Food, Beverage and Hospitality Law Alert: Washington State Makes the Move to Privatize Liquor Sales

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On June 1, 2012 private retailers in Washington State can begin selling liquor to the public after residents on Tuesday voted overwhelmingly in favor of Initiative Measure No. 1183 (I-1183). I-1183 does away with the state-owned liquor stores that represent half of the 328 licensed liquor retailers in Washington (the rest being contracted with the state).

A press release from the Washington State Liquor Control Board states that the agency "will continue to maximize revenue in responsible ways through the holiday season" and, in January, will focus on divesting itself of the state's current wholesale distribution and retail operations. "By June 1, 2012, all liquor business operations -- including purchasing, distribution and retail -- will be transitioned to the private sector." The measure does, for the most part, restrict such sales to those retailers whose footprint is 10,000 square feet or larger.

There are some significant aspects of the measure which could have reverberations far outside the state's borders. I-1183 allows licensed retailers to purchase directly from distilleries, bypassing wholesalers, one of the standard "three tiers" of the alcohol distribution system -- a first in the United States. It also allows those retailers to garner discounts for volume purchases and to warehouse the alcohol themselves.

There remain many unknowns that are expected to be addressed by agency rulemaking in the coming months. However, it is a certainty that such actions will affect all aspects of the alcoholic beverage industry -- producers, distributors, and retailers. Potential changes with state involvement in liquor sales in Idaho and Oregon are already the subject of speculation, and retailers and producers currently operating in states like California where liquor sales are already handled by the private sector, are evaluating opportunities in Washington State.

If you have questions about any of the issues raised in this alert, please contact a key contributor.

Key Contributors

Nicole C. Hancock
Christopher R. Hermann
Susan M. Johnson
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