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Liquor stores struggle with privatization
Nearly a year after a voter approved ballot initiative allowed liquor to be sold in large retail stores, the former state-owned and contract liquor stores on Whidbey are struggling.
The liquor store in Oak Harbor closed in late 2012 while contract liquor stores in Coupeville and Freeland saw sales plummet by more than half since privatization went into affect.
“It’s not going well,” said Pam Smith, owner of Coupeville Liquor on North Main Street, adding she’s not ready to jump ship. Coupeville’s Liquor store now competes with local grocery stores.
She estimates that her business dropped about 60 percent since the market flooded with competitors.
Ken Vaughan, manager of Freeland Liquor, said he’s lost a similar amount of business since privatization.
His store is located close to a grocery store, which also started selling spirits after June 2012.
When stores that were at least 10,000 square feet were legally able to sell alcohol, the number a businesses where people could buy booze skyrocketed.
Initiative 1183 was approved by voters in 2012, and allowed large stores to sell alcohol beginning in June 2012.
Prior to privatization, 328 businesses, both state-owned and contract stores, were able to sell liquor. After privatization, that number jumped to more than 1,500, according to the Washington State Liquor Control Board.
On Whidbey Island, grocery stores such as Safeway, Prairie Center and Payless Foods, started selling liquor.
Smith said in the months after privatization, she continues to diversify her offerings and offer spirits people won’t find in the larger supermarkets and pharmacies.
“When they need a bottle of something really weird, they won’t find it anywhere on the island,” Smith said about what might happen if her business closed.
She also started stocking craft beers and wines out of the North Main Street store she has operated since 1995.
In addition to its eclectic selection of liquor, customers also enjoy the springtime appearance of young farm animals such as goats. This year, she has a rescue dog that hangs out behind the counter.
Smith said she would like to see an environment that would allow her to complete in the marketplace.
Liquor retailers are required to pay a 17 percent tax on all liquor sales. Because of that tax she is required to charge, all of the sales she made to Whidbey restaurants dried up. They bought from distributors who didn’t have to add the 17 percent.
“That makes it pretty tough,” Smith said.
Vaughan said he lost all but one restaurant when the number of sellers increased.
Smith said that state legislation had been proposed that would have allowed her to distribute liquor without paying the tax, however, that legislation didn’t get approved and the session ended.
The two liquor stores find themselves at a disadvantage from the large stores. They can purchase a larger inventory at a cheaper rate.
Both Vaughan and Smith noted that the large stores, with a wider variety of goods in addition to alcohol, can lower the price of their liquor and the loss can be absorbed through sales of other items.
“It was all set up to totally kill the little guy,” Vaughan said.
Privatization has increased the price of liquor too. Coupeville Liquor has to post pre- and post-tax prices due to the complaints staff fielded from sticker-shocked customers.
The average price per liter has increased since the voter-approved initiative was enacted. The cost per liter per month from June 2012 to February 2013 ranged from $23.70 to $25.35 per liter, according to information from the Washington State Department of Revenue.
The price per liter for the same time period a year earlier ranged from $21.28 per liter to $23.11 per liter.
Smith said the remaining liquor store owners talked about forming a co-op and buy as a group, but determined it wasn’t possible.
The small liquor stores continue to stay open. Vaughan said he hopes to see an uptick in business as the snowbirders return to Whidbey Island for the season.