Liquor Privatization
6:37 am
Fri June 1, 2012

Washington Hands Off Liquor Sales To Private Sector

Washington is witnessing a major shift in a multi-million dollar business. Starting Friday, hard liquor will be right there on the shelf at supermarkets, big box stores and privately-run liquor shops. It’s Day One of a new voter-passed law that takes Washington liquor sales out of the hands of the state.

Oregon lawmakers may consider a similar proposal next year and it could affect liquor sales along Idaho’s north-western border. We sent correspondent Jessica Robinson out to see how a government-run industry goes private.

Maybe the best illustration of the sheer magnitude of this shift has been hovering right over the heads of Costco shoppers for the last few weeks.

“What we’re looking at is a whole run of 30 pallets of alcohol at the moment,” says Kelly Frisina, manager of the north Spokane Costco.

“We have everything from R&R, the various vodkas," literally waiting in the wings for opening night.

“And if all goes well," Frisina says, "we’ll have a first at Costco: We’ll be selling alcohol as of 10 a.m.”

This “first” didn’t come cheap. Costco spent more than $22 million last year convincing Washington voters to do away with the state’s monopoly on liquor sales. And it worked. The wholesale giant is now banking on customers making a stop in the liquor aisle on their way past the juicer demonstrations.

“I think it adds a whole other dimension of Costco," Frisina says. "It’s exciting.”

Moving a business from government control to the private sector also requires some major recalibration by the people who actually make the stuff.

“So we call this our giant whiskey savings account back here,” says Don Poffenroth. He's showing me 250 barrels of whiskey at Dry Fly Distillery in Spokane. He’s one of the founders. Poffenroth says production has doubled since the election last fall.

It used to be, all of Dry Fly’s gins, whiskeys and vodkas sold in Washington went to a single distribution center in Seattle.

“We had one point of delivery, one customer, one invoice. It was a fairly simple process," Poffenroth says. "Now we have hundreds of customers. So we’ve had to hire a staff person to ultimately handle the accounting side of that as well.”

Poffenroth hopes privatization will put the Dry Fly label under the noses of people who maybe never set foot in one of those state shops before.

“When we can go from being on 300 shelves to 1,000 shelves, we’ve just increased the visibility of our tiny little brand," he says. "So just from an exposure standpoint, it’s a great thing for us.”

But while work ramps up at distilleries and superstores, another business is closing. That’s how the Washington State Liquor Control Board’s Pat McLaughlin thinks of this week’s hand-off to the private sector. He says the state liquor agency has been terminating leases, finding buyers for its inventory -- and -- making layoffs.

“The people that made this success are mostly losing their jobs," McLaughlin says. "We have over 1,000 people that will be out of work. I’m one of the 1,000 casualties of the process.”

McLaughlin says he plans to host a big going away party for his colleagues -- with drinking.

Meanwhile, hard alcohol in neighboring Oregon and Idaho continues to be sold at state-run stores -- and both states are watching carefully what happens in Washington. In Post Falls, Idaho, the liquor store gets a lot of business from Washington residents who cross the state line for less highly taxed booze.

Spokane resident Wilma Millick is glad liquor will now be readily available at the grocery store.

“I think it will be a lot more convenient," she says. "It will be good for the stores.”

But privatization may not do much for her pocket book. The new Washington law includes fees that are expected to drive prices even higher -- at least in the short term. That may send Washington bourbon drinkers like Alan Grigg across the Idaho border in even larger numbers.

Alan Grigg: “I’m not sure we understand what all the changes are going to be. I’m not sure the voters knew what they voted for to be honest with you.”

Turns out, he was for the new law. Before he was against it. Now, after 78 years of state control, he and other Washington residents are getting their first taste of liquor sold in the private sector.

Copyright 2012 Northwest News Network [053112JR_LiquorPrivatization1.jpg: Spokane Costco manager Kelly Frisina looks up at the pallets of liquor ready to be lowered after midnight on Friday morning. Photo by Jessica Robinson 053112JR_Liquor Privatization2.jpg: Don Poffenroth of Dry Fly Distilling in Spokane says their liquor stills have been working hard to meet the new demand in Washington. Photo by Jessica Robinson 042012TB_Liquor.jpg: Photo by Tom Banse]