Nearly two year since our last event, Brewing Up Cocktails is back with a new menu of cocktails featuring beers from Ninkasi. Join us at Circa 33 this Tuesday for our reunion during Portland Beer Week.
As a follow-up to my article in yesterday’s Oregonian about the failed attempt to include e-cigarettes in the state’s smoking ban, today I’m posting a memo Multnomah County officials have sent to local bars and restaurants. In it, they mislead business owners about the dangers of e-cigarettes, telling them:
State law does not currently prevent the use of e-cigs; however business owners are encouraged to include e-cigs in no-smoking policies. E-cigs pose serious health risks and challenges to enforcement of the Smokefree Workplace Law as it appears people are smoking indoors.
The letter then recommends that businesses include e-cigarettes in their no-smoking policies, adopt completely smokefree outdoor dining areas, and adopt a completely tobacco-free policy for their entire properties. (Here’s a PDF of the memo.)
There are valid reasons why a bar or restaurants might ban the use of e-cigs, such as the fact that some guests find them annoying. But county officials’ claim that the devices pose “serious health risks” is completely unsubstantiated. There’s not even much evidence that e-cigarettes are dangerous for users, much less for bystanders exposed to vapor secondhand.
… the quality and quantity of chemicals released in the environment [by vaping] are by far less harmful for the human health compared to regular tobacco cigarettes. Evaporation instead of burning, absence of several harmful chemicals from the liquids and absence of sidestream smoking from the use of the e-CIG are probable reasons for the difference in results.
And the second:
The study showed that e-cigarettes are a source of secondhand exposure to nicotine but not to combustion toxicants… Using an e-cigarette in indoor environments may involuntarily expose nonusers to nicotine but not to toxic tobacco-specific combustion products.
Even in the case of nicotine, exposure from real cigarettes was ten times higher than that from e-cigarettes.
Those are studies of indoor use. Multnomah County’s advice is to ban them outdoors too. The idea that indoor e-cigarette use could be harmful to bystanders is at least worthy of investigation, although the evidence so far is that it’s nothing to worry about. The idea that outdoor use presents serious health risks is wildly implausible.
This is yet another example of how the crusade against e-cigarettes is driven by unscientific alarmism rather than any empirical evidence of danger. County officials have shown that they have no credibility on the issue by misleading local business owners about the alleged risks.
The Oregon legislature recently failed to pass completely sensible restrictions on selling e-cigarettes to minor, an effort undermined by more extreme anti-smokers who were more intent on banning vaping in workplaces, bars, and restaurants. In today’s Oregonian, I write about lawmakers’ misguided attempt to include e-cigarettes in the smoking ban and their next proposal to impose new taxes on them. An excerpt:
I never thought I’d say this, but I’m actually getting nostalgic for the original smoking ban debate. Advocates exaggerated the dangers of secondhand smoke, but at least they made an effort to ground their views in science and demonstrate that non-smokers were being harmed.
The same cannot be said for those seeking to extend current bans to cover vaping. They’ll be the first to tell you that more study of e-cigarettes is needed. But why wait for results? They’re ready to ban first and ask questions later.
Depending on whom one asks, Bitcoin is the future of currency, a useful tool for conducting transactions with vast untapped potential, or a speculative bubble of no lasting consequence. Enthusiasm for Bitcoin also signals various commitments, as Tyler Cowen notes, such as for libertarianism and technological optimism. Bitcoin has had a big week, with Overstock.com agreeing to accept it and The Chicago Sun-Times trying out a Bitcoin paywall.
The less obvious uses of Bitcoin are also intriguing. Writing at the Umlaut, Eli Dourado explains how the programming language that makes Bitcoin work opens up all kinds of possibilities, including contracts, micropayments, and proof of identity. It’s enough to convince me that Bitcoin or a successor cryptocurrency will likely be increasingly relevant and that it’s worth getting familiar with how to use it. And though I’ve in all likelihood missed my chance to strike it rich, there are far worse gambles than speculating on Bitcoin from my living room. It’s cheaper than Vegas and the drinks are better.
But if one is holding on to bitcoins for any reason beyond speculation, one will eventually want to spend them. There are lots of ways to do this online. Transfers between friends are also easy. But what about a night on the town? Where can one go to, say, turn bitcoins into beer?
To find out, my friend Tom and I consulted CoinMap.org to plot an evening out in Portland exclusively patronizing businesses that accept Bitcoin. As one might expect, it gets a little weird.
Sadly, we weren’t able to experience what likely would have been the weirdest stop on our itinerary. At Float On in southeast Portland, customers exchange dollars or bitcoins for 90-minute sessions in a sensory deprivation chamber, floating in complete darkness and silence. Float On’s FAQ promises that floaters will not drown, that it’s not New Age mumbo-jumbo, and that “only a small percentage of floaters turn into proto-human monkeys.”
Would I hallucinate a UFO abduction, be inspired to take up impressionist painting, or perhaps receive a vision of Bitcoin’s future value? I didn’t get to find out. Float On was booked until 2 am the night of our adventure, which was a little later than we were willing to commit to. The business closed for renovations the following day, promising to re-open in February. I was looking forward to this, but it will have to wait for some other time. I suppose it’s good to know for future reference that if one craves sensory deprivation at two in the morning, there’s a place in Portland to find it.
Our first stop instead was browsing the Mirador home goods store on southeast Division street, which was pleasant, if not quite as mind-expanding as a plunge into sensory deprivation. The store offers everything from standard pots and pans to more Portlandian items like home cheese-making kits. Tom picked out a cutting board and a cocktail strainer, and I made my first Bitcoin purchase, a small brush for cleaning out metal straws. I’d been needing one of those!
The checkout process at Mirador was the smoothest of all the places we visited. The clerk rang up our orders, then used a computer to generate a QR code containing a unique Bitcoin wallet address and the total price of our purchase. We simply held our phones up to the screen, approved the transfer, and the transaction was completed within seconds.
Our next stop was just two blocks away at Papa G’s vegan organic deli, which offers dishes such as a tofu dog, tempeh reuben, and house “nochos.” While the aromas at Papa G’s were enticing, we were not its target demographic and spent a while mulling our options. Eventually we settled on a couple of their house made drinks, a hibiscus cooler and ginger beer kefir. These were both good and refreshing. For those seeking harder stuff, the deli also offers a selection of bottled beers.
Checkout was completed by scanning a QR code taped to the register that is linked to a Bitcoin wallet controlled by the owner. This was fast and easy, but leaves the staff without a direct way of verifying the transaction.
A few minutes north is Madison’s Grill, a place I’d passed by many times but never visited until last week. Madison’s began accepting Bitcoin at the urging of local enthusiasts and hosts the Portland area Bitcoin Meetup group. The menu offers standard pub fare like burgers and fish and chips, and the fourteen-handle tap list includes both familiar brands and a rotating selection of craft beers, among them Awesome Ales and No-Li on our visit. This is easily the best place to convert bitcoins into beer in Portland. Given the rise in Bitcoin’s value from when I first bought in a few days before, my beer was essentially free.
We ended up sitting next to the owner, Steve Brown, an outgoing guy who’s having fun with his experiment being the first full-service bar and restaurant in Portland to accept Bitcoin. Though not yet a huge part of his business, the venture does seem to be paying off with new customers and press.
Madison’s is also notable for being the only place on our crawl that has found a way to integrate tips into their Bitcoin transactions. These are recorded by wait staff and factored into their paperwork at the end of the night, much like a credit card tip.
No tour of Portland is complete without a visit to food carts, so our next stop was Whiffies Fried Pies in the pod at southeast 12th and Hawthorne, just one block away from Madison’s. Whiffies makes sweet and savory fried handpies that I’ve enjoyed many times in the past. Tom and I both opted for the BBQ brisket and mozzarella pie, which came out steaming hot and delicious. This is my pick for the best place to trade bitcoins for food in Portland.
Just like at Papa G’s, checkout here was completed by scanning a QR code linked to the owner’s account.
Along with its coffee shops, breweries, and food carts, Portland’s hospitality industry is famous for its strip clubs. Out of town guests make a point to visit them, the local alt-weekly reviews their steak offerings, and the likes of Tyler Cowen and Josh Barro comment on their economic strategies. While there are plenty of sleazy ones, others feel like good dive bars that just happen to have naked women in them. It’s a strange dynamic, perhaps best summed up like this: In other cities, you go to the strip club and don’t tell your wife. In Portland, your wife invites you.
Thorough research demanded that we conclude our evening at the Kit Kat Club, a new bar that claims to be the first strip club to accept Bitcoin. (This is only the second nerdiest reason I’ve gone to a strip club, the first being the time I went to the Boom Boom Room to see magician Reed McClintock perform card tricks.)
Implausible as the idea seemed, we hoped that this might mean that one could tip performers in Bitcoin, perhaps through creative use of tattoos and QR codes. Alas, that isn’t the case, and for obvious reasons they don’t want customers using phones that could just as easily be recording video as transferring currency. That aspect of the business remains a cash affair. (That said, it seems that an enterprising, tech-savvy dancer could set herself up to accept Bitcoin individually. Paging Lynsie Lee.)
The bar incorporates aspects of cabaret, with an emcee and themed performances, but it’s still very much a strip club. The staff was fun and friendly. Stumptown Dumplings offers food; their pork dumplings with chili hoisin were pretty good, though they require a separate non-Bitcoin transaction. My only knock against the place would be the beer selection, which is bottle-only and dominated by mass market lagers. Is there much of an overlap between people who spend bitcoins and people who go to strip clubs? I have no idea, but if there is, Kit Kat is the club they’re looking for.
Below, a few assorted thoughts and observations from our Bitcoin crawl…
Ease of use: Getting set up with Bitcoin was easy. I signed up with CoinBase for my primary account, linked that to my checking account to purchase Bitcoin, and transferred Bitcoin to a Mycelium wallet on my cell phone to spend while we were out.
Integration: Though all of our transactions went smoothly, Bitcoin payments aren’t yet easily integrated into the point of sale systems of the places we visited. In some cases, the money was sent to an owner who wasn’t on the premises. Staff could potentially verify transactions by watching a customer’s phone screen, but this is hard to monitor closely. At Madison’s they asked for a name and phone number as back up. Right now people paying with Bitcoin are early adopters and trust is high, but better integration with POS systems would make bar and restaurant use of Bitcoin more secure.
Tipping: As mentioned above, Madison’s was the only one of the four bars and restaurants we visited that factored tipping into their accounts. At every other stop we needed cash for tipping staff, making it impractical to spend a night out using only Bitcoin. (However if a restaurant wanted to switch to a percentage service charge model, that would be easier to handle.)
Privacy: I think that only one of the businesses we patronized generated a unique address for each Bitcoin transaction. Since the blockchain documenting Bitcoin transactions is public, anyone who knows the address used by a business can see how much money it has received. Right now this is a small enough part of their volume to be of little concern, but if Bitcoin becomes more popular one can imagine that they may not want to broadcast their sales so easily.
Volatility: It should go without saying that the volatility of Bitcoin prices is a concern for businesses to consider. Right now, I doubt many local businesses would have any trouble converting their Bitcoin receipts to dollars if they don’t want to carry a large balance. On the other hand, if they’re optimistic about Bitcoin’s future value, they may want to hold on to them.
New customers: Perhaps the best reason to start accepting Bitcoin now is to attract new customers. There are people who want to spend bitcoins and they currently have few options for where to do so. There is a benefit to being one of the first in an industry to accept the currency, both for being discovered by new clients and for getting press coverage. Even if one is skeptical of Bitcoin and rapidly converts all sales to dollars, it could be worthwhile to get on board before competitors do.
Advantages over credit cards: Credit card transactions take time to post, they can be reversed if a customer protests, and the associated fees are significant. Standard Bitcoin transactions are fast, irreversible, and cheap. (It is possible to structure Bitcoin transactions so that they can be arbitrated and reversed, but getting a refund for a standard exchange requires the retailer’s consent.) I doubt Bitcoin will replace Visa anytime soon, but these are advantages for a small business to consider.
One additional way restaurants might use Bitcoin is to hold reservations. Popular restaurants lose revenue when a reserved table sits empty. Even if a restaurant takes a credit card number to charge in the case of a no-show, it’s possible that the customer will contest the payment. Restaurants could instead require a deposit of Bitcoin to hold a table and then either return it when the party arrives or deduct an equivalent amount from the bill.
Taxation: Perhaps the biggest disadvantage to accepting Bitcoin is figuring out how to factor it into one’s taxes. This seems to be a gray area at the moment and could get complicated.
Bottom line: There’s a lot of room for expansion when it comes to accepting Bitcoin. Integrating it into one’s business will probably get easier over time, but there are also advantages to being among the first to try it out.
Aquavit Week 2013 is finally here! Below is the menu we’ll serving tonight (and all week long) at The Hop and Vine. In addition to the drinks below, we’ll have an aquavit barrel-aged braggot from Breakside Brewing, neat pours of various aquavits, and a selection of Scandinavian-inspired fare. We also have a bunch of other bars and restaurants joining us for the celebration, all offering aquavit cocktails of their own.
Hot Toddy 9
Linie aquavit, Swedish punsch, lemon, star anise
Bob Dillin’ 10
Gamle Ode Dill aquavit, cranberry vinegar, lemon, sugar, dandelion and burdock bitters
Temperance Regnig Dag aquavit, Maurin quina, Campari
Aquavit & Tonic 9
Sound Spirits aquavit, dill and mustard seed tonic
Norwegian Rose 10
Krogstad Gamle aquavit, Laird’s bonded apple brandy, lime, grenadine
Golden Lion 10
North Shore aquavit, Dolin blanc vermouth, Galliano, celery bitters
Dudley’s Solstice Punch 9
Raspberry-infused Krogstad Festlig aquavit, St. Germain, lemon, sparkling wine
[Photo by Julia Raymond.]
Aquavit Week returns in its second year with new aquavit, a new location, and a new aquavit barrel-aged beer from Breakside Brewing. A new website and a new logo too. Check out the site for all the details.
Here’s another of our new cocktails at The Hop and Vine, this one using a delicious drinking vinegar from Genki-Su, a new company based here in Portland:
1 1/2 oz bourbon
3/4 oz yuzu vinegar
1/2 oz lemon juice
1/2 oz simple syrup
2 dashes Angostura bitters
lemon peel, for garnish
Shake, strain into an ice-filled rocks glass, and garnish with a lemon twist.
The Genki-Su vinegars are very good and can be purchased online. I especially like their shiso flavor, which I’ve used in a very similar cocktail with rum.
[Photo by Julia Raymond.]
My bartending these days has migrated from the west side to the east side of the Willamette River, allowing me to trade in monochrome dress slacks for denim and plaid. But the approach to cocktails remains the same. In addition to picking up occasional shifts at the exceedingly cool Expatriate, I’ve taken over the menu at one of my favorite places and long-time collaborators, The Hop and Vine.
With their frequently changing tap list and expansive bottle shop, The Hop and Vine is a great place to work on beer cocktails. The Mai Ta-IPA and Averna Stout Flip are both featured on the new menu. Of course we’re doing more than just beer though. Here’s a look at one of our other new cocktails, the Red Right Hand:
1 1/2 oz Novo Fogo silver cachaca
3/4 oz Aperol
3/4 oz lime juice
3/4 oz honey-chamomile syrup
Shake and serve up. To make the syrup, simply mix equal volumes of honey and chamomile tea.
Bartenders will often tell you that the hardest part of creating a new cocktail is naming it. I came up with this recipe for a Bars on Fire event at The Coupe in Washington, DC. I’d been stuck on the name and forgot to send it in before deadline. I remembered while listening to “Red Right Hand” just as the gong hit; thanks to a red hue provided by Aperol, Nick Cave and the Bad Seeds solved my naming problem.
[Photo by Julia Raymond.]
Over at The Umlaut, I have an essay up today about why mandatory GMO labeling is probably inevitable in the United States, and why that may not be a good thing:
I would be more sympathetic to the cause of GMO labeling if its advocates were not so intent on stigmatizing genetic engineering. Instead, whether for reasons of political expediency, profit, or simply poor judgment, they too often associate with any idea that could bolster their cause, regardless of its scientific merits. Thus we end up with labeling advocates on stage in front of a Whole Foods banner, sowing fear among foodies that exposure to genetically modified crops may cause autism in their children.
[Photo via CT Senate Democrats.]
Over at Blue Oregon, politico and former pub owner Jesse Cornett argues against liquor privatization, satisfied with the system the way it is:
Bar and tavern owners obtain their liquor almost the same way that anyone in Oregon does: they buy it from a liquor store. It comes with a small discount and can include delivery. When I called in my order, they would ask when I wanted it. Right away? Sure. See you in 30 minutes. At a certain time? Great, we’ll see you then. Run out of a particular product late in their hours? Just pop by. Call on your way and it’s sitting at the counter waiting for you. The system works exceptionally well for Oregon’s pub, bar and restaurant owners. Obtaining liquor was much more convenient than any other product.
Jesse is absolutely right about this. Oregon’s system makes buying liquor simple. To stock the bar I manage, I make one phone call, receive one delivery, and write one check. Easy! In contrast, our wine buyer deals with more than a dozen distributors, taking separate deliveries and writing individual checks for each of them. Pain in the ass!
So yes, the current system is convenient for bar managers. But that’s a terrible reason to keep it in place. It leaves unaddressed, for starters, the cost to the bars. Licensees in Oregon receive only a very small (about 5%) discount off retail. The set price means we don’t spend time bargaining or making deals, or what is known in less regulated states as “doing your damn job.” It also means we pay more for our liquor, making it harder to put quality spirits in our menu cocktails.
The situation is even worse when we want to bring in relatively esoteric spirits from other states. Oregon distilleries benefit from the fact that the state’s monopoly buyer, the OLCC, gives them de facto favorable treatment. The agency is very likely to “list” their products, meaning it will purchase them in bulk and sell them at a lower price. That’s good for local distillers, but not so good for out-of-state producers and the consumers who want to buy their spirits.
As an example, I requested aquavits made in the Midwest as special order items this year. To the OLCC’s credit, they both eventually arrived, but our system renders the prices exceedingly high. The Gamle Ode Dill Aquavit sells in Oregon for $42.45 a bottle. In its home state of Wisconsin, I see it selling for $29.99. The North Shore Aquavit from Illinois? $47.25 in Oregon, $27.99 at Binny’s in Chicago. Shipping costs account for a portion of the difference, but not nearly all of it.
Advantaging local distillers over out-of-state producers shouldn’t be the goal of our distribution laws. It may even be unconstitutional. I have no doubt that skilled local producers will continue to thrive in a private market, just as they do in the privatized beer and wine system. And if there are some producers who cannot survive without the government buying their product in bulk, then maybe they shouldn’t be in the business.
(As a point of contrast, Matt Yglesias notes at Slate today that Washington, DC’s unique openness to importing spirits is part of what has made the city’s bar scene so fantastic. Oregon would do well to follow its lead.)
If Jesse’s argument were correct, there would be no reason not to extend it to restaurants’ other inputs. If a state monopoly on liquor is so great, why not monopolies on beer and wine too? Or on meat and cheese and fish and bread and vegetables? It would be so much easier on the chefs! But no one would take these ideas seriously, because we’ve long since figured out that essentially free markets are the best way to distribute normal goods. Liquor is a mostly normal good – and to the extent that isn’t because of negative externalities, taxes are a far better way of addressing that than inefficient distribution is.
As I never tire of reminding people when it comes to questions of distribution, markets are for consumers. Not only consumers who want local products, but all consumers – even the ones who just want stuff that’s basic and cheap. They would very much like to pick up a bottle for a few dollars less than they pay now and not have to visit a special store to get it. This is why privatization is likely to happen eventually, regardless of how it affects bar managers and local distilleries. Consumers are tired of dealing with a distribution system designed for the 1930s.
And this is where Jesse has a good point: There are going to be winners and losers with privatization, and distributors and large retailers are going to exert their influence to ensure that they get an advantage. This is one reason that Washington state’s privatization measure bars entry to new, smaller stores. If Oregon privatizes via ballot initiative, as appears increasingly likely, then we may end up with similar problems.
The solution to this is acknowledge that getting privatization right is difficult, but doable, and to demand that the legislature write a bill that learns from Washington’s mistakes and puts consumers first. The alternative is to wait for ballot initiatives written by retailers, one of which will inevitably pass.
[Disclosures: In addition to working as a bartender, I consult for several spirits brands and beverage-related products. I have not worked for retailers or distributors.]
The first lesson I’ve learned about the world of publishing: Publishing a book is hard! As many of you know, for the last few years I’ve been collaborating with Ezra Johnson-Greenough and Yetta Vorobik on a series of beer cocktail events called “Brewing Up Cocktails.” I realized early on that there was potential to create a book based on our exploration of beer as a cocktail ingredient. People love beer and people love cocktails, so this seemed like an easy sell. I wrote up a long book proposal, which was a learning experience in itself, and began the long process of pitching publishers and agents.
Unfortunately, despite getting great feedback about the content of the proposal, it turned out that traditional publishers didn’t agree with my assessment of the book’s potential. They deemed beer cocktails too niche — surprising when I look at the number of niche cookbooks that do make it into print — and weren’t confident that it would find a market large enough for their needs.
Not long ago, my only likely options from there would have been to either drop the project, settle for a small publisher with lower production values, or self-publish. Thanks to Kickstarter, I’m trying a new way to go forward. I’ve teamed up with Ellee Thalheimer of Into Action Publications to try a different model that combines some of the best attributes of larger publishers — ease of distribution, lower printing costs, and quality production — with the nimbleness of a small imprint. If we meet our funding goal, we’ll produce a book that looks fantastic and get it into stores faster than a traditional publisher would.
Of course, there are trade-offs. Had a larger publisher picked up the book, I’d likely have received a small advance and, if it sells well, modest royalties. It would have been a low-risk, low-reward proposition. In contrast, our approach is high-risk, high-reward. I’ve put in a lot of work and expense upfront. Even if our Kickstarter is successful, I may be working on practically no advance, with no income coming from the project for a long time. And if the book doesn’t sell well, none of that will be recouped.
But, obviously, I believe in the book and in its appeal to beer and cocktails lovers, so I’m taking the chance. And if it succeeds, I’ll have a much greater stake in the project than most first time authors ever do.
If you’re a regular reader of this site and enjoy the drinks I post here, I hope you’ll give it a shot too. For $20 you can be among the first to get a copy of the book as soon as it’s off the presses, and we have other rewards built into the Kickstarter for higher levels of support. Smaller contributions are appreciated as well. You won’t be charged at all unless we reach the minimum amount we need to produce the book — enough to cover printing, graphic design, photography, and the other costs associated with bringing a real physical book into existence. Please check out our Kickstarter here.
I couldn’t be more excited about the creative team assembled for the book. I’ve already mentioned Ellee, who’s also the co-author of Hop in the Saddle: A Guide to Portland’s Craft Beer Scene, by Bike. We also have the extremely talented David L. Reamer as photographer and Melissa Delzio as graphic designer. With them on board, I can guarantee this book is going to look fantastic.
Finally, I’d like to offer a few words of thanks to those who have helped get us this far, regardless of what happens from here: Yetta and Ezra for kicking off our series of events; author Diane Morgan for invaluable advice on getting started; Natalia Toral, Dave Shenaut, and Raven and Rose for letting us shoot in their Rookery Bar; our video crew, including Ben Clemons, for doing an amazing job; and Todd Steele, owner of Metrovino, for indulging my beer cocktail experiments over the years, even when they are of questionable cost-effectiveness.
Press so far for Cocktails on Tap:
Allison Jones at Portland Monthly
Anna Brones at Foodie Underground
Erin DeJesus at Eater PDX
Marcy Franklin at The Daily Meal
Jeff Alworth at Beervana
This year Negroni Week, the celebration of the classic cocktail hosted every year by Portland restaurant Nostrana, spread out to include bars all over the country featuring variations of the drink. Metrovino took part, and unsurprisingly, I reached for aquavit. The cumin-forward, barrel-aged aquavit from North Shore works great in this cocktail:
1 oz North Shore aquavit
1 oz Campari
1 oz sweet vermouth
orange peel, for garnish
Stir with ice, strain into a chilled cocktail glass, and garnish with the orange twist.
Today’s Oregonian editorial urges Oregon to make like Washington and privatize liquor:
It’s possible, even probable, that Oregonians will vote on same-sex marriage and marijuana legalization in November 2014, leaving the state one measure short of a following-Washington’s-footsteps trifecta. That spot may — and should — be filled by an initiative privatizing liquor sales. It’s time to drag booze regulation out of the 1930s.
I’m with them on this, but they oversell the case a bit in using Washington as a model. This paragraph in particular seems disingenuous:
Despite the initial price shock, Washingtonians bought more booze than they did the year before. It’s simply far more convenient to buy liquor at Safeway or Costco, as Washingtonians now can, than to make a separate trip to a state liquor store. And consumer choices have increased thanks to the appearance of popular store brands, says Gilliam.
I think it’s fair to say that the appeal of these “popular store brands” lies more in price than in quality. And that’s fine. I’ve said before that we shouldn’t force mainstream consumers to pay higher prices so that booze nerds can buy esoteric spirits. But let’s not pretend there’s no potential trade-off here. The OLCC, to its credit, has become quite good at placing special orders compared to other control states. (Trust me, I used to live in Virginia.) It’s also acted as an incubator for Oregon distillers. This seems at least partly because the agency is not a pure maximizer of profits. Depending on how retail licenses are structured in a successful privatization plan, the state may end up with a less responsive supply side.
The benefit of watching Washington privatize liquor first is that we can learn from its mistakes. So here are two to keep in mind:
Keep taxes reasonable — Washington gave privatization a bad name by packaging it with extremely high taxes, the highest in the nation. As a result, consumers associate privatization with price hikes instead of the lower costs they anticipated.
Allow small retailers — Washington’s initiative generally limits new retail licenses to stores that are at least 10,000 square feet in area. This is a classic “bootleggers and Baptists” dynamic: Temperance-minded voters didn’t want proliferation of liquor licenses, and large grocers didn’t mind restricting competition. This makes it difficult to open boutique stores appealing to consumers that Costco may ignore.
Both of these concerns will be a factor in Oregon’s eventual privatization, which may be broadly popular but will be driven by particular interests. The state will want to retain its revenue. Retailers and distributors will want to shape the law to their benefit. To get this right, voters and legislators will need to keep in mind that privatization is a means to the end of competition, not an end in itself.
A new law in Oregon will allow the state’s distilleries to open additional tasting rooms and retail sales centers:
The bill allows distillers to offer tastings and sell their products at their distillery and five other locations. Current law allows distillers to perform tastings and sell their spirits one other location in addition to the distillery.
Distillers still must purchase their liquor from the Oregon Liquor Control Commission, the same way liquor store owners do now. And distillers must enter into a contract with the OLCC to sell bottles of their craft spirits.
The goal is to help the increasing number of craft distilleries continue to grow, though as it currently stands only two of them (McMenamin’s and Rogue) have enough locations to take advantage of the new opportunities. Spirits produced in Oregon now account for about 12% of the state’s liquor sales. That’s really impressive, and some of the spirits made in Oregon are fantastic. I hope this trend continues.
However this new law might not be the best way to help craft distillers. It may be nice in the short-run, but is it constitutional? I think that it’s vulnerable to legal challenge by out-of-state producers as a violation of the Commerce Clause, following the arguments that allowed wine producers to strike down discriminatory direct shipping laws in Granholm v. Heald. (I have no formal legal training, so take this as a layman’s reading. The case isn’t too complicated.)
Granholm explicitly addressed the balancing of the Twenty-first Amendment, which gives states broad authority to regulate alcohol, and the Commerce Clause, which generally forbids states from discriminating against out-of-state producers.
The Twenty-first Amendment reads in part:
The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.
This has been interpreted to allow states great flexibility in deciding how to regulate alcohol, including the power of outright prohibition. The Court’s ruling in Granholm made clear, however, that these regulations must treat in-state and out-of-state producers evenly, not giving undue favor to the former. As Justice Kennedy wrote in his majority opinion:
The mere fact of nonresidence should not foreclose a producer in one State from access to markets in other States. [...] States may not enact laws that burden out-of-state producers or shippers simply to give a competitive advantage to in-state businesses.
The Twenty-first Amendment does not exempt states from this requirement:
The aim of the Twenty-first Amendment was to allow States to maintain an effective and uniform system for controlling liquor by regulating its transportation, importation, and use. The Amendment did not give States the authority to pass nonuniform laws in order to discriminate against out-of-state goods, a privilege they had not enjoyed at any earlier time.
In Granholm, the question at issue was whether states could allow their own wineries to ship directly to consumers while denying the privilege to wineries from other states. The Court ruled that they cannot. States can choose whether to ban or to allow direct shipping of wine, but they must treat in- and out-of-state wineries consistently.
The case doesn’t address liquor directly, but it’s easy to extend to the logic. Oregon’s new law allows in-state distilleries to open up to five retail stores, a privilege denied completely to distilleries from anywhere else. The law’s supporters say explicitly that its purpose is to promote local businesses:
“It takes advantage of Oregon agricultural products, it promotes tourism and it promotes small business development,” said Sen. Elizabeth Steiner Hayward, D-Beaverton, who is one of the bill’s sponsors.
The law clearly discriminates in favor of Oregon distilleries. For this to be permissible under the Commerce Clause, the discrimination must be necessary to achieve some other legitimate purpose. In Granholm, the states argued unsuccessfully that their laws were necessary for the collection of taxes and to keep alcohol out of the hands of minors.
It’s difficult to imagine either of these arguments faring any better for Oregon. All of the spirits sold in Oregon, including those in the new tasting rooms, retail at a set price through the Oregon Liquor Control Commission (OLCC). The state has no sales tax. Collection of revenue, then, is not a concern.
As for sales to minors, it would be hard to argue with a straight face that local distilleries are uniquely qualified to sell only to adults.
So if Oregon distilleries can open tasting rooms and retail centers anywhere in the state, why not distilleries from across the river in Washington? Or from Kentucky? Or anywhere else, for that matter? It’s easy to imagine an out-of-state distillery suing for access to Oregon’s market on equal terms,
This hypothetical case may be strengthened by the fact that through its monopoly on liquor distribution, the OLCC can grant de facto preferential treatment to Oregon producers. Though the agency doesn’t explicitly do this, there’s good reason to believe that it has this effect. From a recent article about the state’s craft distillery boom:
OLCC officials stopped short of saying the agency shows a preference for stocking Oregon-made products at its warehouse — but it hasn’t created many obstacles for start-up distilleries.
“We make it easy. They get a listing,” said Brian Flemming, director of retail services for the OLCC.
The makeup of the Court seems favorable to extending the Granholm interpretation. As Garrett Peck notes in his book The Prohibition Hangover, dissent in the case was associated with age, with all of the justices who were alive during Prohibition siding with the states. Dissenters Rehnquist, O’Connor, and Stevens have all since retired. If a new case involving distillers does reach the Court, they may get a sympathetic hearing.
That’s a big “if.” Even if a case is brought, it may never go that far. And lower courts may decide that since Oregon’s law presents a different set of facts, the ruling in Granholm doesn’t apply.
Nonetheless, promoting craft distilleries through laws that discriminate in favor of local producers is a risky strategy that may backfire when and if they are challenged in court. There are other ways to open up the market for craft distillers that would rest on more secure legal footing.
[Photo: Still at Grand Traverse Distillery in Michigan, 2008.]
[Disclosure: I do contract work in the spirits industry, often with brands not based in Oregon.]
An Oregonian editorial last week was refreshingly libertarian, calling for same-sex marriage, tuition equity for some undocumented immigrants, restraint on gun control, and even opposition to the state’s smoking ban. I sent in a letter about the last item, which they published today:
The Jan. 12 libertarian-leaning editorial “Protect and expand personal freedom: Agenda 2013″ was a breath of fresh air, especially in regard to our state’s excessively stringent smoking ban.
Current law makes few exceptions for businesses that cater to smokers, making it essentially illegal for entrepreneurs to open new cigar bars or smoking lounges even in stand-alone tobacco shops. Regardless of whether one supports a broad smoking ban, it’s difficult to justify forbidding these businesses to open.
Sensible reform would replace the current exemptions, which apply only to venues that have been grandfathered in, with objective guidelines that would allow both existing and aspiring business owners to offer smokers an indoor refuge.
As I reported in the Oregonian in 2011, the promised decline in heart attacks that the smoking ban was supposed to usher in never developed.
It’s not everyday that one sees a corporation exert its dominance over government as openly and brazenly as Nike did to Oregon Governor Kitzhaber and the legislature this week. From The Oregonian:
Turmoil over Nike’s taxes surfaced Monday when Kitzhaber made a surprise announcement that he was ordering lawmakers into an “extraordinary” special session with four-days’ notice. He said he was motivated to act fast after being approached by Nike officials who were asking for greater tax certainty before proceeding with a major expansion.
Nike got the guarantees it wanted. Kitzhaber defended the policy by citing figures regarding the corporation’s economic impact — figures provided by Nike without verification:
In speeches and press releases, Kitzhaber and Nike representatives claimed that the company offers an average annual compensation of $100,000 to its employees and that employment in Oregon has grown 60 percent since 2007. Kitzhaber, citing a Nike economic analysis, said the company’s expansion could trigger up to 12,000 direct and indirect jobs and a $2 billion-a-year boost to the state economy.
Those numbers were repeated by supportive lawmakers on Friday, although Nike has not provided data to back up those claims. The company has declined to release the economic report done by AECOM.
Kitzhaber’s spokesman, Tim Raphael, said that the office took the figures from fact sheets provided by Nike, without any independent verification. Nike refused requests from The Oregonian for evidence or context regarding the figures.
The tax deal doesn’t change anything in the short term, but it’s a sign of a sick relationship between the state and large corporations.