Cost of WA Liquor Going Up June 1?

On Friday, June 1, many grocery and big box stores around Washington will begin to sell liquor — in addition to beer and wine — as a result of Initiative 1183 passing in last fall’s election.  The result of that, say many retailers, is that prices may be going UP.  The price hike, according to a wholesalers trade group, could be as high as 15% to 35%, and is rationalized by a need to cover increased costs and new investments.

According to an article in the Seattle Times last weekend, that has some retailers are stocking up on alcohol purchased from state stores — before the price hike hits.  While about 1,500 retailers (that’s nearly 1,200 more than the number of now defunct state-contracted liquor stores) have applied to sell liquor in Washington, there is still much debate about pricing.  Traditional grocers such as QFC and Safeway appear ready to sell well-known brands at close to typical prices, but will likely charge higher prices than the state liquor stores did and take the position that price will not increase as high as stated in the Washington State Office of Financial Management report which estimated that markups could go as high as 72%.  That initial estimate included a 27% fee imposed on wholesalers and retailers to make up for the state losing its liquor business, although that fee is slated to be decreasing in 2014.

Ultimately, it seems that wholesalers are looking to put enough money away to cover the payment they may owe the state next year.  Initiative 1183 decreed that if wholesalers’ 10% fees don’t meet the $150 million mark by March 2013, they will need to make up the difference.  So perhaps they’re taking advantage of the opportunity to ensure they’ve got some extra cash stashed in the event it’s needed.  Certainly, that’s open to debate, but the higher prices appear to be felt quite keenly by restaurants and small retailers.   The long and short of it appears to be that — at least for a while — the markups will make it a bit more expensive (although on rare occasion, it might actually be less expensive) to purchase liquor.  This could have a particularly direct impact on local bars and restaurants, who will have to find a way to cover the increased costs.

Bruce Beckett, head of government affairs for the Washington Restaurant Association, says that some restaurants and boutique grocery retailers are looking at alternatives to the standard wholesalers and their brands, which might encourage growth in our local burgeoning craft distilleries.  In fact, restaurants are stocking up on inventory to avoid uncertainty.  I feel a Happy Hour coming on…

If you have any questions, please contact any member of our Retail, Hotel and Restaurant team.