a very reluctant vote on 1100

Monday, October 25, 2010

The most important and rewarding aspect to writing this blog is the dialogue it engenders, and nothing has brought that dialogue into play for me more significantly than the ongoing struggle to analyze Initiative 1100. Over the weekend, in response to my two most recent posts, three individuals who I have known for many years, and whose opinions I greatly respect, have contacted me to offer their (very different and well-considered) perspectives. All three are opposed to 1100.

I have been right on the verge of writing “hold your nose and vote yes.” I want to send a message, and I think a lot of other voters do too.

The message is “Give us freedom of choice. Give us a free market for wine and spirits. Give us vendors who know their products and love what they do. And end the inherent conflict in a state monopoly that both sells and restricts the same products.” I was thinking that Prohibition ended over 75 years ago, and I don’t have another 75 years to wait for the state to amend the current laws. Here are the arguments that make the case that this initiative is simply too broad and too vague – a clearcut rather than a cleanup.

Caleb Foster, who with his wife Nina owns Buty winery, one of just 20 to receive five stars in my new book, has posted this note on my blog. It’s important enough that I want to repeat parts of it here (the entire post is on last Wednesday’s blog).

“Paul, I want to weigh in to say that it's important to vote NO on the 1100 initiative. The hundred words of an initiative are not information enough for voters about their proposals. Most well intentioned people don’t understand what's at work already let alone the changes proposed. In fact, Washington is rare in allowing (since 2009) any winery in the USA to get a distributor's license to directly sell to any store or restaurant in the state. Washington already allows that "direct marketing avenue" we agree is needed.

What's really at stake here is gross market control by the wealthiest distributors, stores etc. The question really is who do you trust? Do you trust the mysterious author of this initiative to make new laws built for their special interest, or the elected people who for the last 70 years have reworked the laws allowing for a wildly successful small farm wine industry to thrive in Washington making some of the world’s greatest wines in the recent past under the current laws. Who do you favor? Shall we protect small family producers and vote NO or whoever wrote this law and vote YES? Baiting you with Jim Beam in the grocery store, they rewrote the rest of the law to get everything else which would give them a unique market advantage over their competition, me.

Please enjoy reading Initiative 1100 in its original at http://www.sos.wa.gov/elections/initiatives/text/i1100.pdf I have read it. As an English major and business owner, I don't like it. As a small winery owner I voted NO against 1100. Please vote No with me. I am openly asking that you protect me and all my friends making great wines in Washington.”

Also over the weekend I spoke at length with Marty Clubb, who called not only as a winery owner (L’Ecole No 41) but in his capacity as the current President of the Washington Wine Institute. Marty has been a tireless (and often under-appreciated) worker on behalf of Washington wines and wineries, and owns (with his wife Megan) one of the largest family-run wineries in the state. He too is opposed to 1100. I asked him why, as far as I could tell, there was no unanimous opinion about the initiative – some neutral, some for, some opposed.

“The neutral parties,” says Clubb, “tend to be the bigger parties who are more able to deal with a totally unregulated free-for-all market. The Restaurant Association is for it, the big retailers are for it, and the smallest wineries are for it. Most of those guys don’t deal in other states.

This initiative process takes a sledgehammer to the rules, with unforeseen consequences. We don’t have a mandatory three tier system. My point of view is to change the laws progressively with time. That’s the Wine Institute tack; we’ve done that over the years. We have the most liberal tied house rules of any state; less restrictive than California. By redlining the entire statute, everything goes away. There’s nothing that defines anything in terms of credit. All the tied house rules go. So you have states like Florida where they don’t enforce tied house laws, and the retailers make more money on shelf placement than by selling wine.

“I would argue,” Clubb continued, “there’s a potential for reduced consumer access in some circumstances. Let’s look at quantity discounts. We were open to working toward some way to pass quantity discounts. But as you know the distribution business is a margin business. You can argue that you can improve efficiency, but at some end the distributor has to make some margin to pay the bills. Let’s just say that’s 30%. With quantity discounts, if you buy the bigger volume, you get a 20% margin. They make up for it by selling the smaller winery products at higher markup.

Centralized warehousing – all the big guys are going to implement it, which probably will lower pricing. But all of these places will deal with boxes, not bottles. If you go into Safeway now and there’s a wine facing, three or four deep, they can replenish that spot alone. But if you have to buy by the case you end up with multiple facings so the number of SKUs go down. The way we should do this is not by gutting the law, but by doing it strategically. The biggest unforeseen consequence relates to these tied house rules.”

In closing, Marty told me about his own efforts to place one of his wines on a prestigious New York restaurant’s wine list. He finally got them to agree to pour the wine by the glass; then they said “oh, by the way, it’s going to cost you $1500 to help us print the menus.”

The third person who weighed in over the weekend has worked all his life in wine distribution. For obvious reasons, I cannot divulge his name, but this is someone I have known a long time and whose opinions mean a lot. He writes:

“Both 1100 and 1105 are very messy and really not very transparent to the voter. While [my company] has taken a neutral position on the matter, I will tell you I am voting ‘no’ on both and recommending that to people if they ask me. Why you ask? Simply, neither are solutions that will benefit the consumers. While 1105 favors the distributor, it is 1100 that scares the dickens out of me. When you read the entire initiative, the only thing that will be illegal in Washington State will be selling to minors. All rules, laws, etc. are gone.

Slotting allowances will be legal so the big suppliers will push aside the small wineries and anyone else who gets in their way for the premium shelf space. (Check Coke and Pepsi where slotting is legal). Small wineries everywhere will lose “big time” if this passes. No other state in the USA will be as ‘lawless’ as Washington State if 1100 passes. This is not a scare tactic, just a statement of the facts.

Liquor will not be cheaper by the 51% noted in the ‘for’ campaign. They are being disingenuous in their comments and projections. The state makes 29% GP on the sale of their products. Drop by any Liquor store or check their web site for the breakdown of the costs of a bottle of spirits in their stores. Public information. All the rest of the cost is in taxes and these will not go away. Costco works on 13.9% GP and most all other retailers work on between 25 – 30%. Will life go on, yes it will. However, the changes will be far more dramatic than what the ads and Costco are saying.”

PG: My takeaway from all of the above is that there have been positive changes made to the laws, mostly behind the scenes. The Wine Institute has done a poor job of defining and selling their agenda to the general public. What should be done is to develop a master plan for an ideal system of liquor sales; explain to the voters what it entails, and then go about implementing it, as Marty Clubb says, strategically. Much as a clear cut, clean sweep of the current morass promises voters a certain amount of immediate satisfaction, the mess it creates may be as bad – or worse – than the tangled jungle of conflicting rules and regs we are currently stuck with.

So I’m going to hold my nose and vote... No... on both 1100 and 1105.

34 comments:

Sarah Timbrook-Nugent said...

Thank you, Paul. I've been harping on the play to pay issue with others I know since this thing reached the ballot. Consumers have no idea how much their choices are limited by big retailers' policies in this regard, and it needs to come to light so that it becomes obvious how difficult it is for small companies to compete in the "free" market. I learned about it working at a small publisher years ago; book publishers pay for every aspect of placement in chain stores, including face-out, eye-level shelving, mandatory contributions to the store's marketing fund, and more. This is why you don't find their books at the big box stores. I really appreciate that lack of payola in the wine business in our state. The variety of local wines carried by even grocery stores is wonderful. Let's keep it that way!

Bob Neel said...

Thanks, Paul. We support the positions of Marty and Caleb. I personally think the "Family Wineries of Washington" (which do NOT represent all, nor perhaps even a small portion of Family Washington Wineries -- of which we are one) are sadly deluding themselves in the belief that the unfair practices [cited above] are protected by "Federal Antitrust" legislation. Right. A 2000 case winery has a great chance suing a million-case corporate giant over shelf placements... Sure. We all want the State out of the Spirits business; but the cost of 1100/1105 is too onerous for the small players who make up the fabric of Washington's uniqueness in the world of wine.

Mrs. G. said...

NIce work my dear!!

Greg said...

Paul - excellent article. I think maybe I can add information on "pay to play" and its implications. To many, it seems like a scary proposition, but having worked in many states that allow this or where it occurs under the table, I will conclude that it’s a non starter to most of our industry. For brevity, I will just address the aspect of the business of which I am most familiar - restaurant wine programs. I spent most of my career running large multi unit restaurant groups, the last being in NYC. To start, I'd like to comment that the deal described above has been/is illegal in NY for many years. There were many under the table deals occurring when I worked in NYC, but in 2005/6 Spitzer investigated the industry and cleaned up much of what was going on, although I'm sure it still exists to a limited extent. Even so, in NYC, there are only a few companies in which pay to play would apply, on both sides of the table, even if it were legal. The supplier needs large volume to make a pay to play placement worthwhile. That usually means a multi unit restaurant group, not a single location (or a large big box retailer). Also, I don't know of any prestigious restaurants (let's say 3/4 star NYT review, for lack of a better definition) that asks for dollars for placements. They simply don’t buy the wines that suppliers who employee the pay to play strategy sell. Also, smart restaurateurs ask for a discount on pricing over cash payments, as you can pass savings onto the guest and still increase margin. As we in WA don't for the most part have these larger groups (I can think of maybe 2 or 3) this simply won't be a factor for the majority of the WA suppliers dealing with restaurants. It could impact larger wineries, but not the majority of family winemakers selling wine above $15 - 20 a bottle retail. Furthermore, if it did have an impact, it would be for lower priced, higher volume brands. Other factors of 1100 may be of great concern, but I don’t see this being one of them.

Greg Harrington

MagnumGourmet said...

Paul,

Thank you for sharing all of the various viewpoints on the positives/negatives of the initiatives.

While I agree that there are some issues that make me lean towards voting no, I will be voting yes for the following reasons.
1 - Convenience and Price
2 - Sends the right message to the legislature - If 1100 doesn't pass, our representatives may interpret it as if we don't want changes to the prohibition era regulations. Also allows for well funded lobbyists to manipulate any changes in the rules to fit their agendas.
3 - Any changes will get fixed in two years - The legislature can alter an initiative after 24 months. Those items that are truly broken can be modified. It at least gives an opportunity to see if the doomsday predictions are correct/offbase in a short time frame.

john said...

Paul,
While I, too, have enormous respect for Caleb and Marty, neither represents the point-of-view of the consumer. And it's always easier to be against change than for it, because change entails some unknowns. In this case, I'd rather start over with a clean slate than continue with the "tangled jungle of conflicting rules and regs we are currently stuck with", as you so accurately described the current situation. One thing for sure, if I-1100 passes, there will be tremendous pressure on the legislature to tweak the new law address to some of the issues Marty and Caleb are most concerned about - and that's fine. Otherwise, if I-1100 fails, there will be no legislative urgency to do anything. So, I'm going to hold my nose and vote YES on I-1100.

PaulG said...

I truly appreciate all the thoughtful comments pro and con. I can't ever recall being so conflicted on any vote before... but I am pleased to present cogent arguments on both sides and we'll all just see what happens. Hopefully, win or lose, 1100 will be the beginning, not the end, of a real push for well-organized restructuring of this state's liquor regulations.

Anonymous said...

Sorry Paul, but "pay-to-play" already exists in this state. It may be against the law, but it happens. Passing I-1100 will just make it more transparent. In the past year, I've had two wine stewards at different stores tell me they had to move my wine to another location because "the store manager told me the distributor pays for that spot".

I've had other (larger) winery owners tell me that if I want to move more wine, I need to do what they do: pay for vacation trips for wine buyers and wine stewards at the big grocery stores.

I had a restaurant manager once tell me that he loved my wines, but his wine list consisted only of wines from a single distributor because they pay to print and reprint his menus.

The WSLCB will enforce the laws, but depend on the industry to tip them off to violations. I'd never rat out a retailer who was in violation because it would mean that I would be completely shut out of their stores.

Distributors no longer want to work for their 30 percent cut. They want the wineries to do all the work, sell the product, advertise and promote the product and then the'll mop up, take the orders and 30 percent. They want to simply be state-protected middle men who take orders and deliver product at a whopping 30 percent. The mob wishes they had it so good.

I'm voting yes on 1100 and no on 1105 and I'll take my chances in the competitive market. The system is already tilted in favor of the big guys.

Anonymous said...

I'm dealing with "terms" already in my direct sales to wine shops and restaurants. Bounced checks, forgotten signatures and check books that are "out of the store" at delivery time crop up daily. Chasing down payments from legal 30 day terms will not be easier. I don't believe orders will increase due to terms either, most shops/restaurants don't have the physical space to lay in more stock. Pay to play is yet another weight on my neck. I'm voting no, hope you do too.

Simon said...

I'm grateful, Paul, that you listened and responded to well-expressed arguments against I-1100 and 1105. I had a similar feeling when I filled in the circles on my ballot. While I would love to have the State out of the business of retailing wine and spirits, these two initiatives only use that as a shield to carry other interests that pose tremendous risks with unknown/unforeseen consequences. So, like you, I held my nose and voted no on both.

B.D. said...

Paul, excellent analysis. Thank you for taking the time to seriously consider the issues involved and report on them in a thoughtful manner. Full disclosure: I am a liquor store manager for WA, yet I am for privatization. I have little time in with the state and in the long run I hope to profit nicely from the move. However, I have been encouraging friends to vote no on these initiatives. 1105 just keeps the poor distribution monopoly in power. 1100 eviscerates the laws in a self serving manner that shows no respect for modest control measures or state revenues. I do hope this is the beginning of the discussion and will gladly assist any thoughtful changes planned in the legislature.

kevin n. said...

Anonymous said...

"Distributors no longer want to work for their 30 percent cut. They want the wineries to do all the work, sell the product, advertise and promote the product and then the'll mop up, take the orders and 30 percent. They want to simply be state-protected middle men who take orders and deliver product at a whopping 30 percent. The mob wishes they had it so good."

It sounds like you need to change Distributors. I can only think of two that operate in this manner and a yes vote on 1100 or 1105 only puts them in a stronger position and you in a weaker one.

Matt Albee said...

Thanks for your support and the well-written article, Paul!

Paul Beveridge said...

Paul: I am surprised by your change of heart on Initiative 1100. The wineries against 1100 have been seduced by the dark side and may actually believe the Shinola being spread by the big beer distributors. But you should not and your readers deserve a complete analysis. A wine critic is an advocate for wine consumers, not big distributors and a few paranoid wineries who are afraid to compete on the merits of their products.

Wineries and big distributors should not receive the so called “protections” from competition under current Washington State liquor law that are unavailable to any other businesses in the State. Sticking customers with unfair prices is not a sustainable long term business strategy for the Washington wine industry. The heavy handed “pay to play” concerns such as “slotting fees” expressed by these wineries are already illegal under federal law (the federal Alcohol Administration Act), state and federal antitrust law, and federal and state unfair competition law (see our memo below).

Only two arguments raised by the wineries opposed to 1100 are true: passage of 1100 will permit wineries to offer quantity discounts, and 1100 will allow wineries to offer up to 30 day credit terms to restaurants and wine shops (longer would remain illegal under federal law). Removal of these restraints on competition will benefit retailers, restaurants, and, most importantly, every wine, beer and spirits consumer in Washington State – in other words: your readers. And, according to my Whitman College professors, removal of these restraints will increase profits for all wineries willing to compete and thereby increase demand for their products (not to mention increase demand for Washington wine grapes, restaurant wine purchases, and retail store wine purchases).

The restraints on trade sought to be preserved by the opponents of 1100 were called “pernicious” and “lacking in redeeming virtue” by the 9th Circuit Appeals after extensive testimony by all sides. For the last five years, we have tried to work with the legislature to reform these laws, but the powers that be have divided the wine industry and used their influence in the legislature to stop any meaningful change (they even opposed extending just 24 hour credit terms to retailers!). With the 9th Circuit calling for legislative reform, and the legislature unable to act, Initiative 1100 is the best opportunity to modernize Washington’s wine laws that we will have in our generation.

Of course there are some things we would like to change about 1100, but a no vote on Initiative 1100 sends the wrong message, and is anti-restaurant, anti-retailer, and, most importantly, anti-consumer. Freedom is a good thing! The free market is the only level and fair playing field! Please urge your readers to vote for Initiative 1100 (and no on 1105)! Thanks.

Paul Beveridge
President, Family Wineries of Washington State

Paul Beveridge said...

P.S. Here is a complementary analysis from a thoughtful small wine retailer:

When Costco and Wal~Mart moved into our small town, our retail wine business took a hit because we couldn't compete with their small profit margins. Our distributors couldn't get themselves through their doors fast enough and we were treated like outsiders thereafter. We found, however, that we could offer boutique and unique wines that a number of customers desired. It was our aggressive marketeering that allowed us to offer a selection that "didn't have the turns" the big stores require for a product to have shelf placement. We found our customers were looking for the nostalgia of the small winemaker toiling to produce a few bottles for sale to the public. And we sell the small winemakers that way. Yes, the majority of customers flock to the homogenized taste of "big tank" wine products and they still ask me for "two-buck chuck". Being a good salesperson requires me to advise them that "chuck" could also be a verb and that is when I educate them about the difference between mass produced wines and those wines that are produced with love. I know very few wine drinkers who have gone from cheap/value wine to fine wine and then reverted to cheap wine. Once they enjoy the taste of fine wine, they are ours forever. To all of you small winemakers... "THANK YOU!" You help keep us in business. Let the big stores have the unsophisticated wine drinker and use your money to educate them to the better wines rather than pay the big boys for shelf placement. Don't fret over the liquor store privatization initiatives. Find your niche and build from that. You do not need government protection if your wines are what the public wants.
Note to small winemakers.... please take the time to personalize your select product by personally signing each label. It becomes another selling point that you personally are proud enough to affix your name to your wine. Make sure you include your title as "Winemaker". I can't tell you how impactful that is to a wine buyer. It's as if you personally handed the bottle to the buyer. It may also be a talking point between diners when your wine is opened to be enjoyed. Word of mouth is the best advertising."

Paul Beveridge said...

P.P.S. Here is the response we provided the WA Wine Institute weeks ago. It shows that their claims that 1100 will lead to harmful “pay to play practices” such as “slotting fees” are unfounded:

To: Board, Washington Wine Institute
From: Board, Family Wineries of Washington State
Re: Response to WA Wine Institute Flyer against Initiative 1100
The Washington Wine Institute is presently circulating a flyer to Washington State wineries urging them to vote no on Initiative 1100, the pro-consumer initiative supported by Family Wineries of Washington State, Costco Wholesale, the Washington Restaurant Association, and others to get the state out of the business of selling alcohol and to reduce economic regulation that benefits some industry segments at the expense of wine consumers and most wineries.
We strongly disagree with some of the statements made in the WWI flyer, which appear to be based on an erroneous reading of the legal environment in which wineries now operate and the rules that would apply following adoption of Initiative 1100. After thorough analysis and discussion of the changes, the FWWS Board concluded that, on balance, the changes in trade practice regulation offered by Initiative 1100 are highly positive for the great majority of wineries and harmless for all.
This memorandum corrects certain misunderstandings promulgated by the WWI flyer. While we assume differences of opinion arise in good faith and do not maintain that anyone is resorting to intentional falsehoods, our overall impression of the flyer is that it attempts to create unjustified fear by warning of results that simply do not follow from the initiative’s largely beneficial reduction of state interference in the market for wine.
In particular, it seems clear that the WWI has misstated the effects of removing the state’s implicit credit ban in its “tied house” law and its statutory ban on all volume discounts. Here is our take:
Washington will substitute a result-orientated regulatory system for its rigid and archaic trade practice prohibitions. Federal regulation of trade practices is based on preventing harm, rather than dictating methods of doing business. Its enforcement philosophy is that marketing ideas that do no harm to a competitor and comply with the trade regulation laws applicable to all goods are not forbidden to wineries –thus preserving the consumer benefits of innovation and fair competition. Under I-1100 the Liquor Control Board would concentrate on abusive and underage drinking, where its efforts have historically been productive, rather than engage in economic intervention. I-1100 leaves state and federal antitrust law and federal alcoholic beverage law completely applicable to beer, wine, and spirits. The history of competition in this country demonstrates that fears of unregulated markets under existing state antitrust law and existing federal antitrust and alcoholic beverage law are unfounded.
For example:
1. Federal law will continue to protect small wineries from companies able to negotiate extended credit terms or deep discount deals.
Under the Federal Alcohol Administration Act, it is unlawful for a supplier to make a sale to a retailer at the expense of a competitor by extending more than 30 days’ credit. Both the federal Robinson-Patman Act and Sherman Act and Washington antitrust law regulate trade to prevent harm to competition from predatory pricing.

Paul Beveridge said...

Memo continued:

2. Federal and state law will continue to protect small wineries from competitors’ quantity discounts that are not cost-justified.
Initiative 1100 will end the ban on retailers’ saving money by placing a few large orders rather than many small orders. Passing through actual cost savings in handling orders benefits consumers and stimulates healthy competition. Using financial muscle to offer discounts that exceed cost savings and harm other businesses’ ability to compete violates the federal Robinson-Patman Act prohibition of price discrimination and Washington law of unfair competition, which imports federal standards, and also invokes federal Sherman Act and Federal Trade Commission Act restraints on predatory pricing. Repeal of Washington’s flat ban on quantity discounts will leave all these protections in place.
3. Federal law will continue to protect wineries from retailer demands to pay for product display space, including so-called “slotting allowances.”
Under the Federal Alcohol Administration Act, it is unlawful for a supplier to make a sale to a retailer at the expense of a competitor by renting display space or making any payment for display services, and retailers may not receive such fees. Thus, large enterprises cannot bump smaller suppliers by paying for shelf space.
4. Federal law will continue to prohibit exclusionary conduct by strong companies.
The Federal Alcohol Administration Act forbids unfair conduct that leaves little space for competitors, such as providing retailers with free warehousing or staged deliveries, requiring purchase of slow-selling items as a condition to supplying high-demand items, requiring high minimum orders, delivering goods with delayed invoicing, and bribes to sales or purchasing employees,
5. Federal law will continue to prohibit “pay to play.”
Under the Federal Alcohol Administration Act, it is unlawful for a supplier to give to a retailer, or a retailer to receive from a supplier, money or other “thing of value” to induce the retailer to purchase from that supplier in preference to a competitor who does not offer such an inducement. Prohibited inducements include, among others, paying for retailer advertising and in-store product displays that exceed $300 in value. In addition, federal and state antitrust laws impose limits on the extent to which enterprises with market power can utilize tactics such as merchandising payments, to assure they do not prevent smaller rivals from competing.
Finally, we do not think it important whether one says I-1100 will change the way wineries do business “radically” (the WWI's term), “profoundly,” or with some other adverb. Our point is that the direction of change is beneficial and the degree of change is properly understood in the context of laws that are untouched by the Initiative. Reducing the paternalism of wine regulation in our state will increase your freedom of choice in all your business relationships with your customers. For the first time since repeal of Prohibition, wineries will be free in most respects to act like other Washington businesses and like wineries in California, the largest and most vibrant wine market in the country, while enjoying the well-tested protection from unfair methods of competition and predatory conduct that has successfully supported the U.S. market in consumer goods for more than a century.
Please join with us in embracing the future and supporting I-1100.
The Board
Family Wineries of Washington State

Gregory said...

I suppose, following pieces of all the arguments presented for a 'no', that one could make a case for full State control of health insurance and allocation of services . . .
Greg

Anonymous said...

Help me out here, folks. It seems that "pay to play" is becoming the Boogie Man for people in the wine trade, similar to how underage drinking is being used as the main scare tactic used with consumers by the anti-both groups. As I understand it, "pay to play" is Federally regulated and illegal in all 50 states for all alcohol products. Why would it be any different than what's already going on in WA if 1100 passes? The lack of a state law would not trump Federal law. I don't want to trivialize it, but it seems to be a small issue relative to the main thrust of 1100 -- getting the state out of the liquor selling business.

PaulG said...

I am certain that whichever way my vote went, the debate would continue. I appreciate that there are strong opinions on both sides and also that, oddly enough, a lot of agreement. No one – I mean no one – disputes the contention that the state should get out of the liquor business. The question is how. Paul Beveridge and many members of the Family Wineries group support 1100, and I am happy to give them their say. Tomorrow you will hear from the author of the actual bill. And after the election, whether 1100 passes or not, let's all work together to make the changes we can agree upon happen.

Anonymous said...

But that's the problem, Paul. If 1100 doesn't pass, the state legislature -- strongly supported by the state labor union -- will simply bury it's collective head and hope that this issue goes away. I just don't think there are enough legislatures in Olympia who are brave enough to go up against the unions. Certainly our Governor is not. If this doesn't happen by initiative, it's not going to happen. That will keep WA in the dark ages for at least a few more years. Now is the time to act. Let's get 1100 passed -- get the state out of the retail business -- then work on any tweaks needed after it is enacted.

Eric said...

1.) Talk about conflict of interest. There is a typical neo-conservative ad running for I-1100. After telling us that there are only 80 enforcement agents in WA, and that 1100 will make enforcement the top priority, they fail to mention, very intentionally, how many agents I-1100 will put in place. 80 is too few, but putting corporations in charge of enforcement is ludicrous on it's face, as the more agents there are to enforce, the less profit they make.
How many agents will they require to be in place? One agent per ten outlets? One per 20? One per 100? One per 400? Every new agent cuts into their profits, and they will not give you THAT information, and we did not find it in the initiative.
As well, just WHERE does the enforcement money come from? Appears to be out of the general fund, which, as we all know, will guarantee fewer enforcement agents when budgets get trimmed.

2.) Alcohol has ALWAYS been easy for kids to get in WA. Making it available at every corner mini-mart WILL increase addiction, thusly decreasing our kids possibilities, and increasing state health costs.

3.) To your point(?), Gregory. Bogus. Very, very bogus. The new health insurance requirements, in fact, let your doctor make more decisions on your health care, rather than letting the Bernie Madoffs and Ken Lays continue putting profit above your health. The EXACT same argument applies to liquor sales: when profit is the motive, integrity falls by the wayside, usually with a swift kick to the back of the head.

4.) $250 fine for illegal selling? Are you KIDDING?! That’s an hours profit, on an average day.

PaulG said...

Eric, I've read your post three times and I still can't figure out what you are saying, but I've gone ahead and posted it anyway.

Eric said...

Paul, we are trying to ascertain where the money comes from, and why people might not believe that childhood drug abuse will not increase significantly.
They are trying to sell "1100 makes enforcement the top priority", but they purposely put the fees collected into the general fund, which means that money for enforcement comes out of the general fund. The general fund has a thousand items competing for the same shrinking pot, so items not deemed “immediate necessity” all compete for what little money is left over after the previously mentioned “i.n.” funds have been used. “Ooh, isn’t that a shame….not enough money to fund any more enforcement agents? WHAT a big surprise.”
It’s a sham from the get-go.
As for children drinking, booze has always been easy to get in WA, and this makes it exponentially easier, with ten times as many places selling, almost all of which have lower standards of ID verification.
Gregory asked what’s next? State health care? As one who had to rely on government health care for a decade simply to stay alive, I can absolutely and positively refute that Neo-Conservative tripe about “The private sector always does it better.” NO, actually, it does not. Just as the state had no motive to push me out the door before I was healthy, so the WSLCB staff have no pressure to push more booze out the door.

Anonymous said...

Why does Washington need to get out of the liquor business? Alteast us drinkers get something out of our taxes and it profits our state, and they give it back to the cities and counties. I don't think Costco will do that.

Anonymous said...

I am a liquor store in a small town with a large grocery store and several convenience stores. If this passes I will have to close my doors because I will not, as a small business, be able to afford to keep up with the big guys. Our community will spiral downward with the loss of revenue and with Spokane just 20 miles away, we will feel the ripple effect from there misfortune as well. Our children and loved ones with drinking problems will have greater access, less police and EMT on the roads and we will be in pure havic just to drive on 395 or Hwy 2. I hope and pray that all of us occupying Washington State do the right thing and keep the Liquor Board in tack.

Eric Murphy said...

Paul-

Great work here. Thanks for providing a voice for both sides, and a lot of good information/opinions from experienced people in this business.

Shane said...

Wow! I haven't seen political debate this healthy, robust, and productive in a long time! It's refreshing when people can disagree without being disagreeable, to sound cliche. I think it says something good about us beer, wine, and spirit enthusiasts.

Whelp, I'm off to go bottle some product for Dry Fly Distilling this evening. Cheers, all.

Larry Lehmbecker said...

I'm with Paul - Beveridge! We've been begging forever to get the state out of the business of economic regulation, and now that we have 1100 to do so, a bunch of wineries are saying, "Wait! I only want to get rid of the regulations I don't like..."

Come on. Every other business in the state can deal with credit terms and volume discounting, why can't the wine industry? Don't want to give a discount - or extend credit? Don't!

1100 is pro-consumer. It will eliminate state mandated practices that increase inefficiency, and this will tend to decrease prices. It will allow suppliers (i.e wineries) to more effectively self-distribute and thus lessen the anti-competitive stranglehold distributors still have on our beverage industry. This also will tend to reduce prices (cut out the middle-man!) and increase access to product.

I'm not anti-distributor. I love my distributors! I just don't think they should have any restraints of trade to provide them built-in business advantages. Similarly, I don't need the state to "protect" me by maintaining restraints of trade that are unique to the winery industry. I can compete just fine if they will just get out of my way.

The same reasoning applies to 1105 - and argues for a different vote. This bill would mandate use of the three-tier system, and thus would seriously crimp the growth of our budding craft distillery industry. 1105 is basically the two big distributors saying "Let's get rid of the State's monopoly on liquor - and give it to US!" Tsk, Tsk. This initiative is thus anti-competitive and anti-consumer.

Vote "Yes" on 1100.
Vote "No" on 1105

Larry Lehmbecker
Owner/Winemaker
Vin du Lac Winery

Anonymous said...

Sorry. I disagree. The state has no business competing with private enterprise. I certainly trust the average business person much more than I do any government employee. For those reasons, I voted yes on 1100, but no on 1105. 1105 simply mandates the use of middlemen distributors. Cut them out and prices will come down. Get the state out of the liquor business, fire the government employees who work there, and shrink government.

Anonymous said...

***It will eliminate state mandated practices that increase inefficiency...??? Can you give some examples of the inefficiency? I am a contract liquor store, and let me tell you, the State is very efficient in how they run the distribution of the product. They have carousels flipping out single cases to this contract store or that contract store, from all over the US... that special case, that ONE case from an out of state distillery to be delivered to my front door, for that ONE special customer who only likes that product, but takes him/her 2 months before she needs another bottle? I don't think the grocery stores or COSTCO will use up shelf space for the slow turn over. You will see inefficiency, when you no longer can have that special something because it doesn't turn over as fast as it should. No extra jobs will be opening, no single outlets will be there for you to pick and choose that special product from. NO one will be able to afford to keep a private business when the grocery stores already have their rent paid for with the selling of groceries. Maybe one or 2 grocery stores will have an opening for a checker, won't that be a special career oppertunity! And yes, the cities and counties profit from the sell and distribution that the State offers. Grants, more jobs for police, fireman, etc.. through grants, to keep our cities and counties running smoothly. Where do you think that money comes from? Sure lets just vote it out, be like all the other states, don't they have it easy.

Larry Lehmbecker said...

State mandated practices that increase inefficiency:

Stores can't use central warehousing (forces them to use middle men - distributors - thus adding 30% cost markup).

Suppliers can't extend credit (forces us to deliver product in dibs and dabs, instead of larger, more efficient volumes).

Suppliers can't use common carriers to transport wine (again, forces us to use more expensive 3-tier distribution model.)

Suppliers can't give volume discounts (restricts our ability to share cost savings of volume sales with retailers, thus minimizing incentive for more efficient volume transportation of product.)

My beef isn't really with the liquor stores, but with the myriad rules that restrict my ability to perform business normally, many of which have been maintained to protect the lock distributors have on distribtuion.

That said, I think it should be obvious on the liquor side that greatly increasing the number of retail liquor distributors will grow the liquor business dramatically, and will result in substantially increased opportunity for small distillers to market their product, particularly if 1105 is defeated and they can market directly to niche retailers and restaurateurs. I also suspect long-term tax revenue will actually increase due to increased distribution and sales.

John Morgan said...

Paul,

Sorry to see you change your mind on this. Almost a moot point at this moment. We'll know in a few hours. I have a few comments though.

First without this "radical" change we will get no change. The idea that the alternative is meaningful steady change is nonsense. the latest major revisions to the economic regulations of Washington wine were written by the lawyer/professional contract lobbyist that is the executive director of the Wine Institute together with the lawyer/professional contract lobbyist that is the executive director of the Washington Beer and Wine Wholesalers Association. Costco's ideas were ignored. Family Wineries of washington was locked out in the hallway. These folks wrote the laws. The idea that they would work to change them is not even logical let alone credible. If they had shown a shred of compromise, we (family wineries of washington)would have held our nose and voted against it as well.
The main issue is that wineries don't want to say "no". "No I won't extend you any more credit till you pay current, No I won't pay you a 'menu printing fee' (or yacht waxing fee etc.) to put my wine on your wine list, No I won't give you a deep discount so you can beat the daylights out of all the other vendors that work so hard for me, No I won't be willing to share your print advertising costs". The question is under what circumstances would people say yes? "Yes, ok you've been a great customer and I know you're having a tough time, I'll carry you for a month, Yes OK your restaurant is very prestigious, I'll pay your 'menu fee' because I can't buy that kind of advertising, Yes, if you feature my wine by the glass for a month I'll share an add with you" etc. etc. The other question here is does the state have a compelling reason to dictate what these sort of discussions entail?
All of this is more or less beside the point. The reason I think you should support I-1100, Paul is that it is all good for consumers, your readers. What is or is not good for wineries should be secondary I think. Though I have to say your sincere concern for your many friends in the wine industry is very gratifying and I am sure is heartfelt.
I can say with absolute certainty that pass or fail, this will not be the end of the world for the Washington wine industry.
PS: I like Mrs. G's comment the best.

PaulG said...

John, thank you for your well-considered remarks. As you say, in a few hours we'll know what happens next. I for one will continue to make an ongoing effort to push for change, because clearly that is called for. I hope that you are wrong about meaningful steady change. We shall see. As a good friend of mine once said, "all hope permitted."

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