Costco will rally for liquor sales

Petition effort seeks to allow stores in Washington that now sell beer, wine to also sell stronger alcohol

By Libby Clark, Columbian Web Editor

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Costco Wholesale Corp. next week will start petitioning its Washington customers to place an initiative on the ballot in November that would end state-controlled liquor sales. All Costco stores in the state, including the one in Vancouver, will hang banners and set up tables to help collect signatures for Initiative 1100.

The effort, led by Modernize Washington, would allow businesses that currently sell beer and wine to also sell liquor, and it would eliminate price controls and allow volume discounts.

The Washington State Liquor Control Board currently buys all liquor sold in the state and distributes it to state-owned and contract liquor stores at a marked-up price.

“The situation in Washington is archaic and it’s anti-consumer,” said Joel Benoliel, chief legal officer for Issaquah-based Costco, which is the nation’s third-largest retailer. “We pay in a state liquor store about double the price and sometimes more than that (compared with) the price you pay at a Costco in California.”

Costco’s political push comes more than two years after it lost most aspects of a court battle to change the state’s beer- and wine-distribution rules.

Several earlier legislative efforts aimed at overhauling the system also failed to make headway.

But those efforts at reform have failed for good reason, said Brian Smith, a spokesman for Washington’s Liquor Control Board.

“This initiative appears to totally deregulate alcohol like it was any other product,” Smith said. “But society doesn’t treat alcohol like potato chips. … Our system provides some element of public safety by limiting access and preventing minors from having access.”

The board’s alcohol sales also generated a $332.7 million net return in fiscal year 2009, which supported state and local government services, he added.John Guadnola, executive director of the Washington Beer & Wine Wholesalers Association, said his group does not have an official position on the initiative but that he personally supports keeping the current regulatory system. Price controls and other regulations minimize alcohol abuse and related problems such as domestic violence and workplace problems, he said.

“In Great Britain, they’re selling beer as loss leaders in grocery stores,” Guadnola said. “It’s easy access to alcohol, and the lower the price, the more the consumption.”

Small grocery stores may like the idea of having the opportunity to sell liquor, but a representative says Initiative 1100 goes too far.

“This would allow very large retailers to acquire and sell alcohol at a price that many of our family-owned grocers would not be able to compete with,” said Jan Gee, president and chief executive officer of the Washington Food Industry Association, which represents independent, family-owned grocers.

The state runs more than 160 stores, and an additional 155 are owned by businesses that contract with the state.

Costco and Sharon Gilpin, a political consultant who put together Initiative 1100, say the state could raise liquor taxes to make up for that loss.

“The Legislature taxes alcohol, and that power is not being taken away, and they should go for it,” said Gilpin, who worked with Bellevue attorney Richard Stephens to draft the initiative’s changes to the state’s Prohibition-era alcohol laws.

Even with higher taxes, consumers would pay less for liquor than they do now because of increased competition and the elimination of price controls, Benoliel said.

“If we’re allowed to apply our efficiencies to any commodity, we can lower the price,” he said. “To some extent, other retailers can as well.”

To make the November ballot, the initiative needs almost 242,000 signatures by July 2.

More than 50 people are collecting signatures now, and Costco will add dozens to that effort next week, when it sets up tables inside 26 warehouses staffed by Costco employees who are registered voters.

“We know we’re going to get an overwhelming response, because we know the concept is very, very popular with Washington people,” Benoliel said.

Costco considered three initiatives before backing 1100.

Gilpin and Modernize Washington, a group she organized for this effort, had a second initiative to change the alcohol-sales system. It was backed by the small-grocers association because it would have kept price and other controls.

Gilpin said that initiative will be withdrawn. “We don’t want to compete with ourselves,” she said. “We’re going with 1100, because it’s getting the most support from people in the industry.”

A third effort, Initiative 1105, would close state liquor stores and revise regulations and taxation. It is thought to be backed by at least one major spirits distributor.

Charla Neuman, a government-affairs consultant in Tacoma who is listed as its sponsor, said it is too early to name the initiative’s supporters. They are not collecting signatures yet, and its description for the ballot is open to public challenge at the Secretary of State’s office until June 1.