Tag Archives: costco

Business, News

Why Washington State’s Privatized Liquor Costs More Than Before

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So I-1183 (the initiative that privatized liquor sales in Washington last year) did not bring about the free-market paradise that the state’s tipplers were promised by supporters of the initiative. (See our earlier story comparing liquor prices at various retailers.) Spirits have been marked up, in some cases significantly. What exactly has contributed to this price hike? It looks like the one-two punch of high state taxes and a distributor duopoly that’s insulated, so far, against competition.

For comparison, sample liquor prices, based on a liter of $20 (pre-tax) liquor.
For comparison, sample liquor prices, based on a liter of $20 (pre-tax) liquor.

The accompanying graphic demonstrates the changes in liquor taxes before and after I-1183. At  The Tax Foundation, Richard Borean explains that, before I-1183, “Washington had a markup of 51.9 percent, an alcohol sales tax of 20.5 percent, and an excise tax of $3.77 per liter, making their total excise tax rate the highest in the country at $26.70 per gallon: more than 3 times the national average of $7.02 per gallon.”

I-1183 did not raise existing liquor taxes, but instead created retailer and distributor license fees (17 percent and 10 percent respectively). The distributor license fee will go down to five percent after the first two years.

It’s true, without any retailer mark-up to replace the state’s mark-up, the combination of taxes and fees post-I-1183 would amount to lower prices. But even if retailers weren’t out to make a profit — as they certainly are — there was a proviso on that 10-percent distributor’s tax: If it did not bring in $150 million in the first year (by March 2013), the distributors would have been responsible for making up the difference. Certain distributors, says Stone, actually raised their prices during the first year to meet that benchmark.

Sound Spirits, the Woodinville Whiskey Company, and SoDo Spirits (home of “only aunthentic Honkaku shochu) all report lowering their prices in order to keep shelf prices reasonable. Steven Stone, owner of Sound Spirits and president of the Washington Distillers Guild, says that even “a small change on the wholesale level can have a big effect on the retail price.”

Yet Stone is optimistic that prices will begin to calm down in the next year or two. The $150-million minimum will no longer be a factor going forward, and in 2014, the distributors’ tax will reset at five percent for all distributors and distilleries in business now. Stone thinks the liquor market is still bearing an unfair share of the tax burden, but he is not hopeful that the law will be changed anytime soon: “I kind of feel like we might be stuck—kind of like hotel California where you check in and you can’t check out.”

Another factor driving pricing is competition—or the lack of it—between distributors. In Washington, Southern Wine & Spirits and Young’s Market are by far the two biggest players, and as such they have the ability to affect prices via the labels they decide to carry. Part of what gives distributors in general their power is that distilleries need their access; in the best case, that’s a two-way street as distributors compete to sign popular or unusual spirits.

Woodinville Whiskey’s owner Sorensen says that their distributor (Click Wholesale) “is awesome. They let us focus on doing what we do best and they do what they do best.” But for a recently started company like SoDo Spirits, not carried by a distributor, the ease of one-stop distributing through the state is a dream of the past.

Though Young’s and Southern have built, effectively, a duopoly in the state’s liquor sales market, I-1183 sponsor Costco is still trying to work its way into the distribution market. Currently, the initiative states that no more than 24 liters (about three cases) may be sold from one retailer to another in a single sale. Large retailers like Costco and Total Wine & More could elbow, in practice, into quasi-distribution but for this.

If Costco can get I-1183 amended, the penny-conscious cocktail customer could see the results in drink menu prices, as Young’s and Southern respond to a large competitor carving out a piece of the distributing market. If in the short term, the lower distributors’ tax and the removal of that $150-million minimum cut for the state — even the prospect of Costco becoming a bigger player — will all contribute to price-pressure in the liquor aisle, no serious discounts are visible on the horizon. As frustrating as it is to admit, nobody can really know where the Washington liquor market is going in the next couple of years. Not even Nate Silver could call this game.

Announcements, News, Sports

Sonicsgate Documentary Gets an Assist from Shawn Kemp

Today, an updated version of the grassroots documentary Sonicsgate was to have re-aired on CNBC, but thanks to Facebook’s IPO being hot news, they’ve been bumped for later. The filmmakers are not taking this lying down, though: You can still watch Sonicsgate: Requiem for a Team at the previously announced time, online.

UPDATE: No, you can’t. Just got word that the Sonicsgaters would like take-backsies on that news release. They can’t offer the new version online. But you can still watch the ’09 Director’s Cut, below.

The new 2012 version of the film will be free for 24 hours starting at 5:00 p.m.(PDT) on Monday, May 14. If you follow the Sonicsgate Twitter feed, they’ll let you know when it’s live. Besides new archival footage, director Jason Reid has scored new interviews with Sonics forward Shawn Kemp, and Pearl Jam’s Jeff Ament.

The rebroadcast was to follow its national broadcast premiere on April 27 (repeated on April 29). Apparently it was popular enough for CNBC to bring it back for a third time, to the likely chagrin of former Sonics owner Howard Schultz.

Ironically, given producer Adam Brown’s ejection from Howard Schultz book-signing at Costco in 2011, director Reid is joining Reign Man Kemp for a DVD signing at the SoDo Costco from 4:00 to 6:00 p.m. this Thursday, May 17. It looks like you need to be a Costco member to get in, in which case you already know the address: 4401 4th Avenue South. (This is your chance to get some of your own back, Howard!)

Why Costco? Because they are carrying the new Sonicsgate on DVD, at 12 warehouse locations in the Seattle, Portland, and Sacramento markets. (Around Seattle, besides the SoDo location, your Costco-purchase options are Aurora Village, Issaquah, Kirkland, Woodinville, South Center, and Covington.) Why Kemp? Well, he’s also got a new restaurant, Oskar’s Kitchen on Lower Queen Anne, to promote.

If you can’t wait until 5 p.m., tide yourself over with this 2009 director’s cut:

News, Politics

Prohibition Ends in Washington! Where’s My Booze At?

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As you may by now have heard, Washington voters overwhelmingly approved Initiative 1183! This historic vote ends our state government’s unAmerican monopoly on liquor sales and/or turns our state’s highways into a giant game of drunken bumper cars, depending on if you work for Costco or not.

Of course, the question you and I want to know is: When is Safeway going to start selling me some damn George Dickel?

Here are the facts as I have cribbed them from various news sources.

  • Stores can start selling liquor on June 1, 2012 (just 205 days away!)
  • Prices won’t go down that much, since we retained our state’s high liquor taxes.
  • Only stores that are 10,000 square feet or more will be able to sell liquor (that’s about the size of the average Trader Joe’s, according to the Tacoma News-Tribune)
  • Don’t get too excited, owner of a 10,000-sq. ft.-retail space! You still have to apply for a license to sell liquor from those pesky state bureaucrats.
  • Also, pesky city and county bureaucrats will be passing regulations about where liquor stores can be. So if your 10,000-sq.-ft. retail location is next door to an elementary school, church/mosque/wiccan magic circle, hospital, or other place where sobriety is highly recommended, you may be S.O.L!
  • All the state-owned liquor stores will quit business by June 1, no matter what Bartleby says. Some state liquor stores are run by third-parties–those folks will be able to stay in business (even if they are smaller than 10,000 sq. ft.) but will have to buy their inventory from the state.

So, to recap, June 1, 10,000 feet, bureaucrats. Happy drinking, Washington!

(Photo of George Will and wife via Facebook)

Business, News, Politics

Seattle Doesn’t Trust Costco to Hold Its Liquor

All this could be Costco's...then yours. (Actually, it's the bar at Still.) (Photo: MvB)

Publicola (natch) tips you off to the latest Elway poll on Initiative 1183 (aka “Costco’s liquor-privatization initiative”), which shows a full 50 percent in support of I-1183 statewide. But not so fast.

First, as Publicola cautions: “It’s worth noting, though, that most pundits say a measure needs to initially poll at around 60 percent so it has a cushion to withstand the inevitable negative campaigning of an election.”

And secondly, as the Seattlepi.com’s Chris Grygiel adds, 54 percent of Seattle respondents were opposed.

Predictably, law enforcement and religious groups have looked askance at a proposal whose success is based on increasing total liquor sales in Washington. They’ve been joined in this by the United Food and Commercial Workers union, which represents some 1,000 workers currently employed by the state in its liquor stores. (The UFCW argues, persuasively, that union employees running state liquor stores are more stringent about not selling alcohol to minors than private enterprises.)

I-1183 calls for the closure of state liquor stores and the liquor distribution center; private sellers would then be licensed, with the state still collecting a 17 percent vig from total liquor sales. To forestall corner booze emporia popping up, the initiative requires stores to have 10,000 square feet of retail space. But there’s no denying that the hope (or fear) is that greater convenience and “non-uniform wholesale pricing” would tend to increase liquor sales.

The state’s Office of Financial Management agrees, and offers this rosy prediction for a state beleaguered by deficit, should Washington adopt I-1183:

…total State General Fund revenues increase an estimated $216 million to $253 million and total local revenues increase an estimated $186 million to $227 million, after Liquor Control Board one-time and ongoing expenses, over six fiscal years. A one-time net state revenue gain of $28.4 million is estimated from sale of the state liquor distribution center.

So what’s Seattle’s problem? Democrats. We’re loaded with them, and 62 percent don’t seem to care for anything with “privatization” in the name. Seattle Republicans and independents, by contrast, are in favor 57 and 54 percent, respectively. It’s a little strange, in that initiative sponsor Costco is beloved by Democrats, at least those running for office. Maybe the emphasis should be on “de-socializing” liquor, instead?

Business, Health, News

Health Net “Alerts” Customers to 6-Month-Old Data Breach

You're screwed, little kid. Good luck fixing your credit history!

I had to read the letter I got from Health Net about a possible data breach twice, for several reasons. First there was the notice that the incident was prior to January 21, 2011. That’s when “IBM informed us the company could not locate several hard disk drives that had been used in Health Net’s corporate servers….”

Notice that’s not when the hard drives went missing, necessarily, it’s when IBM told Health Net about it. The drives were decommissioned when  Health Net moved its data center operations in Rancho Cordova, CA, to IBM’s facility in Boulder, CO. Back in March, Health Net announced the “unaccounted-for server drives” contained information on “some” customers. (We’re going to come back to that “some.”)

Then there is the date of the letter actually informing me that I’m in the unaccounted-for pool: July 27, 2011. Six full months for data thieves, if that’s what happened, to get a head start on looting, with “details such as your name, address, health information, Social Security number and your financial information.”

Lastly, Health Net writes, they wanted to tell me about the incident–again, six months after a “continuing” investigation has been started–out of “an abundance of caution.” (Here, the ghost of Inigo Montoya whispers to me that he doesn’t think that phrase means what they think it means.)

What’s not in the letter? I’m glad you asked. The letter doesn’t admit that the hard drives contained data on some two million Health Net customers. (If you got your small business health insurance through Costco, as I did, then you have Health Net.) About 40,000 Washington residents had their data breached, and 130,000 Oregonians.

Also, Health Net initially told thousands of customers that their Social Security numbers were not on the drives, before confirming that, in fact, they were.

Nor does the letter mention that Health Net, in 2009, reported a breach involving 1.5 million customers. It also fails to mention that Health Net was sued by the Connecticut attorney general, in part, for taking six months to alert customers to that breach: “Even more alarming than the breach, Health Net downplayed and dismissed the danger to patients and consumers.”

It doesn’t seem like the lesson took. The Foley Hoag legal blog muses that if Health Net is penalized in proportion to Massachusetts General Hospital, the payout would $9 billion. Somewhat more than the two years of “free” identity fraud protection that Health Net is offering its customers through Debix.com.