Presentation is loading. Please wait.

Presentation is loading. Please wait.

NABCA Legal Symposium on Alcohol Beverage Law and Regulation Rick Garza Deputy Director Washington State Liquor Control Board March 09, 2011.

Similar presentations


Presentation on theme: "NABCA Legal Symposium on Alcohol Beverage Law and Regulation Rick Garza Deputy Director Washington State Liquor Control Board March 09, 2011."— Presentation transcript:

1 NABCA Legal Symposium on Alcohol Beverage Law and Regulation Rick Garza Deputy Director Washington State Liquor Control Board March 09, 2011

2 Privatization Efforts in Washington State Timeline: Costco vs. Hoen Lawsuit Joint Select Committee Beer/Wine Regulations SHB 2040 Modifications to 3-Tier and Tied House Laws 2010 – State Auditors Report Legislative Bills to Privatize Public Perception of State System Initiatives Liquor Control Board Response Public Safety Revenue Convenience 2

3 Uniform Pricing Laws & Regulations ( Costco v. Hoen) Costco's Challenge Costco filed a federal court challenge to several key requirements of the states three-tier system of beer and wine distribution, arguing they violate federal anti-trust laws. Nine specific restraints were challenged: 1.Uniform Pricing (manufacturers must offer uniform prices to distributors, distributors must offer uniform prices to retailers). 2.Price Posting (prices posted electronically with state and may be viewed when final). 3.Price Holding (electronically posted prices adhered to for 30 days). 4.Minimum Mark Up (selling price at least 10% over posted price). 5.Ban on Quantity Discounts (no price break for volume purchase). 6.Ban on Credit (no distributor sales on credit to retailers). 7.Delivered Pricing (price to retailer includes cost of delivery, even if delivery declined). 8.Ban on Central Warehousing (delivery is to licensed retail location only). 9.Ban on Retail to Retail sales (retailers cannot sell to other retailers). 3

4 Privatization Efforts in Washington State Timeline: Costco vs. Hoen Lawsuit Joint Select Committee Beer/Wine Regulations SHB 2040 Modifications to 3-Tier and Tied House Laws 2010 – State Auditors Report Legislative Bills to Privatize Public Perception of State System Initiatives Liquor Control Board Response Public Safety Revenue Convenience 4

5 Joint Select Committee Beer/Wine Regulation 3- Tier and Tied House Laws – Supports separation of the three tiers – Prevent domination of one tier over another or exclusion of competitors products – Two aspects: Ownership – prohibit M and D from owning or having a financial interest in a R. – EHB 2040 removes prohibition in financial interest and ownership between the tiers Moneys worth – prohibit M and D from providing things of value to R. – EHB 2040 allows manufacturers and distributors to provide branded promotional items of nominal value to retailer with conditions All other Costco related issues rejected by Legislation 5

6 Privatization Efforts in Washington State Timeline: Costco vs. Hoen Lawsuit Joint Select Committee Beer/Wine Regulations SHB 2040 Modifications to 3-Tier and Tied House Laws 2010 – State Auditors Report Legislative Bills to Privatize Public Perception of State System Initiatives Liquor Control Board Response Public Safety Revenue Convenience 6

7 Its time for the state liquor monopoly to go. This fall, Washington voters should support Initiative 1100, which keeps the state as the regulator of alcohol but not the retailer. The two tasks conflict. The state is set up to police the market, not to make money from it. Retail trade is not what government does best. While the board is divided on whether continued state control is preferable to privatization, it is persuaded that liquor sales are not essential services of state government. If Washington is to preserve its ability to provide essential educational and social services, it will need to pare state programs – even worthwhile ones. Its time to shed this antique system, turn liquor distribution and marketing over to the free market, and enforce liquor laws without a conflict of interest or well-disguised and ignored irony Opinion Page Editorials 7

8 Impact 1100: Deregulation of Alcohol 1. Repeals Pricing Restrictions on Alcohol Beverage Industry Initiative 1100 deregulates alcohol and treats it like any other product. It repeals traditional three-tier system, tied-house restrictions and price controls on spirits, beer and wine. Initiative 1100 allows pricing practices that are currently prohibited such as: 8 Uniform pricing Quantity discounts Purchases on credit Central warehousing by retailers Retail-to-retail sales No restrictions on financial ownership or interest No restrictions on distribution 2. Terminates State Distribution and Retail of Spirits by December 2011

9 Impact 1105: –Terminates State Distribution and Retail of Spirits by April 01, Initiative 1105 directs the Liquor Control Board (LCB) to implement a plan to terminate the system of state liquor stores and liquor distribution and dispose of assets. LCB policy, enforcement and licensing functions remain (unfunded) Creates general licenses for retail and distribution Over 930 state employee jobs eliminated Over 155 small businesses impacted 9

10 Background Impacts of InitiativeI-1100I-1105 Scope of InitiativeSpirits, Beer, WineSpirits Closes State/Contract Liquor StoresYes Date of Mandatory ClosureDecember 31, 2011April 1, 2012 Date Private Stores May SellJune 1, 2011November 1, 2011 Allows Private Parties to Sell & DistributeYes Eliminates Board Mark-upYes Repeals Existing Liquor TaxesNoYes Distributors & Stores Subject to B&O taxesYes Distributor License Fee$2,000$4,000 Retailer License Fee$1,000$2,000 Major ProponentsLarge RetailersLarge Distributors Major OppositionIn State Distributors, Unions, Law Enforcement, and Prevention Community 10

11 11

12 12

13 13

14 Privatization Efforts in Washington State 14 Timeline: Costco vs. Hoen Lawsuit Joint Select Committee Beer/Wine Regulations SHB 2040 Modifications to 3-Tier and Tied House Laws 2010 – State Auditors Report Legislative Bills to Privatize Public Perception of State System Initiatives Liquor Control Board Response Public Safety Revenue Convenience

15 Washington State Liquor Control Board Survey of Customers & Non-customers: Satisfaction & Potential Changes DECEMBER 2010

16 KEY FINDINGS 46% of all respondents shopped at a state liquor store in the last year Frequency of shopping went down as age went up Stores got high marks from customers Highest grades were for staff, cleanliness, safety, and supply Lowest marks were for prices, and wine selection 7 in 10 were satisfied with selection High ratings for convenience As and Bs for location, checkout speed, store layout and operating hours 2/3 said there were the right number of liquor stores 2/3 Customers said right number 4/10 Non-customers said right number Majority of customers supported suggested changes On-line order Expand items to include non-alcohol items Open liquor stores inside other stores Sell gift cards Extend hours of operation Most Non-customers opposed every change

17 Courtesy, Cleanliness Got Highest Grades; Wine Selection, Value, Prices Scored Lowest Q8: Now, Id like to ask about your impression of the liquor store you shop most frequently. As I read a list of things about the store, I would like you to rate each one. We will use a letter grade system, like they use in school, where A is Excellent, B is Good, C is Satisfactory, D is Unsatisfactory and F is Failing. 17

18 Convenience Factors Mostly Graded A or B Q10: Next, Id like to ask you a few questions about customer convenience. Using the same grading scale as before, how would you rate…. 18

19 Most Customers Support Most Suggested Changes; Most Non-customers Oppose Q13: The state is considering some changes in the operation of its liquor stores. As I read a few of these, tell me whether you think that is a good idea or a bad idea. 19

20 Modernization Initiatives Stores and New Models – 8 new stores – Pilot up to 5 co-located within grocery stores – Open 2 new specialty super stores in dense, urban markets Standardize store hours Gift cards Online ordering for pickup at store – Customer – Restaurant 20

21 Modernization Initiatives Delivery to licensees – Contracted out to private sector Liquor-related merchandise such as ice, corkscrews, and barware – Stocking contracted out to private sector Sampling in liquor stores 21

22 22

23 $15.95 Standard Bottle Cost $6.50 State Tax $5.06 State Profit $1.63 LCB Operational Cost $2.76 Washington Pricing Standard Bottle Cost $6.50 New Gallon Tax $0.65 New Sales Tax $0.87 LCB Operational Cost $2.76 $10.78 Applying the California pricing model in Washington would reduce the average retail bottle price by 32% or $5.17 per bottle. Annual revenue distribution would be reduced by 76% or $224 million Current Revised 23

24 Standard Bottle Cost $6.50 CA Gallon Tax $0.65 Distributor & Retailer Mark-Up $3.58 CA Sales Tax $0.93 $11.66 LCB business operational expense is 32% less than average private sector. Washington State distributes more than 4 times the money per bottle than California. $15.95 Standard Bottle Cost $6.50 State Tax $5.06 State Profit $1.63 LCB Operational Cost $2.76 California Comparison Washington California 24

25 25

26 Questions

27 27


Download ppt "NABCA Legal Symposium on Alcohol Beverage Law and Regulation Rick Garza Deputy Director Washington State Liquor Control Board March 09, 2011."

Similar presentations


Ads by Google