Why You Should Vote NO on Initiative 1100

July 30th, 2010 · 65 Comments · General Beer News, Washington Breweries

Initiative 1100 is being promoted as an initiative to modernize Washington’s liquor laws by privatizing spirit sales and getting rid of the state-run liquor stores that everyone loves to hate. But, there is more to it than that. The full press release on how it affects the Washington craft brewing industry is below, but here are a few summary points:

1) Many voters see this as a chance to privatize the liquor industry in WA. But, they don’t realize the threat is in the part of the initiative that completely deregulates the WA beer/wine/liquor industry.

2) Currently, if Brewery A’s product is sold in WA it is the same price for all retailers to buy it. If this initiative is passed, larger stores (such as Costco, large grocers, etc…) and restaurants/bars will be able to obtain significant volume discounts, putting smaller local businesses at a competitive pricing discount. This also opens up the market to stores like BevMo and Binny’s, liquor warehouses in other states that dominate the market because of their volume. While this may be a good thing for bottom-line prices to consumers willing to buy from large retailers, it could be bad if you like having that local bottle shop around the corner from you and having a large selection of local brews.

3) For local breweries, they may be expected to cut their sale price and give more freebies to bars/retailers in order to compete for shelf/tap space. As a result, these small breweries may make less money and may not be able to compete.

4) Distributors are left in limbo. The initiative removes the three tier system and all breweries will be able to directly distribute to retailers, if they so choose. Many bars already choose to buy beers from a single distributor for one reason or another, now they may be given deep discounts to buy from a single brewery, such as MillerCoors or AB, further limiting your selections. The three tier system has always been a gray area to me, as there are many local breweries that already self-distribute legally….many people cite that the repeal of the three tier system is a great thing for small breweries who want to distribute their own product, but some already do this, yes? Someone feel free to jump in and explain here.

If anyone has an alternate view on this, I’m all ears. I don’t pretend to be an expert on these matters. Please feel free to leave comments below. But, if no one can convince me otherwise, I’ll be voting NO on Initiative 1100.

Here is the full release from the Washington Brewers Guild:

Vote NO on INITATIVE 1100

I-1100 is the greatest threat the Washington craft brewing industry has experienced in a decade.

  • Actively being promoted as modernizing liquor laws, by privatizing spirit sales.
  • Actually a sweeping proposal that repeals 39 RCWs, enabling the biggest retailers, distributors, and producers to own and give favorable pricing to each other, which would eliminate the level playing field small businesses need to grow and prosper in our state.

I-1100 negatively impacts the craft brewing industry.

Washington State is home to one of the most innovative and fastest growing craft brewing industries in the country. During the last 24 months, throughout the worst economic downturn in our lifetimes, the craft brewing industry in the State of Washington has grown more than in any 24 month period in history. Dozens of new craft breweries have opened, creating new employment opportunities for hundreds of state residents, and capitalizing on the creativity and innovation our state is known for.

What this means for YOU as a beer enthusiast:

The majority of the Washington craft brewing industry is small businesses. I-1100 would stunt the growth of our industry as breweries encounter more competition and pressure to give discounts, free product and services to obtain shelf space or handles at big box stores, chain restaurants, and other retailers. A reduction of microbrew presence in the marketplace would have a disastrous effect on our burgeoning craft beer culture.

I-1100 deregulates a prospering, innovative industry.

The problems resulting from Federal deregulation of telecommunication, airline, and banking industries are well known. The affected industries now have reduced competition, less innovation, and benefit only the largest and wealthiest companies. I-1100 eliminates the level playing field that requires consistent pricing for all breweries.

What this means for YOU as a beer enthusiast:

I-1100 would legalize Tied-Houses (alehouse owned by a brewery, selling only their products) moving Washington State towards the now failing English Pub system. Those breweries not willing or able to compete with large producers’ deep pockets will be forced out of the marketplace, eliminate jobs and close their doors.

I-1100 takes away consumer choice.

The success of the craft brewing industry has been a huge success for the consumers of Washington State. Consumers have literally hundreds of choices of locally made, hand-crafted beers from across our state. I-1100 hurts consumer choice by giving volume pricing discounts to the largest companies, thereby reducing competition. Without the means to compete in the marketplace, small, neighborhood craft breweries will close and consumers will have less choice at their favorite establishments.

What this means for YOU as a beer enthusiast:

Washington state’s reputation as a destination for great craftbeer will cease to exist as more and more craft handles are replaced by big beer and breweries close their doors.

Vote AGAINST the deregulation of the entire alcohol industry!

Vote No to preserve the vitality of the Washington Craft Brewing Industry!

Vote NO on INITATIVE 1100


65 Comments so far ↓

  • LH

    I’m voting no for a couple of reasons.

    First, state revenue will be lost. I understand the argument that the state will save money by not running these liquor stores and distribution centers. I also understand that the state will still be collecting taxes on liquor. However, the state has a 50% markup on liquor right now. They will be losing that 50% markup. That money makes state liquor sales more than profitable. If there was more state money to be made from privatizing, trust me, the state would be all for it. Independent studies show that lost revenue will be around $277 million for I-1100. The problem with state revenue being lost… they’ll get it back somewhere else.

    Second, people are all under the assumption that liquor stores are state owned and operated. Almost half of the state liquor stores are actually contracted stores. They are owned by private citizens who have contracted the right to run a state liquor store. That’s officially and directly putting small business owners out of business. There will also be a number of state jobs that would go away. I don’t think very many jobs will be created by this initiative though – how many people will Safeway or Costco have to hire because they start selling whiskey?

    In all honesty, I could live with these first two. I’m actually all for privatizing liquor sales. It has some downsides (above), but I think it’s worth it. What convinces me to vote “no” on this initiative (and I-1105) is the lack of regulation. That’s the real killer.

    There are many posters on here saying that small breweries flourish in places like California and Colorado even though they have private liquor sales. That’s true. However, I-1100 doesn’t give us the same laws as those states. I-1100 takes away regulation that exists in those states… which is why small breweries and wineries flourish there. Yes, an independent shop in California can still exist next door to a BevMo’s because there are price regulations. BevMo’s is paying the same for that beer that Mom & Pop are. If you take away the price regulations, then BevMo starts buying cheaper booze because they buy far more than Mom & Pop. That means that Mom & Pop end up charging more for their booze… which mean Mom & Pop go out of business and end up working at BevMo’s. That’s the difference between California & Colorado and a post-1100 Washington.

    It works the same way for smaller breweries and wineries. Yes, we’re already paying more for good craft beers. However, there is a price point at which people will a macro over a micro. They may not enjoy as much, but they will do it if the price of the micro is too high.

    There is one scenario where I think these small breweries and wineries survive though. It all comes down to the larger store’s desire for immediate profit versus their desire for market share. BevMo can run Mom & Pop out of business by lowering their price to a point that Mom & Pop can’t compete. However, BevMo may just decide to keep prices at their current rates since the price point has already been set. If they do keep their price at current levels, then Mom & Pop might be able to stay in business. However, it just means your money is lining BevMo’s pockets instead of going to the people of the state. So, either you put the little guy out of business or you make some large company much larger at the expense of state revenue.

    It’s very simple… follow the money. Ask yourself who you would rather be in bed with. Personally, I’m typically routing for the little guy. On the opposition’s side, you do have some large distributers contributing money (because they risk losing money if this passes). However, you also have small breweries, wineries, and grocers. On the support side, all you have are Costco, QFC, Safeway, and Walmart… Walmart, people… Walmart.

    I’m all for getting rid of the state run liquor stores… but it’s just not worth the deregulation.

    Oh yeah, the argument about kids getting liquor… I was a drinker when I was a kid. We got ours. It doesn’t matter where it’s being sold. If kids want it, they’ll get it. That’s kind of a non-issue in my book.

  • gary

    the state will make more money in the long run. so i will vote yes

  • Alex

    I work for a brewery that self-distributes. The bars are able to get our beer easier because we can make on-site deliveries during hours a distributer can’t. It also comes down to customer demand, our beer is more expensive than traditional domestics, but customers don’t mind paying more for better beer. Brewers that are afraid of losing money need to make a beer that appeals to their audience. In the end, the customer will always decide which breweries succeed and which fail.

  • AJ

    As an economist, I am just not convinced that being able to sell liquor more places and slashing alcohol taxes and markup across the board will have any effect on the way restaurants and brewers purchase and price product.

    There are no “price regulations” in WA that standardize beer prices. This is why Pabst can charge $9 a case, Pyramid $14, and Full Sail $18. None of this will change anything about the way restaurants and stores buy beer and wine.

    Now, will shoppers choose that liter of Smirnoff instead of a six of Sierra Nevada at QFC, because it’s cheaper? Possibly. More likely it will matter between Smirnoff and Bud.

    I firmly believe in the Northwest’s robust craft brew culture. People will buy beer and wine because they like it for what it is.

  • Doug @ Beer Blotter

    I really like Alex’s comment above. More and more, I am seeing brewers push aside the the Guild’s position. I am still not sure its the best thing for brewers, but I think that a lot of the fears that they have had, are unsubstantiated.

    That said, its clear that 1100 is a consumer’s haven. As long as it does not deter growth in the brewing industry (and i am leaning towards “it wont”), I don’t see how beer fans can vote no.

    The best argument that I have heard is the fear of complete upheaval of a aged and understood system. I do believe that may be a problem and a fear that distributors, bars, and other beverage companies can share. How will business adjust? Will there be a gradual change or overnight free for all?

    If beer producers and sellers are mostly concerned about liquor taking their market share – then they must not believe in their amazing products. We are lucky to have one of the nation’s best trained beer consumer base. They love local beer because its great, and because it helped build their communities.

    Its an incredibly interesting business debate that will go down to the wire. I still haven’t completed my ballot.

  • Brian

    Just because the current monopoly is good for some, that doesn’t mean it’s the best system. I’m voting YES on 1100, no on 1105. Let’s modernize these antiquated systems.

  • Heather

    think of the jobs lost so we all can save a buck.
    VOTE NO.

  • Dikla

    Very well put Doug. I’m also in his camp.

    Here’s where I’m coming from (and this may come off as naive, but here goes): I grew up in Southern California, and left in the days of the ever-growing popularity of BevMo. I know most of my family and friends shop for their “bulk liquor” at places like BevMo and Costco, and rightfully so. It’s cheap. Why would you not buy things like gigantic bottles of Grey Goose for half the price if you could? But, when it comes to things like beer and wine…well, people are still shopping for these things down there the way we do up here. And I don’t just mean shopping in the sense of picking up six-packs, I mean heading in to bars as well. BevMo may open up here, but it’s going to be treated (with regards to beer) the same way we beer advocates treat grocery stores already. You are going to go to specialty shops to find the stuff you like to drink and pay the price for it, because it’s fantastically tasty.

    Look, Doug has it right. Seattleites (and Washingtonians in general) are picky about EVERYTHING, not just beer. We’re a group of relatively educated, savy, money-conscious individuals that are going to continue our rituals the same way we have no matter what. Yes, we will be excited (I will be f-ing THRILLED) to be able to head over to Safeway on a Sunday afternoon and pick up a fifth of Sailor Jerry’s if we need it. But I truly don’t believe this is going to drastically affect what bar we go to on our regular Friday Happy Hour venture or when we need a 22 of Rogue Double-Chocolate Stout.

    I agree that some beer enthusiasts and breweries out there are working themselves up for nothing. If anything, it is a good thing to be more forward thinking and not stuck in the safe, cozy confines of how things have been done here for years. I see small breweries distributing all over the city all the time, and I believe they will retain the same advantages/disadvantages regardless of this change in the laws. Beer should be like anything else in a competitive market: work for your cred and know your audience.

    I am in agreement that I’d like to see a little bit more carefully planning and regulation go into this initiative and am still a little skeptical, though I lean toward the “yes” vote. We’ll see how I’m feeling as I pour over my ballot with a beer on Monday, November 1st.

  • Dikla

    After discussing this further with some people, I see more and more where LH is coming from. I think where I’m at is:

    “I’m all for getting rid of the state run liquor stores… but it’s just not worth the deregulation. ”

    While I feel strongly in favor of, “The state should never have had their hands in liquor regulation in the first place”, the way 1100 and 1105 are set up is just not good enough to create a buffer for what deregulation means to a state that has functioned this way for so long.

  • Gov't Beer

    We’re in a broken system. The fix isn’t perfect, but it’s a start. I-1100 starts us down the reasonable path of less social regulation on alcohol. Adults should be able to buy liquor without having to jump through outdated social legislation. I brew my own and support small breweries. I’ll never drink Bud, Miller or Coors no matter how cheap they are, but I wouldn’t mind the wider selection of micro brews from other states/countries that this law will open the market for.

  • Tim O'Connor

    I love my micro-brew’s! I just started brewing myself and I’m part of a hobby website that tracks what Seattle’s micro-brew’s are being served where.

    While reading the guilds position on 1100 I cringed with mixed feelings. I hate the 3 tier system and yet I love my micro-brews!!! So conflicted!!

    So I’m siding w/ Doug and Gov’t Beer. If enough people like myself love this dank ass brew then the industry will continue to flourish.

    Down with distributors!!!

  • Brandi

    I am voting NO because I know hundreds of people who will be losing their job. I think its stupid that you would vote yes in this economy. Do we really need to play with job loss? You really want to make a lot of people lose their job just so you have liquor more convenient and cheaper? I would rather pay the taxes than to know I helped a lot of people lose their job just so I could have easier access to alcohol and a cheaper drink.
    The entire concept to buy in bulk is what is helping the alcohol be cheaper. But the convenient stores cant buy in bulk because they dont have the space. Convenient stores make most of their income off of their beer sales. When they cant buy in bulk and cant have competative prices because they will have to sell alcohol 3x higher, than where do they make their money? If they dont make their money they will go out of business. And if the larger stores start going through the breweries(Coors etc) that leaves very little for the distributers to go with. So with that, if/when convenient stores go out of business the state is expecting 30,000 to close and each one employs 2-3 people. When they close and the large stores arent going through the distributers then where do the distributers get business? How do they stay alive? Im not talking about the brewers who distribute their own beer, im talking about the larger independant distributers. So many jobs will be lost if this passes.
    Another issue, stores and bars stop selling alcohol at 2am. If this passes the bars will still stop at 2am and cut people off…but those people will have until 3am to get to a store to buy liquor. People who may already be drunk and stop to buy more on the way home. I dont want alcohol to be more available for people to drink and drive, especially after they leave from the bar because they got cut off.

  • Steve

    Actually AJ, there are price controls on beer in the state. It doesn’t regulate a maximum price, but it does regulate the minimum. If a distributor/brewer wants to market their product at a promotional price, it requires at least 45 days notice (I believe) to the SLCB, during which time other distributors are allowed to comment, and then other distributors/brewers will also be able to market at *your* promotional price if granted by the state. As an example, let’s say you open XYZ, a nano-brewery, and to allow some initial market penetration you petition the SLCB for a promotional price 40% lower than your wholesale price. All other beers in the state will then be able to sell during your promotional sales period at the same wholesale price, which effectively wipes out any competitive advantage. I doubt your competing local craft/nano brewers would take advantage of that, as it still appears to be a pretty collegial business atmosphere, but a larger craft brewer would be foolish not to.

    As to other’s arguments against 1100, there is no solid, 100% fair nor perfect solution to establishing a marketplace after deregulation. I think 1105 is deeply flawed, and while yes, there are provisions of 1100 that could impact the craft brewing industry, I think many of the arguments against are specious because craft/nano’s are always priced higher than macro and psuedo-crafts; a lot of these dire predictions would have already occurred, rather than what was pointed out in that the local craft-nano industry has consistently grown over the past 24 months. So to say the current rules are better than what’s proposed and currently promote good business practices and should not be replaced is wishful thinking at best.

  • Vincent "The Legend"

    I still believe in the free market enterprise, so therefore I am voting yes. Either get absorbed, go bankrupt, or evolve with the times. Fixed prices don’t help anyone.

  • Mark

    Thank You Vincent, I couldn’t agree more.

    State protection through monopolistic controls is not the answer. Why not have the state regulate cigarettes too? And candy, bottled water, and bicycle tires, and every other non-essential consumer good? If you like government controls and state-run stores in your life, move to a communist nation.

    I refuse to support a monopoly. Anyone who does is begging for the onset of the plutocracy. Long live capitalism!

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