Washington State Senators understand the importance of SSB 5731, the bill that would allow Specialty Beer/Wine Store licensees to carry small craft distilled spirits. However, members of one committee in the House seem confused as to the good will this bill brings to small businesses, consumers, and State revenues. Right now this bill dead-in-the-water for the second year in a row, with refusal to put it to vote. The result? More small businesses will close. Surely, our local businesses are deserving of a vote.

Here’s four reasons to support SSB 5731:

1) Consumer Choice & Customer Service

• Shopping Location: There are few small neighborhood businesses selling spirits. Those remaining focus on top-selling mass-produced spirits. This forces most consumers to drive outside their neighborhoods to seek out craft spirits.
• Local Support: Consumers will be able to buy craft spirits at local, family owned small specialty shops.
• Customer Service: Specialty shop owners focus on knowing their products and personally representing every brand they carry, with ability to communicate information and make recommendations to customers based on their personal taste preferences.

2) Promoting Washington Small Business

• In 2014, approximately 50 new small distilleries will open in Washington State.
• Our legislators admit there will be insufficient shelf space for these local producers by year-end.
• Small distilleries don’t get shelf space at large chain stores; grocery stores, drugstores, mega liquor stores, and existing small liquor stores all focus on fast-selling well-known brands.
• By approving SSB 5731, our legislators have the opportunity to allow small specialty beer/wine store owners to obtain license to sell craft spirits by small producers. Specialty beer/wine stores have the shelf space, the ability to represent these products, and experience selling alcohol.

3) Safe & Experienced Retailers

• Specialty beer/wine store owners are experienced alcohol retailers.
• Small beer/wine stores have low incidence of selling to minors and low theft. That’s probably not a surprise as it’s pretty easy to keep an eye on shoppers in shops that are about 1200-square feet in size.
• Though they’ve never sold spirits, many are already familiar with spirits.
• Specialty shop owners pride themselves in knowing their products and are already experts at craft beer/wine.

4) Increased State Revenue

• The State will have an additional tax revenue stream and more income from the 17% alcohol licensing fee for each bottle sold, plus sales tax, plus annual licensing fee.
• With small businesses, the majority of profits stay in state. In contrast, BevMo! is a privately held corporation based in Concord, Calif.; it is owned by TowerBrook Capital Partners, L.P., a New York- and London-based private equity firm. Total Wine & More was originally founded in Delaware but now its corporate offices are located in Potomac, Maryland.

Other impacts

There are two major concerns that have been brought up in opposition to SSB 5731.

Addressing the public safety concerns regarding an increased number of alcohol outlets

• Because specialty beer/wine stores are already considered “alcohol outlets” there will be no increase in the number of alcohol retailers.
• There are fewer than 900 Specialty Beer/Wine Store retailers licensed in Washington State, of which “approximately 200 are true specialty beer/wine stores who qualify under this bill“, says Karen Rogers.
• Not all small specialty beer/wine stores who qualify will apply for the Liquor license. Those that do, must undergo an application process monitored by the State Liquor Control Board.
• Under SSB 5731, those small retailers eligible to apply for a (small spirits) Liquor license must have a Specialty Beer/Wine Store license issued prior to January 1, 2013. Thus, no new alcohol outlets will be added.
• 167 state stores were sold at auction. Under 200 true small specialty beer/wine stores exist; estimates are that half of these shops will apply to sell small craft spirits. Thus, the market won’t be “overrun by alcohol outlets;” in fact, it would have about the same number of small business alcohol outlets as represented in the tables of I-1183.

Discussion on infringement on the rights of auctioned store license holders

• Over 60% of the auctioned liquor stores have closed. More will be closing by the end of the year. The remaining liquor store have been operating 1-1/2 years now, but many of the new business owners still don’t do the basics in marketing their business and its products.

Commentary on SSB 5731 being stopped in the House Government Accountability & Oversight Committee

This is the second year that the bill that would allow small Specialty Beer/Wine Stores (under 10,000-sq ft) a more fair playing ground against large Specialty Beer/Wine Stores (over 10,000-sq ft) has been stopped in this committee. This sends a clear message to small specialty shop owners that the chairman of this committee prefer to cater to big business, than to make the playing field more fair for Specialty Beer/Wine Stores of all sizes.

Since the privatization of liquor, our state has experienced exchange of one monopoly (State) to another (corporatization). BevMo and Total Wine & More have entered the state in full force. Total Wine hasn’t been shy about going after small business, running radio advertisements targeting specialty wine stores. They are also targeting specialty beer stores. These mega-stores have two core licenses that allow them to sell alcohol in Washington State: “Specialty Beer/Wine Store” and “Spirits Retailer.”

Even though small wine and beer stores carry the same “Specialty Beer/Wine Store” license, they are unable to even apply for a Spirits license because their locations are under 10,000-square-feet. Does building size really matter?

Our legislators have worked with small craft distilleries to get bills passed to help them grow their businesses, but now as committee chair, Rep. Hurst, refuses to allow his committee to approve the optimal retailers for these producers. Specialty beer/wine store owners are experienced, safe operators. The Senate and its committees recognizes this by overwhelmingly voting in favor of SSB 5731. In the first House review committee, Rep. Hurst refused to put the bill to vote, stating the bill was not “prime time” enough and that he didn’t have the votes … in fact, he was one of the opposing votes. Why? Rep. Hurst has worked with small distilleries on bills, yet he is opposed to giving them experienced specialty alcohol retailers as sales outlets. In my phone call with Rep. Hurst, he first indicated he was opposed to 5731, then for. Which is it? For or Against small business?

In our conversation, Rep. Hurst indicated that specialty beer/wine store owners aren’t experienced in selling alcohol (spirits). While we haven’t sold spirits, we learn everything we can about the products we sell and are experts at selling craft beer/wine. If allowed to carry craft spirits, we will do the same. I’m not sure why this was even a topic he brought up as the State of Washington auctioned so many of its small liquor stores to people who’ve never sold alcohol, who have never worked with alcohol distributors, who have no experience in the alcohol industry. Specialty beer/wine store owners have years of experience in these areas; selling spirits isn’t that much different than selling wine or beer. It’s the reporting and taxation and licensing of spirits that is different; specialty beer/wine store owners have already demonstrated their ability to report taxes and direct-shipment receipts to the State.

While my sympathies go out to those owning former state stores, especially those contract owners, there are other bills in the legislature that are in support of auctioned and former contract state liquor stores, to help their businesses better compete with corporations (e.g., dropping their alcohol licensing fees from 17% to 7%). The effect of SSB 5731 on these small liquor retailer will be virtually null as they focus on 50-70 top-selling liquors (McCormick, Jager, Jack Daniels, Seagrams, Smirnoff, Makers, Absolut, etc.). In contrast, small specialty beer/wine stores would focus primarily on locally produced self-distributed handcraft spirits.

When working triage, you give your blessings to the dying (small liquor stores) and you help those who still have a chance to live (Specialty Beer/Wine Stores). On one auctioned liquor store, King 5 reported: “The sales from what the store was doing before privatization have dropped by about 95 percent,” said owner Meru Belbayeva. With 53% of their profits going to the State, that doesn’t leave much to operate on. Even Rep. Hurst, in our phone conversation, recognized that despite his efforts to help these retailers that the majority would be out of business by the end of the year. In contrast, many of the struggling small specialty beer/wine stores don’t need giant increase to bring their businesses back into the black; some just need a 3-5% boost in revenues, which could easily be attained by the addition of small craft spirits — products that aren’t offered at most small liquor stores.

The small Specialty Beer/Wine Store owners were sandbagged in the public hearing for SSB 5731. In the same hearing (watch it on TVW) SSB 6237, the bill regarding license issuance fees imposed on former contract liquor stores was presented. Their heartbreaking testimonies confused the issue at hand for SSB 5731, making it no longer about corporations vs. small businesses, but about small business vs. small business.

Though I strongly disagree that SSB 5731 is a bill pitting small business against small business. In our conversation, it was clear that Rep. Hurst disagrees. I pointed out that the liquor store nearest to my specialty shop had closed, leaving us unable to meet the requests of those turning to us for spirits. He counteracted, citing Sip City Wines and the former state store, Liquor and Wine Enumclaw. But catering to his belief, I ask “If you were to hedge bets on this triage scenario, to which small business would you give first attention?”

Side note #1: Many of these CLS Spirits Retailers have obtained a Specialty Beer/Wine Store license, with additional endorsements for growlers and keg sales. There is no protection offered to the small specialty beer/wine store owners for auctioned state liquor store owners attempting to steal our customers or edge in on limited supplies of rare beer/wine. We are being attacked both by small business and corporations. So, from that angle I can see that Rep. Hurst could be right when he infers that small business threatens small business… but he isn’t looking at it from both sides. Specialty beer/wine stores are being squeezed by both small liquor stores and big corporations. But as a specialty beer/wine store owner, I’m not asking to take anything from already struggling small liquor shops; I’m asking to have the right to bring in small craft distilled products. They’ve had opportunity to carry craft spirits, but most of them focus solely on the mega brands. It’s the second year his committee is refusing to allow businesses like mine to fairly compete with corporations. Note, there is no record of him voting against small businesses like mine on these bills because they were stopped at his committee (i.e., as committee chairman he refused to take a vote).

Side note #2: The auction winners who bid on the right to own and operate the former state liquor stores object to Specialty Beer/Wine Stores ability to obtain a Liquor license, even with its tight limitations of being only for those produced by “small craft distillers” because they believe it infringes on their rights. Together, they spent more than $31 million for Washington’s 167 state-run liquor stores. Their high bids were based on financials of a state monopoly, with zero competition in liquor sales. Their bids were over-inflated for what they were getting. Because they mortgaged houses and took out loans for their American dream, because their liquor license is “good for life” (within a certain square mile radius of the shop they purchased), they believe they should have exclusive rights to sell liquor as a small business in Washington State. Even after over 60% of them have gone out of business. Whoever they consulted with on this bad business deal should be sacked!

Side note #3: I can’t help but notice one simple difference between the two stores Rep. Hurst cited: Marketing. Only Sip City Wines has gone to the effort to list their business on both Yelp and The Patch – Enumclaw, the other hasn’t. Neither have Websites. Neither have facebook pages. Neither have twitter feeds. How can people learn about your business, your products, if you don’t take a few minutes each day to market them? As a small business owner, I have found marketing an invaluable tool — and the wonderful thing about the Internet is you can do much of it for free, it just costs a little of your time. As a specialty beer/wine store owner, there are days where I post a photo of a new product on twitter or facebook and meet customers coming in for it within 20 minutes.

But, really, let’s LOOK AT THE BIG PICTURE of what’s really happening in Washington State:

It’s about corporations vs. small businesses.

Can the small David (small businesses) even have a chance at fighting a fair battle with Goliath (mega liquor corps) if the State takes away David’s slingshot and ties his hands behind his back?

Contact Rep. Hurst and tell him to bring SSB 5731 to the Government Accountability & Oversight committee for a vote. Washington small businesses need a fair chance to compete against corporate America.

Contact Speaker Chopp at (360) 786-7920 and ask him to help us unstick SSB 5731 and bring it to a vote. Small specialty beer/wine store owners deserve the dignity of a vote.