Wholesale Abuse and Costco’s New Initiative

Practical Winery and Vineyard Journal has published my latest perspective on wholesaler attempts to pass anti-competitive federal legislation. A copy of that is available here.

Also, a news item worth checking out is Costco’s latest effort to remove regulatory barriers for alcohol retailers in Washington State. The company is advancing a new initiative–#1183–for the ballot this fall, which is somewhat different than the ambitious liquor privatization and market-opening initiative from last year. It cuts a host of compromises, creating many politically determined winners and losers rather than opening the market to competition.

Some highlights according to the Seattle Times include:

• A 17 percent tax on all liquor sales. This provision attempts to buy off the state government, which would otherwise lose revenue under privatization.
• A limit on the number of stores that could sell liquor. Specifically, the initiative would only allow stores with 10,000 square feet to apply for a liquor license. This leaves out smaller supermarkets, convenience stores, and others. The apparent hope is to avoid opposition from people who don’t want to see alcohol at 7-11 and similar shops.
• No changes to the way beer is sold. This aspect attempts to thwart any battle with beer wholesalers who helped topple last year’s initiative by spending millions.
• Allow wineries to offer quantity discounts to retailers (who can pass them on to consumers) and allow retailers to centrally warehouse alcohol–both of which are critical to Costco’s wholesale model.

According to the Seattle Times, Costco estimates this measure would allow 1,500 stores to apply for liquor licenses, as compared to last year’s initiative which would have provided the opportunity to 3,000 – 5,000 stores. Considering that only 329 stores now have liquor licenses, this surely is an improvement on that end. But the 17 percent tax is hefty and the provisions limiting the opportunity to get licenses and leaving out beer retailers are simply unfair.

Image credit: greenwenvy08 photostream on flickr.