Liquor Board's 'emergency rules' put craft distilleries in a tight spot
Just months after Ballardite Mhairi Voelsgen launched her company, BroVo Spirits, she has run into a major hurdle - the ratification of Initiative 1183.
The new law privatizing liquor sales could drive craft distilleries out of business due to some unintended consequences of the law.
As a result of the passing of I-1183, state liquor stores have stopped ordering from local craft companies like BroVo Spirits, and some existing orders were cancelled, including an 800-case pre-order from Voelsgen's company.
Another blow came from the 'emergency rules' implemented by the Washington State Liquor Control Board, which prevent local distillers from self-distributing until March 2012, and demand a total of 27 percent in fees from retail and distribution.
Craft distillers were originally told that they would be allowed to begin self-distribution starting December 8th, but now the date has been pushed back to March 1, 2012.
"And with a restriction on special orders, many of the restaurants and bars that stock our product are not able to get it. We hear from people daily that they want our products," Voelsgen said. "Special orders are our bread and butter. This has shut down sales for us."
The only way for companies like BroVo Spirits to get their product out to the public now is through tasting rooms. But the interpretation of the new law calls for a 10 percent distribution fee and a 17 percent retail fee for all tasting room sales.
"This is hugely problematic," Voelsgen said. "We have to factor the fees into our margins and raise our prices. But since liquor stores aren't paying these fees, our prices are higher than the store prices. We're caught in a Catch-22."
Voelsgen said that Washington craft distilleries as a group are working to get the word out about the new rules the Liquor Control Board has put into effect as well as reach out to lawmakers in hopes of repealing the decisions.
But until then, people like Voelsgen, who cashed out her 401(k) to start the business, are looking for opportunities elsewhere.
"We are trying to enter the market in other states. We have to," Voelsgen said, adding that she and her business partner, Erin Brophy, have opted to take no pay and tighten their belts. "We're not going anywhere but boy, it's distressing," she said.
Echoing Voelsgen's concern, Steven Stone, President of the Washington Distiller’s Guild, said that these regulations, which seemingly favor the big corporations like Costco, are going to be tough for the state's craft distillery industry, which consists of 40 craft distilleries and around 200 employees.
"The guys that are new [to the craft spirit industry] are especially affected. And I feel bad for the guys out in the country. That's a long way to market," he said.
"We are not against privatizing the system," Stone clarified. "We are happy and excited about a privatized market but we're just not happy with the implementation."
Stone and Voelsgen argued that the Liquor Control Board is misinterpreting the initiative and that the significant imposition on small craft distilleries was not the voters' intent.
"People thought they were voting for California prices but you can't have those prices without lowering taxes," Stone said. "We already have the highest [alcohol] taxes in the country."
In the meantime, Voelsgen encouraged people to help the local craft spirits industry, its 200 employees, and the 400 families across the state that are impacted by the industry by
- asking your local liquor store manager for craft products, especially ones made regionally.
- asking your server or bartender for a drink made with local spirits
- buying liquor for holiday gifts at your local distillery