The curse of 1183
As 2018 approaches its close, it seems like an appropriate time to look back on proposition 1183 that has now been in place some four years in our nearby neighbor Washington. The law heralded as a huge benefit for consumers and largely funded by the likes of Costco, Total Wine and Trader Joes has turned out to be anything but a benefit.
Two effects of the law tell the story of just how damaging it has been to the beer and wine industry, since the passage of the proposition 92 percent of small family owned beer and wine shops have been forced to close. The structure of the law and the associated volume discounts and allowance for private labels has resulted in the three giants mentioned above dominating the market driving small shops out of business. This is not only bad for the owners of small shops, but also for consumers as choices of great small production wines is limited.
The other effect has been the overall increase in the cost of wine and spirits. When 1183 took effect eliminating the state-controlled liquor stores, it was replaced by hefty taxes across all categories of alcoholic beverages. In fact, the increases in prices drive consumers across the state line into Idaho just because prices are so much better here.
Other consequences continue to emerge though. As a sop to wineries, the big box retailers wrote into the law a provision that allows wineries to open multiple tasting rooms across the state of Washington. One only need take a journey through downtown Spokane to see the proliferation of winery tasting venues. This further hurts small retailers, but in a strange twist, it is proving just as deleterious to the wineries themselves. It is expensive to open and operate these tasting rooms, and with so many in markets like Spokane, it is very challenging to stand out and carve out a niche that allows the tasting room to maintain profitability. You see as many close as you do open. It will take some time, but I speculate that wineries will soon abandon this misguided plan to market their wines.
The most important lesson for regulators here in Idaho is to not move too fast when contemplating changes to the state’s liquor laws. There are in fact many very good parts of our laws that support small business and provide consumers with a wide array of choices in the best small production wines consumers crave.
In Idaho every retailer, every restaurant or any other purveyor of wine and beer have the right to buy the same selections of wine at the wholesale level. So even if a big box retailer develops a private label wine, we as a small independent retailer have the right to purchase that wine as well. This effectively prevents big box stores who push private label plonk from entering the market. Most of these private label wines are so bad we never would purchase them for our shelves, but it deters this giant retail chain and others from entering our market, a good thing.
In addition to having access to all the same products, we all pay the same price at the wholesale level. So, whether it be a big box retail chain, a small locally owned shop like the dinner party or a restaurant, we all pay the same price. This restriction on volume discounts prevents huge chains from driving smaller businesses out of the market.
The structure built into our laws here in Idaho level the playing field and create an environment that actually supports broad customer choices in beer and wine. We have a wide and deep array of wines to choose from provided by the great distributors that work in our state. The idea that this limits choice is specious. While the wine industry in Washington continues to be crushed by the consequences of a poorly designed law in 1183, crafted by a few huge chains, here in Idaho the industry is strong and diverse. We encourage our lawmakers to think long and hard prior to venturing down the path of our neighbor to the west.
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George Balling is co-owner with his wife, Mary Lancaster, of the dinner party, a wine and gift shop in Coeur d’Alene by Costco. The dinner party has won the award for best wine shop in North Idaho twice, including for 2018. George is also published in several other publications around the country. After working in wineries in California and judging many wine competitions, he moved to Coeur d’Alene with Mary more than 10 years ago to open the shop. You can also follow us on Facebook at facebook.com/#!/dinnerpartyshop.