***This post was originally posted on BreweryLaw.com, a blog devoted to beer law! The blog is published by Reiser Legal, LLC, a Seattle, Washington law office. Reiser Legal’s Douglas Reiser is our regular legal blogger.***
Well, its over. Both of the private liquor initiatives have failed to win the hearts of Washington voters. Even though there are still some votes to count, the battle is over.
But why did voters not embrace this initiative?
This year the elections were charged by an eagerness to reduce taxes and eliminate the government stranglehold on business. Nationwide, voters made it clear that they felt that big government had failed.
With voters looking to reduce taxation and governmental control, you would think that an initiative to eliminate Washington’s monopoly over liquor sales would prevail, right? How about an initiative that, as both sides would argue, would reduce the costs of beer and wine sold in Washington state? Hole in one, eh? Nay.
Washington voters listened to the issues and voted with their brains, and not their hearts. I firmly believe that Western Washington’s love for its communities, defeated these measures. They listened to the local businesses that they support and decided that I-1100 was not for them and their families. (Note: I-1105 was defeated roundly). The massive amount of money that was dumped into this initiative appears to have been put to good use, as public education significantly assisted the “No” campaign.
So, what’s next?
One thing is for sure, it was a close call. The I-1100 vote came down to the final votes. The dividing line is not too wide.
Secondly, many of the organizations that supported the “No” campaign, including the Washington Brewers Guild, are not against the concepts of liquor privatization and free markets. They simply do not want it to happen overnight.
The one sentiment that I believe most shared was that overnight deregulation could be disturbing for businesses in the industry. Most of these groups might have been willing to get behind a measure that built in gradual deregulation. Heather McClung, owner of Schooner Exact Brewing, stated that the Guild’s members favor “slow, steady growth in modernizing those laws.” So, its possible they would get behind some, better crafted, legislation.
Finally, this was a voter initiative and not a legislative measure. Public citizens drew up significant changes to Washington state law (called for the repeal of 26 state laws), and I believe that it frightened some people. If a more gradual measure was to pass through the legislature, it might have more footing.
In the end, I suspect that there will be a congressional push to get proposed legislation circulated in the legislature. In the next few years, the State of Washington will likely have some form of private liquor sales and a more deregulated alcohol business. I would take those betting odds.
Ok, so I lied. Well, kind of.
But, I received a letter penned by Fish Brewing Company’s Sandy Berry. Since I promised to kill talk of I-1100 on this blog, I shelved it. But with election day coming tomorrow, I thought I had an obligation to let a brewer speak his mind on the debate. This is especially true because this brewer takes the opposite position of many others.
Read the letter below, and remember to vote tomorrow:
Why this brewery does not fear I-1100
By Dr. Sandy Berry, Director of Fish Brewing Company in Olympia
“The Greatest Threat to the Washington Craft Brewing Industry in a Decade” is the well intentioned but misguided campaign of the Washington Brewers Guild against Initiative 1100, and is based on fear of the unknown. Get over it and remember your strengths: great beer.
The greatest strength of the craft beer revolution is the ability to connect the local beer consumer with the truly local small brewer. This was true early on, and the craft beer market is still at its foundation a brewpub revolution. It’s brewpubs operating as brewpubs – not as regional-bottling wannabes.
The craft beer market is immune to the fears of bottling distribution hassles: shelf-space, distributor attention and pay-to-play ploys. The ability of brewpubs and craft breweries to make and direct-distribute draft beer in local markets will remain intact under I-1100. You are still as likely to have a new brewpub open down the street and succeed because it is local and makes great fresh beer.
Dismantling direct liquor distributor control has not hurt California, which has a vibrant craft beer and small-wine industry.
The myth is that the three-tier system is a small brewery’s friend. All emerging small breweries or brewpubs have stories of underperforming distributors that they may be required to use to extend geographical reach. Distributorships are a protected business model, so they do not always service their customer: the beer producers.
Imagine under I-1100 that there were no territories, just the entire state, with anybody able to become a distributor. Only those who gave true value to their brewery producers would succeed.
The fear is the sky is falling and it will squash the poor little craft brewer. Guess what? It already has fallen, and the Washington craft brewers have prospered. Many taverns are what I call “yellow” beer taverns, and are purveyors of mega-brewery beers. The traditional beer factory syndicates have lost a generation of beer drinkers by not understanding the importance of craft beer.
Having more direct yellow taverns would not attract the craft beer drinker, who will continue to support taverns that have craft tap handles and have a very local flavor. Besides, we already have chain craft-beer establishments, which function like tied houses but are not legally tied houses – McMenamins, the RAM – and brewpubs remain successful.
The fear is craft brewers will lose shelf space to mass-produced beers. Please. The “safeguards” of the current system have been so often circumvented or rarely enforced that we may as well legally remove them. We make a better product, sold to loyal beer drinkers who like local, fresh and interesting beer.
Loss of shelf space to liquor is another false fear. Shelf space will remain in the larger grocery stores for craft beers, because it is high profit and high volume for the grocer.
The Washington Brewers Guild and all craft brewers should remember their strength: the public and most legislators support your success story. You have good political capital in Olympia. The Legislature will still likely have to look at the issues around beer, wine and spirits even after I-1100 passes.
It is at this point, after I-1100 becomes law, where I think the craft brewing community will have a voice in addressing the realistic concerns of our small businesses.
The unspoken fear from brewers: the upper side of the craft beer pyramid (bottling or regional craft brewers as opposed to the truly small and pub craft brewers) are loathe to offend the hand that they think feeds them: beer distributors.
They don’t wish to be seen in support of dissolving that same distributor business system, with whom many brewers are secretly frustrated.
It’s time for the industry as a whole to stop protecting one side from another, and instead support changes to the law that open the marketplace to competition and innovative free enterprise – the very mantra of the craft brewer.
You might be sick of Initiative 1100 by now (and please tell me below, if you are), but here is more fodder for the fire. Initiative 1100 is getting more and more face time, every time I turn on the tube.
The ad campaigns used by both sides showcase many in the local alcohol industry – some who are for it; others who are not. Here is a look at what is out there, so far.
You probably have already seen the videos put out by the “No To Initiative 1100/1105” campaign. The two that are most often shown (and perhaps the only two out there) profile Washington winemaker, Darby English, and a Washington corner store owner.
Here is Darby English talking about why he believes the Initiative will harm his business:
Other ads showcase the safety hazards that many are pushing as the negative impact of the Initiative. This one is from a local firefighter:
Another video was put out by the Teamsters, who put 700-800 people to work in the alcohol distribution business. Take a look:
But, where are the supporters videos? Until recently, it appeared that the “Yes to 1100” campaign wouldn’t put as much money into ads. But a recent video shows that maybe they were just saving all their guns for one ad. Check out this video of many of Seattle’s most prominent restaurateurs:
Many will say that this video is merely a collection of bar/restaurant owners, looking for cheaper liquor. But, the Yes to 1100 campaign has been out in the community getting video testimonials from many people in the alcohol industry. You can see some of these videos below.
Wallace Wright of the Meridian Market:
Jackie Moffit, local bartender and author of DrinkGal.com
Alison Helfen of the Wine Alley:
What I really wanted to show are the real people out there that will be impacted by the Initiative. Most of us are merely beverage consumers who care about the bottom line. Through these people’s stories, I think you can get a better idea of the impact of this legislation. Hopefully, it will help you make your choice next month.
I just read an excellent article put together by Seattle Times writer Melissa Allison. The article presents a duel look at the positions of supporters and opponents of Initiative 1100. Our blog has discussed I-1100 in the past, and if you still don’t know what it is, read these posts for more on the issue.
In any event, the article takes you on a whirlwind tour of the Initiative, what it seeks out to do, and who is on each side. For instance, did you know that Anheuser-Busch and MillerCoors have collectively donated at least $2 Million to the opposition party? Neither did we.
Mike Hale, of Hale’s Ales, a brewery between Fremont and Ballard, figures he would do well in an open market, and said the laws that I-1100 would nix are easily circumvented now.
“There are many loopholes and exceptions and shenanigans,” said Hale, who has brewed for 27 years and served on a state task force in 2006 with other industry representatives and the Liquor Control Board.
Hale’s Ales and others create products for Costco and other retailers that no one else buys — for example, beer on pallets without cardboard separations — and sell them at prices that might as well be volume discounts.
Some breweries pay consulting firms to place their beer at eye level in grocery stores, a service cheap or free to the grocers and therefore a gift in exchange for shelf space from breweries, Hale said.
“No one could enforce these silly laws,” he said. But the result is “supporting the middlemen culture [distributors], who have a guaranteed sweet spot.”
I am not sure how this fits into the big picture. Hales Ales is one of the few Washington brewers who bottles and has been selling in volume for some time. That might have an impact on their point of view.
The Guild‘s Heather McClung (Schooner Exact Brewing) made an appearance, resonating the Guild‘s position that I-1100 makes it more difficult for local brewers to sustain pricing and find shelf and bar space. Beer consumers can feel for the Guild’s position, as it certainly would be a blind-side change for brewers in Washington state.
But, its apparent that the Guild is ready for some change. Heather advised that the Guild would like to see slow and steady deregulation – as opposed to the sudden, complete deregulation in place under 1100.
In the end, the issue might come down to trusting Washington consumers to dictate the market. I think that the statement made by Ashley Bach, spokesman for the “Yes to 1100” campaign resonates much of the sentiment of beer consumers:
“Wineries and breweries are worried about the unknown, but the wine and beer industries are very well established in Washington and consumers are among the most sophisticated in the country and will seek out good products no matter who’s selling liquor in Washington state”
Regardless of where you lean, the article presents a good look at the pluses and minuses. This Initiative might come down to the final week of campaigning. For now, its a toss up for most consumers.