This month’s Virtual Tasting is the 2008 Rulo Syrca tonight 7-8pm Pacific. Read how to participate here.
I have decided to vote against Initiative 1183 because I believe that it poses a threat to numerous small wineries, distributors, and wine stores. I believe that the effect on these businesses would be bad for the Washington wine industry and bad for me as a consumer. Here’s why.
Let me start by saying that I am for liquor privatization. If Initiative 1183 were just about privatization, supporting it would be, for me, a no brainer – despite my distaste for the initiative process. However, Initiative 1183 is about much more.
First and foremost, Initiative 1183 is a battle of big businesses trying to use the initiative process to write laws that favor them/stop laws that don’t. Costco, Wine and Spirits Wholesalers of America, and other interest groups have spent over $33M to pass/defeat this initiative. We are all pawns in this game.
While this turns my stomach, it is not the reason I am voting against this initiative. The key component of Initiative 1183 from a wine industry viewpoint is that it removes uniform wholesale pricing and allows volume discounting. This creates an incentive for retailers to buy larger volumes of wine at a cheaper cost. I believe that this change may make it more difficult for Washington wineries to compete.
Washington has a very limited number of ‘large’ wineries. 27 of our 740+ wineries account for 90% of the total wine production in the state. Yes, these 27 wineries will be able to slug it out in a volume discount market with wines from California and other areas.
However, the vast majority of Washington wineries are small, family wineries producing less than 3,000 cases annually. These wineries simply do not make enough volume to make a profit by selling wine in large quantities at a reduced margin, unless their business model and marketing approaches completely change.
For many of these wineries, uniform wholesale pricing is what allows them to survive. Take this away and I believe it may be more difficult for many of these wineries to sell their wine. I also believe that it puts small distributors at a disadvantage, as they are the people selling these wines. Many of them will have a tough time in what will increasingly be a large distributor industry focusing on low margins and high volume. That does not help our industry. That does not help me as a consumer looking to buy Washington wine.
I also believe volume discounting will make it harder for Washington wineries to find a spot on grocery store shelves due a decrease in the number of available SKUs (See a comment from Dave E from a small wine store on changes they would anticipate at their store in the comments section of my blog here). Spirits taking up space would compound this issue. Again, that does not help our industry. That does not help me as a consumer looking to buy Washington wine.
Finally, I believe that Initiative 1183 puts independent wine and beer stores at a competitive disadvantage. First, it makes it difficult if not impossible for them to compete on price and potentially even increases the prices of small production wines if distributors charge ‘case break fees’ to encourage retailers to buy in larger volume.
Secondly, by requiring 10,000 square feet of floor space to sell spirits, Initiative 1183 not only eliminates the ability of convenience stores and gas stations to sell spirits – a good thing, it also eliminates the ability of small specialty shops to do so. To wit, even large Seattle-based wine retailer Esquin has only 7,000 square feet of floor space and would not be able to sell spirits (NB: A representative from Esquin indicated that they are against Initiative 1183 as they believe it hurts small wineries). Again, that does not help our industry. That does not help me as a consumer looking to buy Washington wine.
Is my position being protectionist? You’re damn right it is. Washington is not just any other state in the nation in terms of wine consumption and liquor laws. It is the second largest wine producing state and an emerging wine region with a multi-billion dollar wine industry. Isn’t that something worth protecting?
Perhaps I’m wrong and the industry would be fine if Initiative 1183 passes. Perhaps over time, as the industry evolves, volume discounting might present less of a threat. But implementing this significant of a change during the worst economy in 70 years probably isn’t the best time to find out.
Some proponents of Initiative 1183 have said, ‘The government shouldn’t tell me how to run my business.’ Would you rather have Costco telling you how to run your business? This is what Initiative 1183 does. It lets Costco make laws that help their company at the expense of smaller businesses that can’t afford to have laws made for them. To me, that is something we should all be protecting ourselves from.
I know some of my readers have opposing views on this initiative, and I respect those opinions. I realize that some wineries in Washington, including some small ones, might benefit by passage of Initiative 1183. However, I am trying to consider the industry as a whole – which I hold dear – as well as my own consumer interests.
My hope is that, with the series of posts I have written on 1183, I have provided you all with enough information to make your own, informed decision, based on the things that are important to you.
For me, I’ll be voting no, and if you love Washington wine, I encourage you to do the same.
Note: Read a series of posts about Initiative 1183 here.