Washington wine producers are split on a November ballot initiative that would make their state the most deregulated wine market in the country. The state’s main wine lobby, the Washington Wine Institute, opposes I-1100, while a rival group, Family Wineries of Washington State, supports it.
Some winery owners say they feel conflicted, welcoming some of the initiative’s likely effects while fearing others. While typically describing themselves as free-market libertarians, they admit they fear the impact of a deregulated free market on small producers like themselves facing off against giant wholesalers and retailers.
I-1100, backed by Issaquah-based Costco, Safeway, and other large retailers, would erase state laws regulating the economic aspects of the wine, beer, and spirits industries, as well as close state-run liquor stores and allow private liquor sales. The measure would repeal laws barring volume discounting and centralized warehousing, requiring retailers to pay cash on delivery, and limiting cross-ownership between the producer, distributor, and retailer tiers. Costco, the Washington Restaurant Association, and other supporters say they could offer consumers lower prices if they could negotiate discounts for big orders, as they do with other types of products.
The wine institute and other opponents are using explicitly protectionist arguments, and are spending significantly more than supporters on TV ads. An anti-1100 coalition called Protect Our Communities — backed by the wine institute and the Washington Beer & Wine Wholesalers Association — has been airing a TV ad featuring Darby English of Darby Winery in Woodinville, walking through a vineyard and urging viewers: “Protect Washington wine and jobs: Please vote no on 1100 and 1105.”
Wine producers are not taking a position on a separate ballot measure, I-1105, spearheaded by the wholesalers association, which also would close state-run liquor stores but would have no direct impact on wine. It would retain many of the current regulations on the wine business. If both initiatives pass, it’s unclear what would happen other than liquor sales would be privatized.
Both I-1100 and I-1105 have been polling at less than 50 percent support in various surveys.
Costco first tried to win the right to engage in volume discounting and other free-market practices when it sued Washington state in federal court six years ago, arguing that the state’s regulatory system violated federal antitrust laws. It lost that case on appeal in 2008. Last year, the company unsuccessfully pushed for state legislation to allow volume discounting.
The wine institute has held meetings with winemakers around the state urging them to oppose I-1100, even though its largest member, Chateau Ste. Michelle, is remaining neutral.
Washington’s current wine laws allow small wineries, which make up more than 90 percent of the state’s 700 bonded wineries, equal access to the marketplace, said Jean Leonard, director of government relations for the institute, which has more than 200 winery members. “If all the laws are crossed out," Leonard said, "that would allow retailers to force wineries to pay for the best shelf space and for advertising and promotional materials. That will tip the scales against small wineries.”
At a Sept. 8 meeting in Walla Walla attended by about 20 winemakers, Rick Garza, deputy director of the state’s Liquor Control Board, said if I-1100 passes, his agency no longer would have any role in overseeing pricing and market activity, though he took no position on the initiative.
Many of the winemakers who attended the meeting spoke against the initiative with only one speaking in favor, according to Caleb Foster, owner and winemaker at Buty Winery, who was there. “Most people understood the dangerous ramifications for small Washington producers,” he said. “We’d have to pay to have significant placements. And retailers would say, ‘If you don’t give me a 2-for-1 deal, I won’t sell your wine.’ I can’t play that game. This would leave the market to the biggest, baddest, fastest, and most monied interests.”
Leonard added that “our wineries already feel price point pressure, and quantity discounts will wipe them out of the market.”
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