No Victory in Winning for WA Wholesalers

For the Washington State Beer and Wine Wholesalers Association it must seem like there is no victory in winning.

Starting back in 2004, Costco Wholesale fought to change Washington’s beer and wine distribution laws. Their adversary in the legal battle was the Washington Beer and Wine Wholesalers Association. Essentially, Costco wanted to change the three-tier system that governs how beer and wine are distributed in Washington. (That system is used in many states.) It isn’t hard to understand why Costco wanted the system changed. They wanted to buy direct from the manufacturer. They’re Costco. It’s what they do.

Way back in 2005, Costco initially won the concessions they wanted. The wholesalers appealed. The original decision was overturned in 2008 and, in the end, Washington’s wholesale distribution rules remained essentially intact.

U.S. District Judge Marsha Pechman recently ruled that the defendant must now pay for Costco’s legal costs. That puts the Washington Beer and Wine Wholesale Association on the hook for a $1.9 million tab.  That is in addition to another $416,615 that the state was ordered to pay Costco last year for another part of the case.

John Guadnola, executive director and attorney for the wholesalers association, told the Seattle Times that it would work with the state to determine how to share the expense. “We don’t have that much money,” he said.

Share the expense? iCarumba! At least Costco is a locally-based company.

Costco reported a 29 percent drop in its profits last quarter. Ya, that’s a drag. But in other words, they only reported a $206.9 million profit last quarter. Last time I was at Costco, waiting in a checkout line that was at least 8 shoppers deep, they didn’t seem to be facing any real dire straits; however, a 29 percent drop in profits is no paltry thing for one of our area’s larger employers.

Can’t we all just get along?

Since this legal battle began, I have talked to a few different brewers and brewery owners about the issue. They are all over the map on this one. Some think the system should be changed while other think it should not. Some think that the three-tier system protects small brewers. Others think it hurts small brewers.

While I cannot presume to speak for everyone, I would say the most people I’ve talked to think that things need to be rethought for the 21st century, but that doesn’t necessarily mean the three-tier system should be eliminated. However, there certainly are people who think the whole thing should be blown up.



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4 comments

  1. Is this why Costco started branding their own line of beer? (Kirkland Beer, produced on contract by some brewery in California). Seems like selling your own beer is one way to get around the middleman and get better prices.
    The wholesalers don’t get much sympathy from me if they’re basically a state-enforced monopoly. It’s no problem if they provide a re-selling service that adds enough value (logistics, supply chain mgmt, etc) that businesses genuinely wanted to use them; but they shouldn’t need laws to force people to buy from them.

  2. Is this why Costco started branding their own line of beer? (Kirkland Beer, produced on contract by some brewery in California). Seems like selling your own beer is one way to get around the middleman and get better prices.
    The wholesalers don’t get much sympathy from me if they’re basically a state-enforced monopoly. It’s no problem if they provide a re-selling service that adds enough value (logistics, supply chain mgmt, etc) that businesses genuinely wanted to use them; but they shouldn’t need laws to force people to buy from them.

  3. I think that back when they reinstated alcohol with provisions (three tier ‘anti-monopoly’) they never anticipated an entity like Costco. I am happy that Washington has made strides to allow for better access between the consumer and the brewery but its far from perfect. Today for instance if you want order a case of Midnight Sun you can, but with shipping costs what they are you are less likely to want to purchase a pallet of Sockeye.
    In regards to the whole “Costco” brand of beer, I would say that if it tastes like a Gordon Biersch then its still Gordon Biersch no matter what you call it.

    Thanks for the post guys. Now who is up for some beer this weekend?!

  4. I think that back when they reinstated alcohol with provisions (three tier ‘anti-monopoly’) they never anticipated an entity like Costco. I am happy that Washington has made strides to allow for better access between the consumer and the brewery but its far from perfect. Today for instance if you want order a case of Midnight Sun you can, but with shipping costs what they are you are less likely to want to purchase a pallet of Sockeye.
    In regards to the whole “Costco” brand of beer, I would say that if it tastes like a Gordon Biersch then its still Gordon Biersch no matter what you call it.

    Thanks for the post guys. Now who is up for some beer this weekend?!

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