Grocery stores, discount chains prepare for liquor sales

Voters wanted cheaper liquor, more choice and convenience. They wanted the state out of the liquor business. On June 1, the state’s nearly 80-year monopoly on the sale of liquor ends.

The voter-approved transition means the end of state-run distribution and sales of liquor, opening up the business to new wholesalers and retailers.

Mikhail Carpenter, at the state Liquor Control Board says state regulators are in the process of issuing hundreds of new licenses while auctioning more than 150 state liquor stores.

“It’s a huge process to essentially shut down a $1 billion business and to do it in six months,” said Carpenter.

It’s been a bumpy transition for some bar and restaurant owners and their customers, who complain about shortages of some of their favorite beverages. At the Zig Zag Cafe, in Seattle, co-owner Casey Fitch has been dealing with a dozen potential new distributors trying to figure out the best way to supply his well-regarded Pioneer Square bar.

“Chaotic would be the best word for it,” he said.

Bruce Becket, with the Washington Restaurant Association says the fledgling new warehouse distribution system is not up to speed yet, even though private wholesalers have been selling liquor in Washington since March 1. Retailers, bars and restaurants are also still buying through the old system but the state-owned stores got their final shipment of booze last week.

Larger grocery stores, discount and drug stores are preparing to stock their shelves with liquor and start selling next week. Fred Meyer’s Melinda Merrill says it’s been a whirlwind of employee training, programming computers, pricing, finalizing distribution and warehousing.

Like most grocery store items, margins are slim for spirits but she says Fred Meyer has to be in the liquor business for the convenience of customers.

“They like it, and they respond to it, and they purchase it, and it’s a strong part of our business in other states, and will be a nice convenience factor and a strong part of our business here,” said Merrill.

It figures that service and selection will increase with so many new wholesalers doing business here. And everybody wants to know if liquor will cost more, or less after June 1?

“Yes, definitely,” responds Fitch at the Zig Zag Cafe. “Prices have to go up. They certainly won’t be going down. We might be able to keep some of the prices equal to what they used to be,” said Fitch.

Beckett, with the Restaurant Association, says he’s seen some attempts at price gouging by distributors but he expects competition will quickly eliminate that.

Competition tends to keep prices lower but new fees and markups could offset that, and then some.

Privatization eliminates the state markup of more than 50 percent on liquor but new distributors will presumably replace it with their own markup. The new system comes with new fees that will also keep the price of liquor high. One estimate, from the state Office of Financial Management, suggests the markup could go as high as 72 percent.

Fred Meyer’s Merrill won’t predict prices. She thinks time will tell how many retailers will stay in the business of booze.

“I think it will be long,” said Merrill. “I think it will take a couple years at least to shake out the competition and the prices and the fees and get to a place where it settles,” adding “it will be an interesting ride.”