Glass half empty: Job losses, lingering questions for Valley liquor sellers in wake of I-1183 passage
By SETH TRUSCOTT
Snoqualmie Valley Record Editor
November 16, 2011 · 2:04 PM
What Hayditter’s J.L. liquor store in Fall City lacks in size, it makes up for in character. The original dollar from 1990 is still up on the wall, as are the homespun sayings about mankind’s top-ten inventions, among them the telephone, the computer and strong drink.
At the counter, Tom Bergstrom points out a few good deals to a customer, waving to small bottles of liquor on an alcove shelf.
“I’ve had a lot of people tell me this is the best store they’ve ever been in,” he says.
Bergstrom’s shelves are well-stocked for the holidays, but the operator himself is doubtful about whether he’ll still be here next Christmas.
Just-passed Initiative Measure 1183, which as of Thursday garnered 59 percent approval with more than 777,000 votes, will privatize the state's liquor sales over the next seven months. It was meant to get the state out of the liquor business, according to supporters.
But talk with existing liquor purveyors like Bergstrom, and you get the sense that under I-1183, the whole apparatus of liquor sales in the state is being shaken like a cocktail.
A major change
By June 1, 2012, all liquor business operations, including purchasing, distribution and retail, will be transitioned to the private sector. The Washington State Liquor Control Board will still enforce sales rules on the state's 16,000 liquor licensees.
However, more than 900 state employees, who have worked under a cloud of initiative measures over the past two years, will lose their jobs next spring, to be replaced by licensed sellers in private stores, grocery stores or large outlets.
Would-be license-holders kept the Liquor Control Board offices in Olympia busy all day Wednesday, following news of the initiative's passage.
"The phone's been ringing off the hook," said Brian Smith, Communications Director for the liquor control board. The agency planned on getting the licenses available by January, but in the wake of the election, was focused on providing answers and timelines to its worried, disappointed employees and store contractors.
Smith said the liquor board plans to focus on business as usual during the holiday season, but will begin to divest itself of assets starting in the new year. The agency will reach out to suppliers, Smith said, in hopes that they will keep stores stocked up until May 31, then buy back the unsold inventory.
"We won't have a business left to do things come June 1," Smith said.
Right now, liquor in Washington is sold by state-owned stores, or by stores that contract with the state; the state owns the liquor, and contractors sell on commission. Under the initiative, grocery stores of the right size, 10,000 square feet, and a clean record can apply for a license to sell the liquor. For application purposes, these stores will be considered "now licensed" by the state, as if they currently hold licenses for the sale of liquor.
Contract stores, which are not state-run but whose inventory is owned by the state, may also apply for licenses but they do not get the same consideration.
Carnation's contract store, located inside the Ace Hardware on Tolt Avenue, will almost certainly close, says manager, Bob Cox.
"All I know right now is our contract will be terminated," he said on the phone Wednesday.
Cox and his brother, Ron, together with a half-time employee, own and run the hardware store. While they own the physical location, they do not own the liquor store itself, or any license to sell spirits. They are simply agents of the state, Cox said.
He has managed the liquor agency for 28 years. It actually goes back further, to when his parents started the contract store, some time before 1978.
Liquor revenue is significant to the store, roughly equal to one person's salary, but that's one of many reasons that Cox actively campaigned against this initiative, as well as the similar I-1100 that voters rejected by more than 170,000 votes in 2010.
"It gives away a public asset because it's giving all the big stores a public liquor license," he said. "The citizens owned the liquor business. It had a net return of $425 million a year, and they just gave it away, and got nothing for it…as a business owner, I don't think that's very smart."
At about 4,000 square feet, Ace doesn't meet the 1183 size requirement but smaller shops like Ace's and Hayditter's can be grandfathered into the new law. They must have a clean record and meet the operating requirements to qualify, but they can't have another licensed spirits retailer in their trade area, and that's where things are unclear for Ace.
"Trade area is not defined in the initiative," Cox said.
Ace sits less than four blocks from the 23,000 square-foot Carnation Market IGA (formerly the QFC) which meets all the state requirements for the new license. Store Manager Jim Baugher said he hasn't gotten much information yet about the cost implications, but, asked if the store would apply for a license, he said "We would. We meet at least the initial requirements."
Another IGA, on Snoqualmie Ridge, also intends to pursue the liquor retail opportunity that 1183 offers, once they have more details.
"It's definitely an opportunity to have additional sales in your store, so it's something that we certainly think is a viable addition," he said John Albertson, Merchandise Manager for the Myers Group that owns the IGA.
Also, it will be necessary for the store, just to remain competitive with other area grocery retailers, particularly the North Bend QFC and Safeway.
"We're an independent grocer, and those folks are going to have that."
Grocery stores will bring competition to another aspect of the liquor business cocktail, too, distribution.
Many trucking companies that deliver to the small state stores now are anticipating deep cuts starting in June, among them, Ralph Pozzi of Pozzi Brothers Transportation, based in Kent. He recently told the manager of the North Bend liquor store, Deanna Riley, that he might have to lay off as many as 12 drivers because of the new law.
"The grocery stores will get their alcohol from their own suppliers," Pozzi told the Record, and the company, with 30 drivers, won't have work for them all. "t will be about a third of our workforce," he said.
It will also mean selling off or storing some of the company's soon to be unneeded trucks, but Pozzi is most disappointed about the potential layoffs.
"Truthfully, it sucks. I like our guys that work for us, we're pretty regular here," he said.
Many of the people who will be most affected by the law were actually surprised that it passed, including some who stand to benefit, such as Albertson.
"On the negative side, I thought that bill really favored Costco… and I didn't think that was fair," he said. He thought more voters would share his opinion, too.
Now, though, he's looking at the positive side of the change. Besides potential sales increases in his stores, he said "I think it will create a lot of jobs," particularly in distribution, since availability will no longer be limited to one warehouse in Seattle for the 72 liquor stores in King County.
While the measure could dramatically expand the number of places where people can buy liquor, 1183 doesn't expand the funds available to the state for enforcement. According to Smith, it allows for additional money for local law enforcement.
Contract store owners may be able to buy back the state inventory, but a typical small store keeps more than $100,000 on hand.
"That's pretty steep for a lot of owners," Smith said.
Behind the counter in Fall City, Bergstrom agreed, saying that a $100,000 buyback would be a tall order for his boss, owner Jerry Hayditter.
"Even if he did buy the stock, where would you get it from?" Bergstrom asked.
Big retailers will have their own distribution system. "There's no middleman." Small outlets might be able to buy direct from the manufacturer, but "what a pain in the butt that'll be," Bergstrom said.
Fall City's liquor store is grandfathered, but Bergstrom, the Fall City store's sole employee, has his doubts about whether the store could continue in other hands under 1183.
What would happen if the owner was to sell, he asked. Would a license be available? Bergstrom also questions what would happen to the truckers who move the state's liquor today.
"There are several different freight companies that move booze," he said. "They're all going to have big layoffs."
Variety on the shelves, Bergstrom said, will also be hurt by the changed playing field.
"A lot of your major brands will probably disappear," he said.
Bergstrom, a part-time custodian, is a six-to-seven-day-a-week presence at the Fall City Liquor store. Talking with customers, he expressed disappointment in the vote.
Come June 1, "I'm going to have to find another job," he said.
Customer Fred Valenta of Duvall, stopping by for some vacation supplies, commiserated.
"I think it's nice to have small places," Valenta said.
Now preparing to meet the timeline set by the initiative, the control board's goal is to have an orderly transition from public to private business operations. The board plans to maximize revenue in responsible ways through the holiday season.
According to the board, State liquor stores have among the highest no-sale-to-minors compliance rates in the nation at more than 94 percent. The private sector’s overall compliance rate is 77 percent.
"As the sale and distribution of liquor will soon be completely in the hands of the private sector, we hope it will treat this public safety responsibility with the utmost importance," a control board statement reads.
• You can learn more about the state's liquor privatization plans at www.liq.wa.gov.Contact Snoqualmie Valley Record Editor Seth Truscott at firstname.lastname@example.org or 1-425-888-2311.