For those of you following the two initiatives regarding the privatization of Washington liquor sales, be prepared for a noisy battle for the next two months. There is big money pouring into this fight on both sides, so I thought it would be a good time to talk about who is funding each camp. The names of the organizations buying political ads are meaningless, they always sound like noble causes. To really know what the fuss is all about, you need to know who is paying the bills and why. It is then up to you to choose the side that is best aligned with your own interests.

The entity names and donation amounts listed here are all a matter of public record and can be found at http://www.pdc.wa.gov/. In some cases, the motivation of the donor is obvious (at least to me), but in all cases where I attribute motivation you should consider it my personal opinion since I have not interviewed any of the donors.

Initiative 1100

I-1100 seeks to privatize the distribution and retail sales of liquor in the state of Washington. It further seeks to strike down the three-tier distribution system for all alcoholic beverages that was created at the repeal of Prohibition. That system protects the role of the wholesaler in the supply chain and requires (with a few exceptions) that all beer and wine pass through local warehouses before hitting retail shelves. Some other related laws forbid credit terms and require that all retailers pay the same price for a particular product, whether they buy 1 bottle or 100 cases.

Support for I-1100

Costco is the primary financial sponsor of I-1100, with $807,200 in cash contributions YTD. Safeway is a distant second with $25,000. Those two donors constitute 99.7% of the $834,745 raised by Modernize Washington. What is their motivation? Costco and Safeway make big money in other states retailing spirits. They are also irked by the mandated price controls that prevent them from negotiating volume discounts. If you have visited a grocery store, Costco, or large beverage retailer in California, then you probably know what the retailers do with these discounts....they pass them on to the consumer in the form of lower prices. This could put small retailers at a disadvantage, but they can take comfort in the knowledge that Costco never attempts to be a specialist in any retail category. They might carry 50-100 liquor products, as opposed to a specialty shop that should stock thousands.

Opposition to I-1100

"Protect our Communities" is the primary organization opposing both of the initiatives, but of course that tells us nothing. Who is funding POC? 99.9% of the money donated to this group comes from beer wholesalers and unions. $3,250 is from private owners of "agency" liquor stores in rural locations (and their landlords). $650 was donated by political entities, including $200 from State Senator Margarita Prentice.

Beer Distributors

Of the $4,618,000 (wow) in total cash contributions, $4,020,500 (87%) is from beer distributors or organizations that represent them. This is not surprising considering the profit collected by beer wholesalers in Washington. Both initiatives scare beer wholesalers, but I-1100 is particularly troublesome to them. If large retailers are not required to use a local distributor for alcoholic beverages, they may purchase high-volume beer products by the container directly from the brewery or from a central warehouse. Also, if they do choose to buy from a local distributor, I-1100 will allow them to negotiate the price. Either way, the profit margin of the wholesaler falls. Net outcome: lower volume and profit for beer wholesaler, higher volume for large retailer, lower price for consumer.

Beer distributors also benefit from the restricted access to spirits in this state. You can buy beer 20 hours a day at any gas station, grocery store, or drug store. During most of the evening hours, beer & wine have no competition from spirits.  State liquor stores are usually farther away and don't advertise their presence. If these impediments to access are removed, then the consumer has more choices at 10 PM when the refrigerator is empty. Maybe they'd rather have two fingers of Macallan rather than a Bud Light Lime before bed. That's bad news for beer distributors.

Unions

The United Food & Commercial Workers Union represents the clerks in state liquor stores, so it should not be a surprise that they have donated $572,500 of their members' dues to Protect Our Communities. The WA State Labor Council (AFL-CIO) added another $20,000. UFCW does not want to lose dues-paying members, so they will fight this to the death. Yes, some of the state clerks will find jobs in private sector UFCW shops, but certainly not all. One of the worst aspects of the state liquor operation is the appalling inefficiency at all levels. Even if privatization does not increase overall volume, we will certainly see a reduction in the cost of delivery. This invariably means fewer retail clerks, and less income for the UFCW.

Agency Stores

Urban and suburban Washington residents may not realize that there are some semi-private retail liquor stores in the state. The law allows the WSLCB to appoint private contractors to serve as retail agents for the state. These agency stores still follow all the pricing and merchandising rules as the state-owned stores, but a piece of the retail markup goes to the contractor. If you live in the San Juans, LaConner, Naches or Concrete, you shop at an agency store. These store owners will certainly be able to continue as private retailers if either of the initiatives pass, but they will face more competition for customers. Six of these store owners have donated $2,750 to the "No" campaign, and the landlord for two liquor stores has donated $500.

Senator Margarita Prentice

Senator Prentice has only given $200 to Protect Our Communities, but is worth mentioning as the only public official to offer financial support. It is also worth looking at the Senator for the composition of her own financial supporters. In 2008 alone, she collected $11,350 from ten different entities that either distribute beer, represent beer distributors, manufacture beer, or own beer distributorships. Coincidence? Maybe some ambitious reader will do some research on Senator Prentice's voting record on issues related to beverage sales in Washington.

Initiative 1105

I-1105 also seeks to privatize the retail sale of spirits, but leaves all other aspects of the law alone. Alcoholic beverages still have to be landed at a local wholesaler, price and credit controls remain, and access to retail liquor licenses is limited. Washington Citizens for Liquor Reform is pushing this initiative, and they have raised $2,244,000 so far. Odom/Southern Wine & Spirits and Young's Market have funded 100% of this effort. They are both national wine & spirits wholesalers and brokers, and would benefit greatly from retail liquor reform. I-1105 opens up the Washington liquor industry to them, while also preserving their position in the supply chain. Protect Our Communities also opposes I-1105, so no need to repeat that analysis here.

Get Ready for Scary Ads

Protect Our Communities is not going to hit you with ads telling you how much money their benefactors will lose if 1100 or 1105 pass. They know you don't care about maximizing union dues and beer profits. I think we should all expect doom and gloom messages about underage drinking and bottles of tequila filling our gutters. Just keep in mind that none of the alcohol enforcement tools are impacted by these initiatives. In fact, the entire mission of the WSLCB will be focused on education and enforcement. Isn't that a good thing?