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West Coast Liquor Privatization Update

The issue of whether government should or should not be involved in the liquor business (liquor privatization) continues to provoke intense interest along the West Coast. Here\’s a quick update on where things stand in the various jurisdictions with some links to some interesting articles.

Washington. Initiative I-1183 obtained voter approval in November 2011 and was implemented in June of this year when the state government shut down its remaining state retail liquor stores and state wholesale distribution warehouse system. As a result, Washington state now has an entirely privatized system of liquor distribution. The major issue in Washington following the privatization has been pricing. End consumer prices for spirits have gone up in most stores due to new taxes/fees which were included as part of the initiative (however, prices are a bit lower in \”big box\” stores such as Costco or Total). Significantly though, tax revenue on spirits has increased for the state government with recent data showing a hefty 25% increase for the latest quarter. As a result, while consumers are not seeing generally lower prices (due to the new taxes), the state government may prove to the be a winner with higher revenue. Here\’s a rundown of some of the relevant stories: Liquor sales in state picking up, Liquor prices show no signs of coming down, and Washington liquor privatization raises concerns about cross-state transportation of spirits.

Oregon. The Oregon state government is facing pressure to modernize various aspects of its regulatory regime, particularly from grocery stores who have long complained about outdated and inefficient distribution rules. Most recently, a lobbyist for state grocers told the state government that they should update state liquor laws next year or face a privatization initiative on the 2014 ballot: Grocers tell Oregon lawmakers – update liquor laws or face initiative and OLCC considers liquor sales in grocery stores.

British Columbia. The BC government continues with its \”Distribution of Liquor Project\”. This is a limited privatization project which seeks to replace the existing government wholesale distribution operation (which is coupled to a number of private bonded warehouses) with a single private operator. This is a very different approach than what was done in Washington state (see: Two Wine Neighbours – Two Approaches to Liquor Regulation). Essentially, BC is adopting the Alberta wholesale model – without affecting the government liquor stores. At the present time, the BC government has announced a short list of bidders which includes: Containerworld, Exel Logistics, Kuehne + Nagle, and Metro Supply Chain Group. The single successful bidder is supposed to be announced on October 16th, at which point a detailed negotiation process will begin. A final agreement is supposed to be signed by March 1, 2013. The transition date to the new system is slated to be April 1, 2013. It is still unclear whether this process will include reform of BC\’s arcane wholesale pricing structure for liquor (see: Privatization and BC Wine Pricing in the News and BC Liquor Economics & Privatization).

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