Washington state liquor sales headed for privatization

SEATTLE Wed Nov 9, 2011 2:08am EST

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SEATTLE Nov 8 (Reuters) - A ballot initiative strongly backed by Costco to close state-run liquor stores in Washington state and allow sales of hard spirits in supermarkets and big-box retail outlets took a wide lead in early returns on Tuesday.

With all 39 Washington counties reporting, the measure known as Initiative 1183 appeared headed for victory with 60 percent voting "yes" and 40 percent voting "no" among the ballots tabulated so far, as opponents conceded defeat.

"Obviously this is going to pass," said Alex Fryer, spokesman for Protect our Communities, a group campaigning against the measure. "We made 160,000 volunteer phone calls. But that's the way the vote went."

Although the state already allows grocery stores to sell beer and wine, Washington is among eight states with an entirely government-run liquor sales system. But privatization advocates touted the potential to generate greater revenues for the cash-strapped state.

Supporters amassed about $23 million in financial support, almost all of it from Costco, the Issaquah, Washington-based warehouse store chain, campaign officials said.

This shattered Washington's record for the largest single-donor contribution for a state initiative, surpassing the American Beverage Association's $16 million for last year's successful repeal of tax increases on candy, gum, bottled water and soda pop.

Other supporters include retailers, such as Safeway and Trader Joe's, and restaurants that would benefit from the measure's provisions for volume discounts, alcohol storage and delivery options.

Joe Gilliam, president of the Northwest Grocery Association, said the vote total "indicated voters in Washington definitely got ahold of the facts and voted with us. The voters really would like to have this convenience."

The vote NO campaign had raised $12 million, largely from alcohol distributors, who object to the 10 percent of gross revenues they will have to pay in the first two years, followed by 5 percent. Labor unions also fought the measure because it will put some employees at state-run outlets out of work.

Others opposed the measure on public safety grounds, saying it would almost quintuple the number of liquor outlets.

Washington has 328 liquor shops, about half run by the state and the rest by contractors. Passage of Initiative 1183 will open the door for 1,100 additional stores with at least 10,000 square feet of retail space to sell liquor. The state-run stores will be closed or sold to private owners.

Some analysts believe Costco will set its sights on opening up the market in Oregon next, securing an entire West Coast supply chain. There was no immediate comment from Costco on the outcome of the race.

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