The Capitol Record

Entrepreneurs who bought state-run liquor stores struggle against competition

Since the state privatized liquor in June, overall liquor sales have jumped about 10 percent and tax revenue is coming in higher than expected. But the small, formerly state-run liquor stores are not faring as well — with some seeing a 50 percent drop in business.

The state collected $68 million in liquor revenue for the months of June, July and August. That’s about $4 million higher than expected, according to Drew Shirk of the Dept. of Revenue in an update to the House Ways and Means committee today.

Overall, liquor sales are up 10.2 percent higher than “pre-privatization levels,” Shirk said.

Voters approved I-1183 last year, which took the state out of the liquor business and forced the Liquor Control Board to auction off about 160 state-run liquor stores. Another 160 contract liquor stores, run by private individuals, were allowed to continue to operate.

Today, 1,420 retailers hold liquor licenses — including Costco, grocery stores and liquor superstores like BevMo, which has already opened two stores in Washington and is planning more.

The increased competition has been challenging for the entrepreneurs who bought the small state stores, said Liquor Control Board deputy director Rick Garza.

“Those smaller stores, both the auction stores and contract stores, are struggling to meet the sales that we had when the state had the monopoly,” Garza told the committee. “Their sales have declined as much as 50 percent, which makes sense because you have 1,200 more retailers and competition.”

Garza said the small store owners want the Liquor Control Board to exempt them from paying the board a 17 percent retail fee — an issue he said may need to be resolved during the next Legislative session.

On Nov. 1st, the Liquor Control Board is holding an auction to get rid of its remaining inventory of 130 lots of high-end liquor, pints and minis. The board is also readying to sell its distribution center, which has been appraised at $30 million, said director Pat Kohler.

Watch the full meeting here.

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