Control State Battle: Washington

The initiative in the state of Washington, called I-1183, seeks to “get state government out of the liquor business.”

I find the Control State situation a tough one to deal with in developing a point of view. Opponents say that it’s an anachronism reflecting prohibition-based values; government doesn’t belong in private enterprise; the world has changed in the 75 years since prohibition and there are ample other regulatory means to control the sale of alcohol; and on and on.

I feel differently about Washington.

First, I-1183 gets the state out of the liquor business and opens it up to stores measuring at least 10,000 square feet. The exceptions would be underserved areas and existing state run stores. But small boutique/specialty liquor stores will not exist.

Second, the initiative would make Washington the only state to allow retailers to buy directly from the distillers. In effect, the wholesaler role in the mandatory 3-tier system would change if not end. Guess who is pushing I-1183 and spending millions to promote it? Costco. (Their headquarters are in the state of Washington.)

That’s what bothers me. Don’t get me wrong, we love to shop at Costco and get all those juicy bargains. And, who knows, maybe one day in this decade we’ll finally use up the paper products that live in our spare bedroom. But Costco in the booze business isn’t all good.

Sure, the prices are terrific, so long as you buy what they want to sell in 1.75 liters (half gallon sizes). You don’t go to Costco for selection. Often, you don’t get the same brand twice. It depends on how badly they beat up the distiller in that time period. When I was at Seagram, we didn’t mind the abuse by Costco’s buyers, we got to move a lot of volume and even a few closeouts.

If Costco dominates the state’s liquor business what happens to the smaller brands? The northwest is the spiritual home of artisanal alcohol products. Small distillers in Washington are growing and their local liquor stores have a great selection of spirits. I would expect that to end if Costco starts running the show in the state.

Ironically, the initiative in Washington replaces the monopoly of state run stores with the oligopoly of the large distillers and the power and clout of Costco. I don’t think that’s a good thing.