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Costco stores collecting signatures for initiative on liquor sales

By Melissa Allison

Seattle Times business reporter

Costco Wholesale stores in Washington will begin collecting signatures next week to put an initiative on the ballot in November that would take the state out of the liquor business.

Initiative 1100 would allow businesses in good standing that currently sell beer and wine to also sell liquor, and it would eliminate price controls and allow volume discounts.

The push comes more than two years after Issaquah-based Costco, the country's third-largest retailer, lost most aspects of a court battle to change the state's beer- and wine-distribution rules.

Several legislative efforts aimed at overhauling the system failed to make headway.

"Some things are politically very difficult to change through a legislature," said Costco's chief legal officer, Joel Benoliel. "There are so many stakeholders with entrenched roles in this, whether it's distributors or others."

He said some law enforcement and temperance representatives also oppose letting retailers like Costco sell liquor.

John Guadnola, executive director of the Washington Beer & Wine Wholesalers Association, said the group does not have an official position on the initiative but that he personally opposes it because it would dismantle the current regulatory system.

Price controls and other regulations minimize alcohol abuse and related problems like domestic violence and workplace problems, he said.

"In Great Britain, they're selling beer as loss leaders in grocery stores," Guadnola said. "It's easy access to alcohol, and the lower the price, the more the consumption."

Small grocery stores like the idea of selling liquor but say Initiative 1100 goes too far.

"This would allow very large retailers to acquire and sell alcohol at a price that many of our family-owned grocers would not be able to compete with," said Jan Gee, president and CEO of the Washington Food Industry Association, which represents independent, family-owned grocers.

Others are concerned that the state would have trouble making up for the money generated by its liquor stores, about $655 million of which went to the state in fiscal 2008 and 2009. The state runs more than 160 stores, and another 155 are owned by businesses that contract with the state.

Costco and Sharon Gilpin, a political consultant who put together Initiative 1100, say the state could raise liquor taxes to make up for that loss.

"The legislature taxes alcohol, and that power is not being taken away, and they should go for it," said Gilpin, who worked with Bellevue attorney Richard Stephens to draft the initiative's changes to the state's Prohibition-era alcohol laws.

Even with higher taxes, consumers would pay less for liquor than they do now because of increased competition and the elimination of price controls, Benoliel said.

"If we're allowed to apply our efficiencies to any commodity, we can lower the price," he said. "To some extent, other retailers can as well."

To make the November ballot, the initiative needs almost 242,000 signatures by July 2.

More than 50 people are collecting signatures now, and Costco will add dozens to that effort next week, when it sets up tables at 26 warehouses around Washington to collect customers' signatures.

Tables will be staffed by Costco employees who are registered voters.

"We know we're going to get an overwhelming response, because we know the concept is very, very popular with Washington people," Benoliel said.

Costco considered three initiatives before backing 1100. A second initiative also came from Gilpin — who organized a group called Modernize Washington for this effort — and is backed by the small grocers because it keeps price and other controls in place.

A third effort, Initiative 1105, appears to be backed by at least one major spirits distributor.