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State of Washington Wine Industry: The Same

Voters reject two ballot initiatives that would have altered wine sales

by Peter Mitham
washington liquor distribution
Counties colored green voted in favor of privatizing liquor distribution in Washington state, where the proposition failed.
washington liquor distribution
Source: Washington Secretary of State
Benton City, Wash. – Many voters in the 2010 midterm elections took the chance to express their discontent with how government is handling the affairs of the nation, but Washington state voters opted -- by a narrow margin -- to keep the state in the business of regulating and selling alcohol, including wine.

Initiative 1100, spearheaded by Issaquah, Wash.-based Costco Wholesale Corp., would have ended the state’s monopoly on alcohol sales and eliminated regulations that the

Washington Wine Institute (WWI) had fought to refine since Costco’s earlier challenge to Washington’s retail monopoly in 2005. WWI was among the opponents of the ballot initiative, which was financially supported to the tune of $6.2 million by Costco, grocery chains such as Safeway and Fred Meyer, Wal-Mart and a number of smaller parties under the banner of Modernize Washington. Family Wineries of Washington State, which advocates greater liberalization of the state’s liquor laws, lent its support to the initiative.

Voters defeated the initiative, however, with 52.5% coming out against the measure and 47.5% voting in favor as of Wednesday night.

The county-by-county breakdown shows a clear split in the state. Western Washington counties around Puget Sound typically supported privatization, as did Chelan and Douglas counties to the east, while the rest of the state rejected deregulation. Returns range from a 66.3% vote against the measure in sparsely-populated Garfield County in Eastern Washington to an almost even split in Skagit County. Kitsap, the county most in favor of the measure, voted 53% for privatization.

The split wasn’t lost on observers. Mike Veseth, Robert G. Albertson professor of international political economy at the University of Puget Sound in Tacoma, Wash., attributed the split to Costco’s “vigorous” promotion of the measure inside and outside its stores. “Regions with the highest votes in favor of I-1100 were also those with the highest concentrations of Costco stores. Probably a coincidence, but possibly not,” he told Wines & Vines.

WWI president Marty Clubb of L’Ecole No. 41 winery in Walla Walla said conservative attitudes in Eastern Washington probably helped sway voters in a debate where access to alcohol by minors was a key issue (the anti-privatization groups People for Responsible Liquor Laws and Protect Our Communities raised $9.1 million against I-1100). He didn’t discount the presence of a vibrant wine industry in many counties as an agent for raising awareness of the broader issues associated with deregulation.

“I don’t know anyone in the wine industry opposed to privatization of spirits. I think why the wine industry was opposed to (I-1100) was because it completely gutted the statutes that dealt with distribution,” Clubb said. He noted that the WWI has successfully achieved several changes that have liberalized the states’s distribution rules and effectively ended domination by the three-tier system. What remains are protections that shield smaller operators.

“I don’t think there are any rules that have hurt the development of the small, family artisan wineries,” he told Wines & Vines. “In fact, you could easily argue that some of the rules that we have indeed leveled the playing field and have given smaller wineries greater opportunity to expose their product.”

That isn’t to say I-1100 hasn’t highlighted areas ripe for further change.

“There are certain aspects of changes in the law that were in 1100 that we could implement that would help the wine industry,” Clubb said. “Without pointing the finger at any one, the debate about credit terms is a good example.”

The ballot has broadened awareness of the issues, Clubb feels, and the WWI will be discussing future changes through the winter. (The institute’s annual general meeting takes place in Richland, Wash., on Nov. 30).

A vintner contributes
Changes must happen, according to Christophe Hedges of 100,000-case Hedges Family Estate on Red Mountain. Hedges is a member of the WWI, but the winery also gave $500 to pro-I-1100 Modernize Washington, because it is keen to see wineries enjoy greater economic freedom.

Hedges works with distributors, but the ability to negotiate with buyers -- as wineries can with many buyers outside the state -- would be welcome.

“For us it was more about the freedom of the economy,” Hedges said. “You don’t go into the wine business to have a cozy fantasy lifestyle. You go into it because it’s a business. A lot of people don’t realize that, and I think the people who voted against it wanted to protect their hobby.”

That said, he respects the votes cast against privatization, because he knows the existing distribution system works in favor of small wineries.

“Hedges is not super upset about it, we just think the reality is, (deregulation) is the future,” he said. “We think that the distribution system is fantastic, because it protects us, but we know that in the end -- in the fut ure -- it’s not going to be that way.”

State staff hears the voters
Staff at the Washington State Liquor Control Board have taken note of the debate, too. WSLCB communications director Brian Smith identified public safety concerns as a key concern for voters, who feared an estimate by the state auditor that outlets selling spirits might rise from 215 to 3,300 if full privatization of liquor sales occurred with the passage of I-1100, making alcohol beverages more readily accessible.

But discussion regarding changes to the wine industry will also be taken into account as lawmakers enter the next session of the state legislature. “As the legislature reconvenes in January, I think this issue is going to remain alive in some ways,” he said.

Tuesday’s ballot also saw Washington state voters defeat I-1105, an initiative backed by liquor distributors seeking privatization of the state’s liquor business. Voters came out decisively: 63.8% against I-1105.
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