Debate Grows On Craft Distillery Sales

Senate Committee Also Updated On Success Of Washington Wine Industry

Debate Grows On Craft Distillery Sales
A Washington State Senate committee is now considering a bill to expand craft distillery product sales to small wine and beer retailers. Some pushback was evident at a recent hearing, from smaller liquor retailers, but bill sponsors held firm. A similar measure is also in a House committee. Photo: Seattle Central College.

Owners of smaller privately-owned liquor stores Wednesday, January 18 at a public hearing told the Washington State Senate Commerce, Labor and Sports Committee they’re seriously concerned about SB 5006. It would allow small wine and beer retailers to also sell craft distillery liquor. They say that the measure isn’t fair, because many of them paid amounts in the range of $200,000 to the state for limited exceptions to sell hard liquor in stores of less than 10,000 square feet, after voters approved Initiative 1183 in 2012. I-1183 ended the state’s hard liquor monopoly and tilted that playing field toward larger, private sector retailers.

Boost To Speciality Wine and Beer Shops

Sponsors of the new bipartisan Senate bill argue it would give a well-deserved boost to small wine and beer specialty shops competing with larger retailers who already sell liquor, beer and wine; and would provide new sales venues for Washington’s growing craft distillery industry. Out of the estimated 150 distilleries in the state, about 115 operate under a craft license. Craft distilleries are those whose products are all more than 50 percent Washington-sourced.

Last week, the House Commerce and Gaming Committee heard an almost identical bill, sponsored by State Rep. Norm Johnson (R-14).

Speciality Shops Struggle to Survive

Committee Ranking Minority Member, State Sen. Karen Keiser (D-33), is the lead sponsor of SB 5006. At the hearing, she said, “The approach here is to do something to help the small independent beer and wine specialty shops in our communities, who have really struggled to survive. In fact, the one that was in my town of Des Moines has now closed. They felt that, if they could expand their local business beyond beer and wine, they would have a little more viability economically…sadly for my community, it’s too late, but for other communities, perhaps there is still an option here.”

Keiser continued, “The liquor arrangements that were made over the last half dozen years really included the deal that liquor would really be restricted to the ‘big boys,’ and not…the small community-based speciality shops…this isn’t really an economic issue” for the larger businesses.

State Sen. Curtis King (R-14) is also member of the Senate Committee. He said the bill is “a way to help some of our small beer and wine shops,” and for “state-licensed distillers to have another avenue to be able to support their sales.”

Diminishing Existing License Value

Smaller liquor stores had a different take. Jay Smiley, Manager of Chehalis Town Center Liquor and Wine, said, “We are the local place to go for those kind of speciality items.” Smiley added that craft distilleries can already come to such liquor retailers and “do tastings, we can bring them out into the public already.”

Smiley said the legislation would grant smaller beer and wine retailers “the same right we have, to present those local items,” which “takes away from our very struggling marketplace, because the value of the license that was purchased is being diminished…you are not helping my small business.”

Keiser countered, “I think, though, that your real competitors are the big boys, and not these tiny little wine and beer stores…this bill does not allow or propose that every corner mini-mart would be able to stock liquor. This is limited to those beer and wine speciality shops that are licensed as such, and who have more than 50 percent of their revenue coming from those products.”

She added, “just be clear that what you are doing is fighting over a very small part of a big piece of the liquor world. And the biggest piece of that world is at the big-boy store, as you know, it’s not down at the local wine shop.”

On January 19, the committee heard public testimony on two other industry-related bills. SB 5145 would allow craft distilleries to produce private-label spirits to sell uniquely to a restaurant or private club. SB 5161 would increase the number of state theaters allowed a license to sell spirits, beer, and wine.

Washington Wine: A Global Hit

The committee on January 18th also heard a presentation on the economic impact of Washington’s wine industry. According to the Washington State Wine Commission, there are more than 900 state wineries and about 350 growers. Over the past several decades, Washington has added an average of four new wineries every month.

Steve Warner, President and CEO of the commission, said Washington contributes over $5 billion annually to the state’s economy and almost $300 million in state tax revenue.

Warner predicted to lawmakers, “within the next several years, probably two to three, we will be the number one agricultural product” in Washington, based on economic impact.

According to a commission analysis of seven years worth of data, Washington wines are a global leader, on both price and quality.

Washington has received a higher percentage of 90-plus scores from the industry’s leading magazine, Wine Spectator, than Oregon, California, France, and Italy.

Washington’s top Spectator-rated wines are also much more affordable than some of their competitors’ best offerings. They retail for 58 percent of the cost of wines scoring 90-plus from California, and just 45 percent as much as France’s top-rated wines.

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