want an example of a vibrant and healthy craft beer industry, we should be looking at Oregon. They have over 100 breweries and 3.8 million people. That’s pretty seriously badass.

    Kiff – Mrs. Beerblog and I were just talking about that yesterday. The Feds need to remove weed from the list of Schedule 1 drugs so states can do with it what they want, but that’s a different subject.

  13. Well Kendall, you certainly accomplished your goal of starting the conversation early. What a spirited and lively conversation. I would like to address two things:

    Adam, I don’t recall seeing you at the last brewers guild meeting, or getting an email from you on the issues. We cannot form our collective opinion without input from our membership. Input was requested and our official stance is the result. The time to weigh in on a decision is before it is made.

    Kif, I hate fear mongering. This position paper was meant for brewers and brewery employees. They know the experience of losing a chance at a handle because “someone” gave them a free draught system. Free product and coercion exists today and salespeople encounter it often in the field. Right now, it’s illegal and small businesses can stand up to the bar owner demanding free product for tap space. We have the law behind us. If initiative 1100 passes, we won’t have that luxury. Will the whole of WA beer industry die, of course not.

    Let us not stray from the main point which is that Initiative 1100 is being portrayed as ONLY being about privatizing spirits. There is more to the story. Check out the laws about to be repealed. BE AN INFORMED VOTER! Don’t buy the hype. Mine, the Guild’s, or anyone else’s.

  14. It seems like the Brewers Guild is facing an uphill climb on this one, and I do sympathize. It’s a bummer when you carve out a niche for yourself in a particular competitive landscape only to have someone come through with a bulldozer and change it all out from under you. But, I agree with most of the other commenters that this is necessarily a part of life in a free market, and the Guild’s case is pretty weak.

    I’d like to hear an actual example of what they think is going to happen. I’m definitely not concerned about InBev popping up a pub on every corner like Starbucks serving only crap yellow beer (oh, and Stella, cause that stuff is great ). Or maybe the craft brewers are worried that it will be tougher to get handles at places where the big draw is pull tabs or the Bloomin Onion? If that’s the case, I’d be interested in seeing how big that market is currently for the micro / craft brewers… I’d bet that’s a red herring too.

    My guess is that maybe the Guild isn’t worried as much about the supermacro brewers putting them out of business as they are about the competition from other craft brewers. If it were a lot easier for some of the California, Oregon, Colorado breweries to sell their stuff here it would put significant pressure on the local brewers, I’m sure. But the worst case there is that competition gets everyone to step up their game, and I’ll personally keep drinking what’s fresh and local no matter what.

    Regardless, I hope 1100 passes cause maybe then I’ll finally be able to buy a decent bottle of scotch without having to get out my passport. It’s time for Washington’s ridiculous antiquarian blue laws to go.

  15. I will vote yes on 1100 and I think the craft brewers are DEAD WRONG on this! Come on guys, have a little faith in your product. It will do fine! Do you really want !-1105 to pass? The Association of Family Wineries is in favor of I-1100. Maybe your in bed with the distributors?

  16. Ok, I hear a lot of people saying this will be great because California did it, Well California is one of the more broke states in the NATION. I really dont want to be like California If I did I would move there,
    Paul you said do you really want 1105 to pass. It’s not a choose between them. Vote NO on both of them, look alittle farther into the law Are you a resident of Washington do you wont to pay the 750 Million days of lost revinew with 1105 or the 320 Million days lost with 1100, I dont, that money goes to pay for Schools, 911, police, fire personal, roads ext….. Let the people and the bars pay for that People dont get how much we will loose if big biz takes over. and for you that think you will have more selection, NOT, there is about 200 thounsand dollars of inventory in each WA state liq store how many stores do you rwally think are going to carry everthing Just not going to happen. VOTE NO TO BOTH 1100 and 1105

  17. Rubbish.

    If you make a quality product you will succeed, period. That’s the way it should be.

    Both measure are going to pass by a landslide anyway so rather than waste your time with this perhaps you should be wroking on a sound strategy to stay in business.

    Let the free market be free. I’m voting yes for both, no chance to sway me.

  18. For the record, I’m not trying to be a jackass, I’m asking questions that I don’t know the answers to. That being said..

    1. Can I currently open a bar in Seattle and sell only 1 brand of beer? Of course I would go out of business, but is it legal?

    2. When I lived in SoCal Skyy Vodka came in and painted the ceiling of a neighborhood bar, would that be illegal here?

    3. Is there an example of a brewery directly helped by these regulations in question? I’m an outsider, so I have no clue how the business is run, or if that question is even answerable.

    I’m a yes on both, but I’ll have to go out of my way to drink a few extra beers from the smallest breweries to be part of the solution.

  19. After years of buying state restricted and regulated beer/wine/spirits in Washington State, I was glad to see this measure come up.

    I’m all for taking the state out of the alcoholic beverage business.

    However, the more I hear about this, the less I like it. Yeah, I like free-enterprise…. but in a case like this, the new regs would give an unfair advantage to Big Brewer (Anheiser-Busch for example) and would indeed give the large buyers/sellers (like Costco) the power to really impact which products are available, while hurting the companies that won’t work with them (a la Wally World…and I won’t shop there either). Building a good product can’t compete with a big company that can afford to undersell in order to take over a local market.

    Seems like the sentiments for taking the government out are great – but this initiative needs to be distilled to take out the Big Brewer advantage.

  20. Kendall Jones says:
    July 30, 2010 at 4:49 pm

    What we need is a law that affords only intelligent and informed people the right to vote

    ==========

    That would clearly exclude you form ever voting again.

  21. Perhaps I have read into all of this wrong, but it would appear that this would bring about a “Wal-Mart” type of landscape to the alcohol business (the large beverage companies being the Wal-Mart, obviously). While I do agree that privatization of liquor needs to happen, I think it should happen entirely on its own, and not in conjunction with changing laws that could actually cripple my small brewpub. I agree that this will probably not KILL Washington craft beer. But it could change the way our beer HAS to be distributed, and by whom, which necessarily changes our business as small, local, craft brewers. Changing the way we craft brewers conduct our business potentially damages the alliance we craft brewers have formed with one another in the effort to build a very diverse, high quality beer landscape. Being forced to compete directly with the other local craft breweries, instead of as a united front against the enormous beer-making factories that tend towards marketing instead of producing high quality products damages this landscape and our ability to keep bringing new beers to the pint glass. We do compete with one another as craft brewers, but through our practical brewing skills, and not our ability to remove business and sales from other brewers. It will be bad when WA brewers are forced to make market capitalism a higher priority than an ever-evolving, creative, passionate beer scene. Nothing wrong with free market, but it can’t be good when it forces a lower quality product for the sake of lower retail prices. I am a brewer, and not an economist, so maybe I am way off base. But this is just the way I see it…

  22. I have lots of craft brewery friends on both sides of I-1100 (including Mike Hale, who supports it, by the way). Of course all the distributors, big and small, oppose it. It seems that I-1105 is opposed by just about everyone I know except big distributors, and no surprise there, either. But a couple of points to make here: Washington’s 70-year old “tied house” law, making illegal joint ownership among suppliers, wholesalers and retailers, was thrown out last year. Also, in an exception to the existing “money’s worth” rule, the state’s beer and wine retailers are now permitted to receive free promotional items such as coasters, glassware and t-shirts from suppliers. In addition, retailers are no longer required to sell beer or wine to their customers at a minimum 10 percent markup. Pricing practices now are only subject to a clause in the law that prohibits any of the tier members for exerting “undue influence” on another, and complaints about this will be handled by the Liquor Board (which in fact told me these changes were overdue because of so many exceptions to the old rules already in practice).
    I understand small brewers’ fears about volume discounts by the big box stores, but larger craft brewers already have more clout there anyway among retailers with fewer SKUs and bigger orders. And even small retailers have told me they would like to warehouse their own products, and be able to buy on credit from distributors, too.
    As far as selection and service goes, I’m not sure the likes of Costco (which also has its own beer brands now to go along with wines and spirits) could ever really compete with small specialty shops, where price is not the only consideration. But as their CEO Jim Sinegal told me, they can’t compete with the state, either. I really think it’s time for a change, and I-1100 is not going to please everyone, but it will hardly kill the craft beer business in this state.

  23. Alan,
    Thank you for sharing your thoughtful and informed opinion. The best we can do is share real information and not let our decisions be swayed by the relentless, ridiculous advertising on both sides of this issue. Again, thank you for your thoughtful comments.

  24. why do we have to be like California there state is broke with all there free will junk. Our state is floating but with thoughtful thinking we can do some changes but? do we need to take away from our own cities by voting yes we will take our money out of our communities and put it in the hands of the big money makers (Costco, Safeway, Wall-Mart ect…). They are pushing very hard for this why is that, think about it. They will have more control!

Comments are closed.

Initiative 1100 – “The greatest threat the WA craft brewing industry in a decade”

In November you will be asked to vote on Initiative 1100. The Washington Beer Blog wants to get this conversation started early.

It is the opinion of this blog, as well as the Washington Brewers Guild, that you should vote NO ON INITIATIVE 1100. On the surface, it privatizes the sale of liquor. Yes, the state would finally shut down all of those liquor stores and leave the sale of distilled spirits to private retailers (grocery stores, Costco, etc), but that is not all it will do and that is not why this initiative has made it on to the ballot. Other regulatory changes introduced by Initiative 1100 threaten the Washington craft beer industry.

Don’t be fooled

Privatizing liquor sales is probably a very good idea BUT DON’T BE FOOLED! Initiative 1100 is a wolf in sheep’s clothing. While Initiative 1100 would privatize liquor sales, it would also bring about sweeping changes to other regulations. These regulatory changes negatively impact small businesses and especially the Washington craft beer industry. While we often feel suffocated by regulations and our state’s seemingly medieval liquor laws, some of them actually make sense and have an important role in maintaining a level playing field on which our local brewers can compete.

Perhaps the most disturbing changes proposed by Initiative 1100 are to the tied-house regulations. In general, tied-house rules regulate how alcohol is promoted and how manufacturers, wholesalers and retailers conduct business with each other. It was originally an English term that refer to a bar being “tied” by ownership or by contract to a specific beer or liquor manufacturer. Our existing tied-house regulations are intended to prevent “pay-to-play” and other unfair practices that give the largest producers, distributors and retailers an unfair advantage.

How effective the state enforces the existing tied-house regulations is a different subject, but eliminating the regulations altogether would create a massively unfair advantage for the behemoths in the beer industry.

sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor
sponsor

And that’s why this initiative is on the ballot. Not because you and me want to privatize liquor sales; not because we want the Liquor Control Board to focus on enforcement and prevention instead of retails sales; not because we want the LCB to be a more effective tax collecting and revenue generating agency; but rather, Initiative 1100 is on the ballot because the largest players in the industry want to gain an advantage.

Shameless piggy-backers!

The framers of Initiative 1100 shamelessly piggy-backed regulatory changes onto a fundamentally good idea. They know that the majority of us want to see the state privatize liquor sales and they are sneaking in these other regulatory changes because they think we won’t pay close enough attention.

Even if you disagree with our opinion, please pay attention. Don’t let them fool you. Regardless of how you vote, be informed.

Do it for the children

Many of the other opponents to Initiative 1100 will be playing the morality card. They will argue that making liquor available in grocery stores will increase its availability to underage drinkers. They will ask you to vote NO ON INITIATIVE 1100 for the sake of our children. While we usually find ourselves in disagreement with people who use such limp, hollow, and ultimately meaningless arguments to support their cause, we find ourselves allied with them on this one issue. That being said, make no mistakes about it, we oppose this initiative because of the negative impact it will have on small businesses and our local craft beer industry.

While it is hard to understand all of the details of all of the regulations impacted, we stand by our position and we support the Washington Brewers Guild. That’s where we stand – firmly beside the Guild.

Here is what the Washington Brewers Guild has to say about it.

Vote NO on INITATIVE 1100

I-1100 is the greatest threat the Washington craft brewing industry has experienced in a decade.

  • Actively being promoted as modernizing liquor laws, by privatizing spirit sales.
  • Actually a sweeping proposal that repeals 39 State Laws, enabling the biggest retailers, distributors, and producers to own and give favorable pricing to each other, which would eliminate the level playing field small businesses need to grow and prosper in our state.

I-1100 negatively impacts the craft brewing industry.

Washington State is home to one of the most innovative and fastest growing craft brewing industries in the country. During the last 24 months, throughout the worst economic downturn in our lifetimes, the craft brewing industry in the State of Washington has grown more than in any 24 month period in history. Dozens of new craft breweries have opened, creating new employment opportunities for hundreds of state residents, and capitalizing on the creativity and innovation our state is known for.

What this means for YOU as a brewer:

The majority of the Washington craft brewing industry is small businesses. I-1100 would stunt the growth of our industry as breweries encounter more competition and pressure to give discounts, free product and services to obtain shelf space or handles at big box stores, chain restaurants, and other retailers. Long-term affect: A reduction of microbrew presence in the marketplace would have a disastrous effect on our burgeoning craft beer culture. Small breweries not capable of participating in the race to the bottom would close, eliminating jobs. Washington State ’s reputation as a destination for great craft beer would come to an end.

I-1100 deregulates a prospering, innovative industry.

The problems resulting from Federal deregulation of telecommunication, airline, and banking industries are well known. The affected industries now have reduced competition, less innovation, and benefit only the largest and wealthiest companies. I-1100 eliminates the level playing field that requires consistent pricing for all breweries.

What this means for YOU as a brewer:

I-1100 would legalize Tied-Houses moving Washington State towards the English Pub system, making it harder for small breweries to obtain handles. I-1100 allows beer and wine to be purchased on credit, creating a greater accounting burden as you track down customers with overdue balances. I-1100 legalizes Pay to Play, creating a sales system where money speaks louder than quality. I-1100 allows producers and distributors to give away free draught systems, product, mirrors, neons, store remodels, etc. Long-term affect: Those breweries not willing or able to compete with large producers’ deep pockets will be forced out of the marketplace and close their doors.

I-1100 takes away consumer choice.

The success of the craft brewing industry has been a huge success for the consumers of Washington State . Consumers have literally hundreds of choices of locally made, hand-crafted beers from across our state. I-1100 hurts consumer choice by giving volume pricing discounts to the largest companies, thereby reducing competition. Without the means to compete in the marketplace, small, neighborhood craft breweries will close and consumers will have less choice at their favorite establishments.

What this means for YOU as a brewer:

With a pay to play system, a brewery will be chosen based upon their ability to pay in goods or services instead of upon the merits of their beer. Washington state’s reputation as a destination for great craftbeer will cease to exist as more and more craft handles are replaced by big beer and breweries close their doors.

Vote NO on INITATIVE 1100



26 comments

  1. Why are you buying what the guild is selling, Kendall? Initiative 1100 would be great for the residents of Washington, most of whom enjoy alcohol responsibly, and for breweries, which would no longer be required to do business with the handful of gigantic beverage distributors that dominate and monopolize the industry. I-1100 just makes sense. It gets rid of a bizarre liquor distribution system that was designed in the 1930s, when many people still thought Prohibition was a good idea. 1-1100 is about giving consumers more affordable and accessible products. And if breweries would supposedly be so hurt by privatization, why do 32 other states — like California — have open liquor laws and their breweries are doing just fine?

  2. First, I am buying what the Guild is selling because they have a horse in this race. Comparatively, I do not.

    Second, I agree that we have archaic liquor laws that need to be rethought, revised, and in some cases abolished; however, I do not believe that the privatization of liquor sales, which is what everyone is standing up and cheering for, needs to be connected at the hip to the other issues involved.

    Finally, I believe that this is a very complicated issue and I do not want the general public to be tasked with rewriting the state’s liquor laws. What’s more, I don’t want Costco and Anheuser-Busch to rewrite our state’s liquor laws. We should not abandon the current system with the same lack of forethought with which we abandoned the Motor Vehicle Excise Tax with the passage of I-695. Some issues are too complex and too important to just stamp with a tag line like “$30 car tabs” or “privatized liquor sales” and then put to a public vote.

  3. Kendall, you may not want the public to rewrite our liquor laws, but I trust the free market and capitalism much more than the politicians and the political system. The more we can do to get closer to a free market, the better the system will work.

    I will vote FOR 1100.

  4. Harborguy, I will assume that you don’t mean to accuse me of NOT supporting a free market. I am not a communist. 🙂

    What we need is a law that affords only intelligent and informed people the right to vote.

  5. Kendall, you’re taking my comment in a direction I never imagined.

    I want less government, smaller government. Then, no matter who votes and who gets elected, the damage they can do to us is less. While on the surface your idea has merit I’m not quite ready to go there.

    I enjoy the Washington Beer Blog. Keep up the good work.

  6. I like craft beer, but their trade association is all wrong on this issue.

    I-1100 is good for consumers and good for the businesses who know how to win customers with superior products and service.

    I can’t conjure up any sympathy for businesspersons who believe the government can and should help them with protectionist regulations. Who do these guys think they need to be “protected” from, customers who prefer their competitors products?

    And is anybody seriously worried about the return of the abusive tied house? That might have been a problem in the economy that existed 100 years ago. But what are we afraid of now, a Budweiser Tied House? Such a thing couldn’t stay in business in today’s marketplace. It wouldn’t be able to find enough customers.

  7. Harborguy, I was being sarcastic. I am not a huge fan of the initiative process, I admit. It has its merits, for sure, but it can also be abused. We can agree to disagree. That’s cool by me. Doesn’t mean I don’t respect other opinions.

    PAnative is right. Don’t just have an opinion. Be informed. The links he provided are valuable. I should have included those links in the original post.

    With the exception of the state’s monopoly on retail hard liquor sales, I already see a free market. And therein lies my point. I don’t think that a wholesale gutting of the regs will make the market any freer. I fear it might do just the opposite from a consumers point of view. Apparently the Guild thinks it will create a less free market from the brewers’ perspective.

    I hope that this conversation (on this blog and on others) does not deteriorate into a Red vs. Blue volleyball match of meaningless rhetoric. A couple of times, I’ve felt myself starting to go there. We must resist the temptation to turn this into a meaningless talk radio conversation.

    Let’s not lose sight of the fact that we all want the same thing: meaningful, much-needed, revisions to WA liquor laws in a way that benefits all parties involved.

  8. I’m not always sure that what the brewers guild tells us brewers is really the best for us. You don’t think we already have a ton of competition with the big guys now? I mean really it’s a bunch of bull that this measure is going to make it harder to get into retail stores, bars and the like, it’s already hard. When even your own distributor wont push your product because their salesman don’t get the incentives like they get from InBev AB how can we really win? We win because people want a superior product that’s why! All the growth in the market for craft brewers has nothing to do with us getting an advantage in sales compared to the big guys, it has everything to do with people wanting our product. Go down to the grocery store and look at the beer section, when you start looking at all of the big guys stuff including the “pseudocraft” it doesn’t leave much room left for the craft guys, that’s not going to change under any law. I’d say less regulation is probably the best for us. I’ll have to take a good look at the law but next time don’t just regurgitate what the guild tells you please.

  9. In my own defense, I must say that I attended a recent meeting of the Brewers Guild, at which time it seemed quite clear that the organization (as represented by the members in attendance) had not yet formulated a cohesive opinion on this matter. When I saw that statement, I even went so far as to contact the Guild to confirm that it was the Guild’s position and not just the president’s position.

    As for me, I had my opinion before they issued their statement, but then I’m an individual and no consensus is necessary. I am keenly aware that individuals within the guild hold differing opinions.

    Reading the complete text helps and is easy to do. Understanding the ramification of the proposed changes to the RCW is a bit more tricky. My brain kind of swells when I read things like: “The historical total prohibition on ownership of an interest in one tier by a person with an ownership interest in another tier, as well as the historical restriction on financial and business relationships between tiers, is unduly restrictive.”

    And that’s just one example. It’s pretty intense stuff. I hope John Q. Public is able to determine whether or not the restrictions on financial and business relationships between tiers is unduly restrictive.

  10. I agree with Kendall and the Brewer’s Guild. Privatization of the State’s hard liquor monopoly is one thing. (It’s a terrible, terrible idea, but for other reasons.)

    Abolition of tied-house provisions is quite another entirely. Tied-house laws and the 3-tier system may seem like archaic relics from some fanciful and quaintly moralistic prohibition era, but the laws are written that way for very, very good reasons. Prior to Prohibition the majority of bars were owned or at least partly controlled by breweries. The big ones; your Pabsts, Millers, Bud, etc.. It wasn’t always direct ownership. Sometimes it would be something as simple as “How would you like a new bar-top, some stools, a big mirror maybe?” (“money’s worth” transactions) and the house was on the hook. The proprietor was ordered to sell the company’s beer, and ONLY the company’s beer, and to sell a certain quota of it. This led to serious problems with anti-trust and consumer choice issues, as well as major over-service and public drunkenness problems as the bars tried desperately to meet their quotas. Tied houses were specifically cited as one of the main problems with the alcohol industry in the push for Prohibition. Recognizing this, following the 21st Amendment every state has enacted anti-Tied-house laws to separate large producers from retail ownership.

    It’s one thing to say “Oh, let the free market decide!” but quite another when the nature of the industry leads to monopolization, collusion and anti-consumer practices. AB-InBev makes billions of dollars and sells half the beer in the country. The market doesn’t decide, AB-InBev does. And they don’t pull punches.

    If you do care about choice, you want independent bar owners to be able to choose which beers they want to sell, and to sell those that people want and are buying. That’s the “free market”, right? For serious, independent, hard-core beer bars this probably won’t be an issue either way. Coors isn’t going to buy out Beveridge Place any time soon. This is more about that lonely tap or two in more run of the mill bars and restaurants, of something that isn’t Bud/Mil/Coors, disappearing for good. Or becoming Shock-Top or Blue Moon. Always. Everywhere.

    Craft Beer as we know it benefits from, and frankly exists due to, what are essentially anti-capitalist structures in our laws that create a more level playing field in an otherwise monopolized business. Gutting the tied house laws, the only thing preventing vertical-integration of brewery to bar, will harm our local craft breweries. Period. There are many problems with the Three-Tier system, yes. It’s complex and confusing to most people. “Why can’t I just buy what I want, when I want it?” And the middle tier (Distributors) was designed to be a choke point where taxes could be easily collected and distribution controlled. Unfortunately they’ve become their own powerful monopoly, which has been a major barrier to entry for many craft breweries into new markets. The system isn’t perfect, and parts of it could certainly use some change. Widen the middle tier, for example, or allow for easier self-distribution for smaller breweries.

    But the laws are there for very good reasons. If you want to change it, fine. The legislature should be involved, thought and study applied, bills debated and votes cast. But an initiative, tied to “You could buy liquor by the gallon at Costco! Yeehaw!” isn’t the way to do this. The past abuses of the pre-Prohibition alcohol industry aren’t remembered, so the laws seem antiquated. Most people don’t even know the 3-Tier system exists. I’d like to think the Public will think about this, but I doubt it.

    The lure of cheap booze at 4AM on a Sunday in Safeway is just too tempting.

  11. My comment just posted on seattle beer news:

    I will be voting yes on this bill, look at California. In my opinion they have the best beer scene in the country. When the WA Brewers Guild says, “…small, neighborhood craft breweries will close and consumers will have less choice at their favorite establishments.” This is not true and is simply fear mongering in my opinion. They should be saying the places “may have to close” not “will close” and “will have less choice”. I have been critical of the guild in the past and the arguments they made for a no vote on 1100 have not convinced me.

    The only thing that scares me about 1100 passing is the state will try and raise taxes elsewhere to make up for the revenue they lost from the liquor sales. The state made $230 million from liquor sales in 2009. Can anyone say new taxes…or better yet can anyone say legalize cannabis and let the state tax it!!!!!!!!

  12. Thanks for your thoughtful comments everyone!

    Russell, thank you for discussing the nature and purpose of tied-house rules. It is a very important thing to understand when formulating an opinion on this issue. It’s tricky business, for sure.

    Several people (on this forum and others) have pointed to California as an example of a great, vibrant craft brewing scene. No doubt there is a lot of delicious and creative beer coming to Washington from California’s many excellent craft breweries. It’s impressive, no doubt.

    I am a shameless defender of the Washington’s beer scene, so I have to point out something. As I understand it, they have 250 breweries in California. Wow, that’s a lot of breweries. They also have 39 million people in California. According to the Liquor Control Board, there are 132 licensed microbreweries in Washington. More realistically, the number is something like 116 breweries producing beer on a measurable scale. There are only 6.5 million people in Washington. When compared to California, Washington has about 6 times as many craft breweries per capita.

    If we want an example of a vibrant and healthy craft beer industry, we should be looking at Oregon. They have over 100 breweries and 3.8 million people. That’s pretty seriously badass.

    Kiff – Mrs. Beerblog and I were just talking about that yesterday. The Feds need to remove weed from the list of Schedule 1 drugs so states can do with it what they want, but that’s a different subject.

  13. Well Kendall, you certainly accomplished your goal of starting the conversation early. What a spirited and lively conversation. I would like to address two things:

    Adam, I don’t recall seeing you at the last brewers guild meeting, or getting an email from you on the issues. We cannot form our collective opinion without input from our membership. Input was requested and our official stance is the result. The time to weigh in on a decision is before it is made.

    Kif, I hate fear mongering. This position paper was meant for brewers and brewery employees. They know the experience of losing a chance at a handle because “someone” gave them a free draught system. Free product and coercion exists today and salespeople encounter it often in the field. Right now, it’s illegal and small businesses can stand up to the bar owner demanding free product for tap space. We have the law behind us. If initiative 1100 passes, we won’t have that luxury. Will the whole of WA beer industry die, of course not.

    Let us not stray from the main point which is that Initiative 1100 is being portrayed as ONLY being about privatizing spirits. There is more to the story. Check out the laws about to be repealed. BE AN INFORMED VOTER! Don’t buy the hype. Mine, the Guild’s, or anyone else’s.

  14. It seems like the Brewers Guild is facing an uphill climb on this one, and I do sympathize. It’s a bummer when you carve out a niche for yourself in a particular competitive landscape only to have someone come through with a bulldozer and change it all out from under you. But, I agree with most of the other commenters that this is necessarily a part of life in a free market, and the Guild’s case is pretty weak.

    I’d like to hear an actual example of what they think is going to happen. I’m definitely not concerned about InBev popping up a pub on every corner like Starbucks serving only crap yellow beer (oh, and Stella, cause that stuff is great ). Or maybe the craft brewers are worried that it will be tougher to get handles at places where the big draw is pull tabs or the Bloomin Onion? If that’s the case, I’d be interested in seeing how big that market is currently for the micro / craft brewers… I’d bet that’s a red herring too.

    My guess is that maybe the Guild isn’t worried as much about the supermacro brewers putting them out of business as they are about the competition from other craft brewers. If it were a lot easier for some of the California, Oregon, Colorado breweries to sell their stuff here it would put significant pressure on the local brewers, I’m sure. But the worst case there is that competition gets everyone to step up their game, and I’ll personally keep drinking what’s fresh and local no matter what.

    Regardless, I hope 1100 passes cause maybe then I’ll finally be able to buy a decent bottle of scotch without having to get out my passport. It’s time for Washington’s ridiculous antiquarian blue laws to go.

  15. I will vote yes on 1100 and I think the craft brewers are DEAD WRONG on this! Come on guys, have a little faith in your product. It will do fine! Do you really want !-1105 to pass? The Association of Family Wineries is in favor of I-1100. Maybe your in bed with the distributors?

  16. Ok, I hear a lot of people saying this will be great because California did it, Well California is one of the more broke states in the NATION. I really dont want to be like California If I did I would move there,
    Paul you said do you really want 1105 to pass. It’s not a choose between them. Vote NO on both of them, look alittle farther into the law Are you a resident of Washington do you wont to pay the 750 Million days of lost revinew with 1105 or the 320 Million days lost with 1100, I dont, that money goes to pay for Schools, 911, police, fire personal, roads ext….. Let the people and the bars pay for that People dont get how much we will loose if big biz takes over. and for you that think you will have more selection, NOT, there is about 200 thounsand dollars of inventory in each WA state liq store how many stores do you rwally think are going to carry everthing Just not going to happen. VOTE NO TO BOTH 1100 and 1105

  17. Rubbish.

    If you make a quality product you will succeed, period. That’s the way it should be.

    Both measure are going to pass by a landslide anyway so rather than waste your time with this perhaps you should be wroking on a sound strategy to stay in business.

    Let the free market be free. I’m voting yes for both, no chance to sway me.

  18. For the record, I’m not trying to be a jackass, I’m asking questions that I don’t know the answers to. That being said..

    1. Can I currently open a bar in Seattle and sell only 1 brand of beer? Of course I would go out of business, but is it legal?

    2. When I lived in SoCal Skyy Vodka came in and painted the ceiling of a neighborhood bar, would that be illegal here?

    3. Is there an example of a brewery directly helped by these regulations in question? I’m an outsider, so I have no clue how the business is run, or if that question is even answerable.

    I’m a yes on both, but I’ll have to go out of my way to drink a few extra beers from the smallest breweries to be part of the solution.

  19. After years of buying state restricted and regulated beer/wine/spirits in Washington State, I was glad to see this measure come up.

    I’m all for taking the state out of the alcoholic beverage business.

    However, the more I hear about this, the less I like it. Yeah, I like free-enterprise…. but in a case like this, the new regs would give an unfair advantage to Big Brewer (Anheiser-Busch for example) and would indeed give the large buyers/sellers (like Costco) the power to really impact which products are available, while hurting the companies that won’t work with them (a la Wally World…and I won’t shop there either). Building a good product can’t compete with a big company that can afford to undersell in order to take over a local market.

    Seems like the sentiments for taking the government out are great – but this initiative needs to be distilled to take out the Big Brewer advantage.

  20. Kendall Jones says:
    July 30, 2010 at 4:49 pm

    What we need is a law that affords only intelligent and informed people the right to vote

    ==========

    That would clearly exclude you form ever voting again.

  21. Perhaps I have read into all of this wrong, but it would appear that this would bring about a “Wal-Mart” type of landscape to the alcohol business (the large beverage companies being the Wal-Mart, obviously). While I do agree that privatization of liquor needs to happen, I think it should happen entirely on its own, and not in conjunction with changing laws that could actually cripple my small brewpub. I agree that this will probably not KILL Washington craft beer. But it could change the way our beer HAS to be distributed, and by whom, which necessarily changes our business as small, local, craft brewers. Changing the way we craft brewers conduct our business potentially damages the alliance we craft brewers have formed with one another in the effort to build a very diverse, high quality beer landscape. Being forced to compete directly with the other local craft breweries, instead of as a united front against the enormous beer-making factories that tend towards marketing instead of producing high quality products damages this landscape and our ability to keep bringing new beers to the pint glass. We do compete with one another as craft brewers, but through our practical brewing skills, and not our ability to remove business and sales from other brewers. It will be bad when WA brewers are forced to make market capitalism a higher priority than an ever-evolving, creative, passionate beer scene. Nothing wrong with free market, but it can’t be good when it forces a lower quality product for the sake of lower retail prices. I am a brewer, and not an economist, so maybe I am way off base. But this is just the way I see it…

  22. I have lots of craft brewery friends on both sides of I-1100 (including Mike Hale, who supports it, by the way). Of course all the distributors, big and small, oppose it. It seems that I-1105 is opposed by just about everyone I know except big distributors, and no surprise there, either. But a couple of points to make here: Washington’s 70-year old “tied house” law, making illegal joint ownership among suppliers, wholesalers and retailers, was thrown out last year. Also, in an exception to the existing “money’s worth” rule, the state’s beer and wine retailers are now permitted to receive free promotional items such as coasters, glassware and t-shirts from suppliers. In addition, retailers are no longer required to sell beer or wine to their customers at a minimum 10 percent markup. Pricing practices now are only subject to a clause in the law that prohibits any of the tier members for exerting “undue influence” on another, and complaints about this will be handled by the Liquor Board (which in fact told me these changes were overdue because of so many exceptions to the old rules already in practice).
    I understand small brewers’ fears about volume discounts by the big box stores, but larger craft brewers already have more clout there anyway among retailers with fewer SKUs and bigger orders. And even small retailers have told me they would like to warehouse their own products, and be able to buy on credit from distributors, too.
    As far as selection and service goes, I’m not sure the likes of Costco (which also has its own beer brands now to go along with wines and spirits) could ever really compete with small specialty shops, where price is not the only consideration. But as their CEO Jim Sinegal told me, they can’t compete with the state, either. I really think it’s time for a change, and I-1100 is not going to please everyone, but it will hardly kill the craft beer business in this state.

  23. Alan,
    Thank you for sharing your thoughtful and informed opinion. The best we can do is share real information and not let our decisions be swayed by the relentless, ridiculous advertising on both sides of this issue. Again, thank you for your thoughtful comments.

  24. why do we have to be like California there state is broke with all there free will junk. Our state is floating but with thoughtful thinking we can do some changes but? do we need to take away from our own cities by voting yes we will take our money out of our communities and put it in the hands of the big money makers (Costco, Safeway, Wall-Mart ect…). They are pushing very hard for this why is that, think about it. They will have more control!

Comments are closed.