Washington Sends A Harsh Message on Alcohol Regulation

WheelsLast year, when a ballot measure in Washington State that would have taken Olympia out of the business of selling spirits failed to pass, we learned that the failure meant this:

“The vote in Washington state should send a clear message to lawmakers in the nation’s capitol… when given the choice, people do not want to see alcohol deregulated."

This was the teaching of Craig Wolf, president of the Wine & Spirit Wholesalers of America (WSWA), which opposed the 2010 ballot initiative. Despite the fact that Mr. Wolf confuses "deregulation" with reform, many read his political analysis, nodded their heads and were pleased that the voters of Washington State didn't choose to take the wheels off the wagon of a system for alcohol distribution the Seattle Times called "Alcohol Socialism". They breathed a sigh of relief and went about their way.

Yesterday, Washington voters reconsidered the question. On second thought they decided to take the wheels off the wagon and voted to overwhelmingly pass Initiative 1183, which will result in the state of Washington no longer being in the business of selling spirits.

I wonder if this should send a clear message to lawmakers in Washington again that when given the choice, people want to see reform to America's alcohol regulatory systems?

I suspect the WSWA won't come to this conclusion. Instead, I suspect they'll conclude that the $8 million they spent trying trying to defeat Initiative 1183 wasn't money well spent. I suspect they'll conclude all they needed to defeat Initiative 1183 was a few more television ads claiming that the children of Washington State will die in fiery car crash after fiery car crash if Costco is able to sell Jack Daniels and aged Scotch.

More importantly I suspect the passage of Initiative 1183 in Washington is going to be considered quite carefully by folks in Pennsylvania and Virginia where other archaic and anti-consumer alcohol control systems need severe reform. This won't make the WSWA or individual wholesalers very happy.

In fact, the notion that more competitive and pro-consumer models of alcohol distribution might appeal to citizens probably scares the shit out of wholesalers. They aren't in the business of having to compete in a fair, well regulation, consumer-centric marketplace. They are in the business of calling such things "deregulation" and throwing around their enormous government subsidized profits in order to inhibit the development of such a marketplace.

Congratulations, then, to the people of Washington. They made the right choice and, apparently, have sent a clear message to lawmakers all across the country and in the nation's capital: Americans will support reform to America's alcohol control policy in the form of more consumer friendly systems.


19 Responses

  1. Drpinotsjourney.wordpress.com - November 9, 2011

    Tom, well said! … Cork

  2. Bubba - November 9, 2011

    From a mid-sized wholesaler (not in WA):
    The future impact of Round 2 of the Costco lobby initiative will be no better nor worse than the system it intends to reform. What matters is that public health is protected, the state gets their cut, and business gets an even playing field. Broad-sweeping measures like this, no matter how seemingly attractive to the consumer, will no doubt cause a whole lot of grief for established players who will have to re-tool their models, or lose their business. Remember that alcohol is a unique product (read: a drug with built-in demand) that is rightly regulated. That regulation comes at a cost, and creates a system in which there are winners and losers. In this instance, WA State has chosen to loosen the reigns at the direct expense of small retail business and distro companies that have built jobs and tax rolls for decades. I would be happy to see reform in certain areas of 3-tier segregation, franchise law, etc., but in fairness to all parties, it must be done prudently, and perhaps not even at all. The WA State reforms will no doubt create unintended consequences, and show the way for other municipalities looking to fix what ‘aint broken.

  3. James McCann - November 9, 2011

    The difference in PA is that the wholesalers are on board with privatization.

  4. tom merle - November 9, 2011

    Bubba (perfect name for a distributor):
    Your self serving platitudes are at their core completely unAmerican. Of course, changes in the way business is conducted in all sorts of fields always has some negative impacts on those benefiting by the status quo. But the changes occur because some people have found ways to provide goods or services in a more efficient and equitable way.
    The preprohibition situation, ie., the abuses of giant breweries controlling saloons, no longer applies to the US in 20ll. So tied house laws no longer apply.
    In any other industry such outmoded rules would have been replaced long ago. The US is a dynamic place; we depend on innovation and the drive to save a buck by producer and consumer alike.
    Distributors won’t go away because they provide a service in certain situations, but that doesn’t mean that they should enjoy a monopoly. The outrage against government (except by the protected public unions) is driven by the sentiment that any monopoly is abusive in all sorts of ways.
    Just do your job and stop feeding the monster that is WSWA.

  5. Chris - November 9, 2011

    This will create many more jobs than it destroys. 3Xs as many outlets means many more people to stock shelves, work registers, and manage. Not to mentions salespeople to sell, drivers to delivers, and again…mangers. PLUS, more state workers handling applications, checking on compliance, and of course…managers.
    I don’t understand your concern for public health. Is WA’s rate of alcoholism SO much lower than all the other states with more open systems? get real.
    BTW, I think the real issue in PA is not distributors, but a union of people working at the state stores.

  6. James McCann - November 9, 2011

    The ONLY issue in PA is the unions.

  7. 1WineDude - November 10, 2011

    GO WA!!!
    Also, Jams is mostly correct, Unions are big part of the challenge in PA (as I suspect are lobbyists, given that the current Privatization bill on the agenda specifies a limited # of licenses and also specifies that a certain % of them, I think, have to go to stores over a certain square footage… which looks suspicious, I think, in terms of favoring big stores…).

  8. Bubba - November 10, 2011

    Hey thanks for reading my post. I suppose Bubba is a decent name for a wholesaler, about as fitting as Chris is for an effete wine geek, or whatever your thing is.
    Anyway, you miss my point. As a businessman, and that’s what the debate in WA is all about, I really don’t care what the law is so long as it is consistent. Costco doesn’t care if you can obtain your favorite wine if it doesn’t fit into their program. They have pushed an aggressive lobby to further their own interests.
    Consider other regulated products — not totally analogous, but instructive: insurance, securities, pharmaceuticals — the US has recent and poor experience with new players exploiting these markets. Deregulation will invariably disrupt entrenched interests and create opportunities for new ones. “Meet the new boss, same as the old boss.”
    What I want to know is why you guys waste so much ink on this stuff on a wine blog, given that you have no stake in the game, or if you are a player in the market, and a suspect a small one, then you actually have a lot to lose if 3-tier is compromised. I confess I read your rants from time to time for amusement. Get back to talking about wine!

  9. Jamie Peha - November 10, 2011

    This has been the most interesting dialogue I’ve read so far and I hope it continues. Listening to everyone’s take on this is a fantastic way to learn about what this is really going to mean. Please continue…

  10. Joel - November 10, 2011

    Wholesaler Bubba wrote, “Costco doesn’t care if you can obtain your favorite wine if it doesn’t fit into their program.”
    From where this effete wine geek writes, that’s a near-perfect description of the bulk of the industry’s distribution tier.
    And why do folks like us “waste so much ink on this stuff on a wine blog, given that you have no stake in the game?”
    Bingo! The wholesaler world-view, neatly summarized in one sentence: the end consumer, whose dollars drive the entire industry, have “no stake in the game”.
    So we should quit whining, shut up and buy what you decide to make available, eh? Because we’ve got “no stake in the game”.

  11. James McCann - November 10, 2011

    There are numerous lobbyists involved, representing interests ranging from large retailers to the existing beer distributorships. The difference is they are all lobbying for some form of privatization, while the unions are trying to block it all-together.

  12. Tom Wark - November 10, 2011

    Bonjour Bubba!
    Regarding Costco, it’s not like they are new to the game in terms of selling spirits. They are pretty good at it down here in CA.
    Also, I’d take issue with the idea that small players in either the retail or producer tiers have much to lose form seeing the Three tier system de-mandated. But that’s a discussion for another time.
    Finally, we talk about this stuff because it’s interesting! A system in place for over 70 years is finally taken down? Damn….How often does that happen. Plus, lots of us are in the business and have skin in the game, or at least a scab.

  13. Christian Miller - November 10, 2011

    Not directly on topic, but related: liquor can now be sold in Washington grocery stores. Where does the shelfspace come from? Wineries in grocery stores who don’t have distributor muscle, or good relations with shelf management analyts, better stay on their toes.

  14. James McCann - November 10, 2011

    It will come out of the bread aisle. The margins on wine and spirits are much better than on grocery items.

  15. Christian Miller - November 10, 2011

    Margins, yes; but not turns. It’s the combination of the two that the shelf management software crunches. And then there are turf wars between category buyers. Maybe it will come from somewhere besides wine; but that seems like the obvious target, especially given the plethora of slow-moving SKUs.

  16. JB - November 11, 2011

    Sorry, Bubba, but it IS broken!!

  17. JB - November 11, 2011

    The margin on wine FAR exceeds that on potato chips, even with slotting fees. The shelf space will come form potato chips, not wine.

  18. Bubba - November 12, 2011

    Bonjour Tom Wark
    C’est quoi ce merdier — devions parler en francais?
    That’s cute. I only speak french in France, or trying to impress.
    Seriously, you don’t get it. Besides T. Merle insulting my patriotism — (1 combat tour here) — Tom: ‘aint nothing more American than making a buck! — Mr. Joel had the only salient point, which was that the distro and chain retail business (?) doesn’t rightly regard the end-consumer. You are partly correct, and this is no different, in fact much more responsive than other aspirational/luxury comestible product — fashion, media, fragrance, etc. Do “we” influence your tastes? You betcha! Is this news?….come on, get back to talking about wine. If I can get just one of you wine geeks (and BTW I am one myself) to understand what is really going on in WA State, then my work is done. God Bless!

  19. Web Design Company USA, web design sydney - November 18, 2011

    his will create many more jobs than it destroys.

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