Groups' initiatives to privatize liquor sales stir opposition, debate

by: TRIBUNE PHOTO: JONATHAN HOUSE - Lee Medoff, cofounder of Northwest Portlands Bull Run Distillery, explains the whiskey distilling process to reporters during a Dec. 16 OLCC media day. Like bad driving in snow, long lines at the liquor store are a winter tradition in Oregon.

Will local spirit-seekers get to buy their booze at grocery stores in years to come?

That’s the question voters will get to consider on the November 2014 general election ballot unless opponents intervene sooner.

Last week, just as the Oregon Liquor Control Commission was hosting a media day to celebrate 80 years of craft distilling in the state, the Northwest Grocery Association and a small grocery store in Bend filed five versions of what they call the Oregon Liquor Control Modernization Act. The association includes 200 businesses in Oregon, Washington and Idaho.

OLCC Chairman Rob Patridge took offense to the timing. “Unfortunately, the day we’re celebrating craft distilling, an incubating industry here in Oregon, they’re ready to step on the throat and kill it,” he told the Tribune a day after the initiatives were filed.

Pat McCormick, spokesman for the Oregonians for Competition Campaign Coalition, the group that filed the initiatives, says that’s hardly the case. He says the privatization effort includes several incentives that would be a boon to local distillers. The proposal includes spending $1.2 million per year on the creation of an Oregon Distilled Liquor Board, similar to the Oregon Wine Board, to help with promotion and technical assistance for the industry. Oregon craft distillers would also be exempt from paying revenue replacement fees for the first $400,000 of annual gross sales. Finally, it allows them the option to sell directly on their premises without having to go through distributors.

“I think there’s really no argument the big stores want to close out Oregon distillers,” McCormick says. “There’s a lot of incentive to include them.”

Critics of privatization have also pointed out the flaws in Washington state’s model, since voters approved getting the state out of the liquor business last year.

Shoppers have complained of sticker shock, since Washington state also imposed two license fees that businesses must pay in order to sell liquor. Wholesalers pay 10 percent and retailers pay 17 percent.

McCormick admits Washington state has had a “flawed implementation,” but insists his coalition members have been watching closely and intend to remedy those problems with different systems in place.

For instance, he says the Oregon measure will “ensure maximum free-market opportunities,” by offering several models of distribution for retailers.

He says Oregon’s proposed ballot initiative will also retain the revenue the state receives from its state markup, which goes to public safety and mental health programs statewide.

The proposed privatization model would spend 23 of the 25 cents fee per container on public safety funding, and 2 cents per container for the Oregon Distillers Board.

“Oregon consumers have been concerned about the state being in the liquor business,” McCormick says. “It’s not in the beer and wine business. That process is due to change.”

Political dust-up ahead

So will we or won’t we follow Washington’s lead on booze? Oregon prides itself on its political counterculture, a la no sales tax and pumping our own gas at the station. Local distillers met last Friday to sort out the details, and are working on a united response.

Those contacted by the Tribune this week say the current system has worked well for them, but they also do well in the states with privatized systems.

“We do business now in 46 states,” says Thomas Mooney, founder of House Spirits Distillery. “Many of them are open states, a lot are controlled states. We do nicely in both. The mission for us is the same no matter what kind of state.”

House Spirits is one of five (soon to be six) venues at Distillery Row in inner Southeast Portland, which has become a hot spot for the city and state.

Craft distilling has become a major calling card for Portland and Oregon, like the craft brewing revolution but at an even steeper climb. Oregon’s 69 distilleries (including 19 in Portland) generated more than $53 million in sales in 2011, 12 percent of the state’s total liquor sales. Revenue from those sales goes to local cities and counties for public safety and mental health and addictions programs. Portland received $15.2 million in local liquor dollars in the last two years; Multnomah County received $6.7 million.

Local distillers want to do everything they can to continue that growth. Lee Medoff, co-owner of Bull Run Distilling Co., serves on the board of the new American Craft Distillers Association. Local distillers continue to release new products, promote Distillery Row as a hotspot for the movement, and hold public events designed to educate and sell.

The distillers guild’s annual “Toast: International Craft Spirits Revival” tasting event in March became the largest artisan spirits show in the United States, with 50 distilleries pouring their products. The Oregon Distillers Festival at McMenamins Edgefield is a summer tradition; and the Great American Distillers Festival, also in its ninth year, is a gathering of 40 distillers from across the country that come to Portland for tastings, awards and a mixology contest.

Yet distillers feel their industry is just in its infancy.

“I think the public is definitely starting to see it,” says Patrick Bernards, Oregon Distillers Guild president and Bull Run’s other co-founder. “We need to do a better job of getting the word out there. We’ve been growing in little bits and pieces; we’re coming into our own now. We have a voice for ourselves in the Legislature and a good relationship with OLCC.”

Many distillers say they’ll stick to what they do best — make liquor — and let voters decide what system Oregon should adopt.

“I like the open-market systems better,” says Steve McCarthy, owner of Clear Creek Distillery. “If a state like Oregon is our home state and our most important market, I think we’ve made it work fairly well. That isn’t to say we prefer it, but that’s the way it is, and we’ve spent more time and energy trying to make it work for us than we have trying to change it.”

McCarthy says he doesn’t have the resources or political armor to dive into the dispute, but he says he’ll follow the political dust-up with great interest.

The bulk of the opposition to the privatization initiatives will be led by Paul and Danielle Romain, lobbyists for the Oregon Beer and Wine Distributors. The Romains say they’re still reading the initiatives — which have just the smallest differences no one outside of the industry would understand — and will soon start organizing the opposition.

In addition to the distillers, they anticipate lining up the Oregon Neighborhood Stores Association, the small grocers, the AFSCME labor union and Oregon Petroleum Association, which also represents 7-Eleven and other convenience stores.

“If they truly go ahead, we’re plotting the campaign to defeat it,” Paul Romain said. “The industry will be pretty united.”

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