Just over five years ago, on July 1, 2012, the sale of spirits and other alcoholic beverages in Washington State was privatized, ending 79 years of state control through state liquor stores, This came about as a result of the approval of Initiative 1183 by a margin of 60 to 40 percent by voters in the November 2011 election. It was the biggest change in the way alcoholic beverages were sold in the state since the passage of the Steele Act in 1933, after the repeal of Prohibition, which set up the state liquor store system.
The passage of Initiative 1183 was all about getting the state out of the liquor business. After nearly 79 years of state control, voters were tired of the existing system. The Washington State Liquor Control Board had become a fossilized hidebound bureaucracy, beholden only to itself. Over the years, the State Legislature abdicated its responsibility for modernizing the liquor system. The only major change in the way alcoholic beverages were sold was in 1969 when the sale of wines besides Washington produced ones were allowed to be sold in grocery stores and other retailers. All other changes have been incremental.
Initiative 1183 was called the "Costco Initiative" for good reason. The main beneficiaries were the big retail outlets, including Total Wine and More, Safeway, and BevMo as well as Costco. The initiative had arcane layers of fees (on wholesalers and retailers) and taxes which added up to higher spirits prices relative to other states. But the initiative also permitted volume discounts from the wholesaler to retailer which has mitigated the effects of the higher taxes. It is the big guys who benefit the most from the discounts with their purchasing power for their chain operations. Central warehousing also added to the benefits.
So what does privatization look like now, five years later? The biggest change has been a far wider selection of products in the market, not only for spirits, but for wine and beer as well. I was at the Total Wine and More store in Spokane Valley last Friday, and saw a huge selection of everything - vodka, Tequila, Scotch, Washington, California and imported wines, beers and more. I was in Esquin Wine & Spirits (of which I was the founder in 1969) a couple of weeks ago and saw an array pf whiskies, Italian Amaros, Cognacs, brandies, and so forth. One of the reasons why initiative efforts to get the State out of the liquor business failed until 2011 was that the big distilling companies liked the old system because it reduced competition by limiting sales to smaller state run stores.
What about spirits prices? There is no doubt that prices are higher with privatization, but convenience (with more stores and more hours) and selection are greater. Volume discounts and competition has pushed prices downward since 2012. Spirits sales in Washington is being subsidized to some degree by profits from sales in other states.
Today's privatized liquor sales system could be better. Craft spirits distillers could use some help in tax breaks to enable them to be more competitive. And a reduction of the spirits sales tax from 20.5% to the state and local general sales tax would make things more equitable for consumers. But privatization is here to stay, and Washington residents are getting used to it. The Liquor Board has changed, too. WSLCB used to stand for Washington State Liquor Control Board, now it stands for Washington State Liquor and Cannabis Board. How's that for change?