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Costco Conference Call with Grocers Fails to End Dispute Over Liquor Privatization

By Josh Feit November 15, 2011

At Costco's request, the Washington Food Industry Association, a statewide trade association that represents  independent and family owned grocers, sat down for a conference call with the retail giant yesterday morning. The WFIA, with members such as Red Apple, Metropolitan Markets, and Thriftway, has numerous concerns about the Costco-backed liquor privatization initiative that passed 60-40 last week and immediately said they were going to try an get the law amended in the legislature.

Yesterday morning, Costco, which spent more than $20 million campaigning for the initiative, tried to head the WFIA off at the pass, by ironing out their differences.[pullquote][It's]big business manipulation of government regulation for their market advantage.[/pullquote]

"We still have numerous disputes," Jan Gee, President and CEO of the WFIA tells PubliCola. Gee says the initiative gave Costo unfair market advantages most notably around liquor distribution. Costco and other big chains will be able to buy directly from distilleries which will allow them to bypass distribution costs, Gee argues. Moreover, probably WFIA's biggest gripe, even though Costco will become a de facto distributor in that scenario, the initiative specifically exempts them from helping cover the $150 million fee that distributors are responsible for to make sure state revenues don't decline on liquor sales.

Another thing Gee and her members say creates problems for independent grocers is the rule that only stores that are 10,000 square feet or larger can get into the liquor business. Gee agrees that mini-marts shouldn't be selling liquor, but points out that the rule will hurt mid-size, full-service groceries between 7,000 and 10,000 square feet who will lose customers to nearby larger stores who can sell booze.

"All of these barriers in 1183 on main street grocers and distributors and the deregulation for the largest stores will create such a price differential on the retail sale of liquor that consumers will likely be driven to the larger stores; thus [it's] big business manipulation of government regulation for their market advantage," Gee says.

In general, Costco lobbyist Greg Hannon says, "We believe the voters have spoken clearly. While there may be areas that deserve study for improvement over time, we do not believe there will be legislative support to make changes."

We have asked for further comment on the specific issues.
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