This November, voters in the State of Washington pretty overwhelmingly decided to take away the state’s socialist system of liquor sales, 59-41. Don’t like the word “socialist”? Sorry, I’m not sure what else to call state control and ownership of all distribution and retailing of liquor products. I doubt that reliably Blue Washington rose up and took away the state’s gravy train because of a sudden surge of Reaganomic thought, however.
Government does a bad job of just about everything it does, including defense and policing. Government operations are simply inefficient and wasteful, at their best. For most bureaucracies, this isn’t obvious to most citizens. In most cases, it is because they have no interaction with that agency’s work in their everyday lives. In some cases, it is because there is no obvious private sector operation for them to compare as a reference. People don’t understand how badly operated even winning armies are, because private armies are so rare and so small.
They also tend to be run by blond dudes with crewcuts and foreign accents named Gunther…
Hey, I watch TV!
But liquor sales are different. Every time a Washington consumer walks into a profitable retailer of other products, he or she sees how things can and should be run. A look at Washington’s system, and the contrast becomes obvious. This is the outfit that recently installed a brand-new, much ballyhooed automated distribution warehouse that cost umpty million dollars and caused the state to run out of booze.
Across the country, voters are demanding an end to state ownership of booze sales and distribution. In some areas, they are getting it. In others like Pennsylvania, where Republican lawmakers are reneging on a pledge to voters, not so much. In Washington, all is well….
Or it will be eventually. For now, the transition is creating lots of problems and disruptions. Most government action carries unintended consequences, after all, even when that government action is simply stopping a previously on-going government action.
First off are taxes. Governments do not take kindly to having their revenue taken away, and won’t let it happen without a fight. The State Liquor Control Board has “interpreted” the ballot initiative to give the state the highest liquor taxes in the country…. Long term, Washington will have to continue its discussion of this issue to ensure that the restaurant and distilling industries can remain profitable enough to keep providing the citizenry with the vibrant and thriving product they now do.
More acutely to the specialty cocktail community, the transition to private enterprise is causing disruption in supply for consumers and some severe financial hardship for many small distillers.
The LCB is getting out of the distribution business in six months, and is thus understandably gun-shy about taking on unproven, low-volume, or slow-moving inventory. And the entities which will arise to replace the state’s operation are not yet up and running. Further, the LCB has issued regulations in response to the initiative that won’t allow distillers to sell their product to bars or restaurants either! This leaves smaller distillers in a life-threatening bind, with nowhere to sell their wares except their own distillery tasting rooms. (And they are fortunate in that. In states like Ohio, most of them would not be allowed to sell their own product in their own facilitiy!)
Washington has been, and will be again, a great place to be a craft distiller. The sophisticated market has been able to support about 40 small distilleries in recent years, most of which probably survive and perhaps thrive with sales only in state.
But it will be hard, if not impossible, for these small distillers to get through the market disruption brought on by the transition. How many startup manufacturers can expect to weather a six month drought in revenue? Those who have established sales outside Washington will likely make it through the hardship, though the ordeal will not be good for their long-term success. Of those that chose to cultivate their own fertile home market only, most will likely fail before things stabilize, unless some kind of distribution regulation relief isn’t found.
And there are far wider, though less dire, consequences for others in the the cocktail scene in Washington. Bars which have carefully crafted menus and drinks with boutique liquors (from in and out of state I imagine) will have to go without product, disrupting operations. And Washington consumers will have to muddle through shortages, too, though my sympathy for them is limited. They’ll still be able to drink well. It’s not like a redux on the Great Angostura Bitterlypse of 2009.
Washington’s privatization of liquor distribution and sales is a good thing. It will eventually results in a smoother-functioning, more reliable marketplace for liquor, with greater selection for consumers… assuming the state doesn’t tax it so hard it stunts the whole market. The transition to the new system is a bad thing. As with the marketization of every other socialized industry throughout the world, good people who adjusted their plans to a bad system will feel the pain unjustly. In a well-run government, the legislature would pass a temporary enabling act, allowing direct sales of product to bars and restaurants by in-state producers during the next six months. Since it usually takes legislatures six months to pass a non-binding resolution saying that they like puppies, I doubt this is in the cards. But if you live in Washington, a call to your state legislator would not hurt, and it might help.
What you can do, people of the Northwest, is buy local. If you are giving booze at Christmas, give a craft distiller’s product you’ve tried and liked. And stock up for yourself on bottles you like. It doesn’t spoil, you know. Every bottle sold for these guys will help them make it through this, or at least make the end less painful if they don’t make it. If you are interested in helping out, SeattleMet.com has a Guide to Washington’s Craft Distilleries that lists a number of these small manufacturers. They need every retail sale they can get right now.