Free Wine Market Fans: Support WA State’s Initiative 1100

1100 Washington State finds itself in the midst of a campaign for reform that is extraordinarily rare. Initiative 1000 is a ballot initiative that would wholly transform the alcohol distribution system in that state to make it more open, more reliant on free market principles, less dependent on middlemen wholesalers and one of the first states to throw overboard nearly completely the three-tier system of  alcohol distribution created in the 1930s.

The primary results of passage of Initiative 1100 are:

1. Dismantling the state monopoly on sales of spirits
2. Repealing the requirement that spirits be sold through a middleman
3. Abolishing the state's mandatory markup on spirits
4. Allow Quantity Discounts
5. Allows credit terms to be offered by producers to retailers and restaurants
6. Allows producers to give items of value to retailers and restaurants

In initiative 1100's Section One preamble, it states:

"The people of Washington State desire that the Liquor Control
Board focus on its core mission of education and enforcement to protect
the health, welfare and safety of the citizens.

In order to strengthen the agency to more effectively educate
the public, combat abuse, collect tax revenue and enforce state liquor
laws, the Washington State Liquor Control Board will stop selling
liquor and end its Prohibition-era monopoly on selling distilled
spirits. The state will license the sale of distilled spirits to
strictly regulated vendors who are already proven to be responsible
sellers of beer and wine.

This initiative will improve regulations to prevent abusive and
underage drinking, enforce licensing regulations and collect taxes for
the State’s general fund.

David Kesmodol, writing in the Wall Street Journal, correctly described the import of Initiative 1100 when he noted, "The effort is being closely watched by producers, distributors and
retailers of beer, wine and liquor across the U.S. because it would
mark the most sweeping overhaul of any state's alcohol trade
regulations in years and could presage similar proposals in other

As one might imagine, these changes are opposed by the middle tier of the alcohol distribution system for the simple reason that it removes certain advantage given to that tier. But in addition to that, Initiative 1100 is a direct assault on the principles of the three-tier system, that method of regulation that exists in most states across the country and provide the middle tier of wholesalers with advantages over the other two tiers never imagined by those who devised the system over 70 years ago.

The November ballot initiative that would make Washington State the most liberal in the country where alcohol regulations are concerned, is supported by a variety of groups including retailers, restaurants, and wineries. However, it's the support of Costco, the Washington State-based big box store that is most critical to the initiative's success. To-date, Costco has given more than $650,000 to the yes-on-1100 effort and appears to have been responsible for collecting the signatures necessary to put it on the ballot.

As you recall, Costco sued the state of Washington, arguing that most of the state laws being dismantled by 1100 were unconstitutional. Though they won parts of the lawsuit, they also lost parts. Initiative 1100 would give then the win at the ballot box that they failed to obtain in the courts.

Those who have argued that the strict three tier system in place in most states is antiquated, restricts the development of free markets, hinders the growth of entrepreneurship in the alcohol industry and protects middlemen unfairly will want to see this initiative pass. A poll taken in early May showed that 52% of respondents supported the initiative, 37% opposed it and 8% remained undecided.

Between now and November there will be a tremendous amount of politicking over 1100. Supporters of Initiative 1100 will need to show that those claiming it would lead to more drinking by minors and adults alike are simply wrong. They will of course be looking to CA to demonstrate this, where beer, wine and spirits can be sold directly to retailers and restaurants by producers and importers. Supporters will also have to overcome a competing ballot initiative (1105) that would keep the three tier system in place, but take the state out of the sale and marketing of spirits. Wholesalers, State Worker Unions and health advocates will strong oppose 1100. The primary funding for the opposition effort is likely to come from individual wholesalers and public employee unions that fear jobs will be lost if the state gets out of the spirits business.

I've argued that the key to creating a well-regulated, efficient alcohol distribution system that honors concerns over abuse as well as the free market results from reforms that allow for winery/retailer-to-consumer shipping rights as well as "self distribution" rights that allow producers to sell directly to retailers and restaurants without any mandatory sale to middlemen wholesalers. Washington State will be testing citizens desires to have nearly exactly such a system (it remains illegal for consumers to have wine shipped to them from out-of-state wine stores).


12 Responses

  1. Audiovore - June 18, 2010

    I am confused by your last comment on wine. I was under the impression that some states allowed wine to be inter-shipped, and others didn’t. And that WA was one that allowed it, as I live in Seattle and have ordered wine from Wine.Woot a few times.

  2. wildwest_cowgirl - June 19, 2010

    Of course Costco is behind this initiative, they stand to gain the most from it being the unethical self-serving corporate giant that they are. Of course health advocates are not going to support it, they see how deregulated alcohol markets ravage societies. The World Health Organization has a very informative website with statistics on the raging alcohol epidemics in Russia and the UK the result of decades of deregulated alcohol markets. If it could happen it those countries, it could happen here.

  3. Tom Wark - June 21, 2010

    You need to do better than comparing apples and oranges. That said, I encourage you to compare apples to apples. CA has had the type of “deregulated” market WA is contemplating for years. Can you point to the ravaging that has resulted in CA?

  4. James McCann - June 21, 2010

    This is a very interesting saga, but to me, it is the micro-economics of the transformation that will prove the most interesting. Let’s say it passes…
    Costco orders directly from the winery / distillery and applies their standard tiny mark up.
    Private store orders through a local distributor because they are too small for the major winery to deal with.
    What’s the price differential? Does the winery absorb the wholesaler margin, or allow Costco to have it and price it very low to generate huge volume?
    One way or another it will be fascinating.

  5. Dougwsand - June 26, 2010

    After reading this article about initiative 1100 and about the changes, I have to say to the author of this document………………………………………
    The fact that Gregoire and all of her little clones living in the West side of the state think that whenever the state’s budget falls short, the all time, “every time” solution to the lack of funds is to raise the tax on “Cigarettes” and “Liquor”. Not sometimes, it is every time !!! States need to stop trying to control every little thing that is there and start focusing on the real problems that are infecting the state’s health. Not booze and tobacco, it’s themselves!
    Remember in November to vote out “ALL” of Congress and put in some new blood. Get this Gregoire clown knocked out quick! I’m not sure how much more crap this state can take without sure total disaster happening.
    Doug Sand

  6. Arttheshark - June 29, 2010

    In CA and AZ where it is already privatized, a minor has a 1 in 4 chance of being sold to. At the WA state liquor stores they have a one in 20 chance. So privatization would likely mean a 400% increase in sales to minors. I rest my case.

  7. bergsma - July 15, 2010

    I am cofused. Do any of you supporters have children? If you support this and have children I suggest you go to your local liquor store with your children and see the clientele and then explain to your children why you chose to subject them to the “average” liqour store customer while you run to the local grocery store. Is it really a big deal to stop on a liquor store and buy your alcohol? The voters need to put money aside go sit infront of your local liquor store for a couple of hours then cast your vote. Being able to grab your party supplies at Costco won’t look so inviting then.

  8. Jason F - September 8, 2010

    I am a Tacoma resident who grew up in Massachusetts where we had what we called “packy’s” which is just a regional term for mom & pop liquor stores.
    We never had a rampant problem with underage kids buying booze, sure you had kids outside trying to get someone of age to buy for them but more often than not they wanted beer which when last I checked is readily available at any corner store.
    If you honestly think that people who get paid just above minimum wage have more of a vested interest in keeping hard alcohol out of the hands of minors as a proprietor of a private liquor store than you’ve been “hitting the sauce” a little too hard yourself.
    fact is a proprietor has just as much incentive if not more to NOT sell to minors as it’s their alcohol & business licenses on the line if they do not to mention what they have invested in their business.
    I am a very left leaning, liberal person so don’t think of me as one of those who wants to privatize everything in government but having grown up in a place that does have private liquor stores – which also sell beer & wine I am amazed that so many want to stick with this antiquated system Washington has.
    Think also about the overhead the state wouldn’t be burdened with including real estate, labor costs etc. the savings from that added to the tax it would receive from liquor sales as well as license fees for private liquor stores would be a win all around for Washington.

  9. John - September 9, 2010

    According to national statistics, one just has to look and be informed instead of the tear jerking emotional hysterics against the initiatives. Nationally 65% of all under age drinkers got the alcohol from family members!!!! Whether the state had private liquor stores or state controlled stores had NO difference in the minors ability to obtain alcohol. I also grew up in Western Massachusetts and there was no way i could ever get liquor as a minor. However, I could get an adult to buy it for me!!! ’nuff said!!!

  10. Jon - September 11, 2010

    I’m trying to understand why anyone who owns a Washington Winery would support 1100. Regional wineries depend on grocery stores as a major retail outlet. If 1100 passes it seems quite likely that every grocery store in WA state will remove a an aisle of wine and replace it with alcohol–thereby reducing shelf space for wines.

  11. Ty - October 19, 2010

    Click Here!

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