Driving to Drink

For years now, the embattled Oregon Liquor Control Commission has been fighting powerful lobbyists for grocery store chains that want to end the state's nearly 80-year monopoly on selling booze.

The argument for killing off the OLCC goes like this: Letting the private sector sell liquor—that is, allowing customers to pull into a Safeway or Whole Foods for their vodka—will be more convenient for consumers and much cheaper without a state bureaucracy setting prices.

Well, drinkers in Washington state are putting the lie to both those arguments in big ways.

Sales at OLCC stores in towns along the Washington border have exploded—jumping 33 percent from June through October, compared to the same period last year, according to records examined by WW.

Sales in Jantzen Beach are up 43 percent. Warrenton reports a sales spike of 30 percent. And the increases are even bigger in smaller towns: 51 percent in Milton-Freewater, just across the border from Walla Walla, and up 63 percent in Rainier, just over the Lewis and Clark Bridge from Longview.

The rush follows Washington's closure in June of its state liquor stores, a move approved by voters following a $22 million campaign—led by Costco—to allow grocery stores to sell liquor.

The fight over Oregon liquor sales has been a bitter, years-long battle between two monied interests: grocery chains, who want the current liquor sales system abolished, and beer and wine distributors, who fear their business will be disrupted by a change in the way alcohol is handled.

But the hard numbers crush the claims of the OLCC's critics that a state monopoly is hurting consumers.

"Selection and price are the primary factors in driving Washingtonians over the border," says OLCC spokeswoman Christie Scott.

Overall, liquor sales in Washington were up by 2.9 percent between June and September this year compared to last year.

Oregon, however, has seen an 8.4 percent increase in sales during the same four-month period.

"The price drives the sales [from] Washington, and the convenience factor is leveling off," says Paul Romain, who leads the Oregon Beer and Wine Distributors Association, which opposes privatizing Oregon liquor sales.

To convince voters to go along with privatizing, Costco and its allies guaranteed Washington would not lose revenue on liquor sales.

Some opponents of the OLCC think distributors are charging large mark-ups to cover that obligation.

"They have significant tax obligations to the state over the next couple of years," says John DiLorenzo, lobbyist for Grocery Outlet, which favors privatizing liquor sales. "They will significantly lower the prices over time as supply and demand works out.” 

Brian Smith, a spokesman for the Washington Liquor Control Board, disagrees. After two years, the distributor fee drops from 10 to 5 percent, but that does not mean stores will lower prices. 

“It’s up to the market to dictate that,” Smith says. 

But sales numbers after the change in Washington can't be helping the case of grocery chains, which have considered launching their own initiative measure two years from now.

"We will test the waters in the Legislature," says Joe Gilliam, president of the Northwest Grocery Association, "before deciding on an initiative effort for 2014.” 

WWeek 2015