Can Washington State Consumers (And Retailers) Stomach Higher Liquor Prices?


Voter approved Initiative 1183 has effectively privatized the liquor business in Washington. The new law, which went into effect June 1, 2012 will allow stores larger than 10,000 square feet and some smaller stores to sell liquor. But the change in the law will also bring higher prices for at least the next 12 months.

The initiative also requires distributors to raise at least $150 million in licensing fees for the state, or Washington officials can retroactively charge them for it.

That provision puts wholesalers in an uncomfortable position, having to pad their prices enough to cover that surcharge, said Jan Gee, president of the Washington Food Industry Association, a trade association for small, independent and family-owned grocery stores. But the wholesale taxes and fees fall after the first year. (source: Seattle Times)

The initiative has imposed a 10 percent distributor fee and a 17 percent retail fee on alcohol to reimburse the state for millions of dollars in lost revenue. These fees will obviously be passed onto the consumer. And while these fees and taxes will go away after 12 months, there is a fear that liquor prices will remain elevated and that smaller liquor sellers will be pushed out of business.  Costco, which is the largest benefactor (and supporter) of this new law has already made plans to expand into Washington’s liquor market while some smaller sellers are bowing out because they feel they can’t compete the retailer giant. Larger retailers will have the flexibility of negotiating their buy prices because of their bulk purchases while smaller companies will need to choose between accepting smaller profits and closing shop. Since it’s been 70 years since liquor sales were privatized in Washington, no one knows exactly how consumers and retailers will respond to the changes. But it’s probably a safe bet that consumers will continue to buy, even if in smaller qualities while retailers adjust as much as possible.

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