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.]