Former state-run liquor stores fall into hard times
By Rob Ollikainen
Peninsula Daily News
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Instead of a state-run package store, customers in Washington state buy their spirits in a supermarket or at a big-box wholesale store following implentation of voter-approved liquor privatization last June.
And there are fewer remnants of the old system.
The former state-run liquor store in Port Townsend is closed, as is the one in Sequim.
And the one in Port Angeles is moving to a building in which auto parts once were sold.
Port Angeles’ former state liquor store at 1331 E. Front St. will reopen Jan. 2 in a new location half its current size.
Owner Abi Eshagi of Woodinville said he is moving his business into a 2,800-square-foot space at 116 Race St., a former auto parts store, to stay competitive in a state that privatized liquor six months ago.
“Our plan is to close on the first, and reopen the new store the next day,” Eshagi said Friday in a telephone interview.
Booze has been readily available at grocery stores, pharmacies and box stores since liquor became a private industry June 1.
Kulbir Singh of Brazil, Ind., closed the Sequim liquor store at 1400 Washington St. in August and the Port Townsend liquor store at 2005 W. Sims Way in October.
He paid $1.4 million at action for the licenses to eight Washington liquor stores, including $54,900 for the Port Townsend license and $63,200 for the Sequim license.
All eight liquor stores have closed, and a person speaking on Singh’s behalf told the Peninsula Daily News last month that he has been financially ruined.
Brian Smith, Washington State Liquor Control Board spokesman, said the success or failure of former state liquor stores varies by location.
“I think it’s been a mixed bad,” he said.
“It depends on where you’re at. Some are struggling, and some are doing well.”
Smith could not say how many former state stores have closed since the industry became privatized.
“They don’t have to report to us,” he added.
Port Angeles liquor store Manager Jen Ramsey and three others who work in the existing store will move to the new, highly visible location between First and Front streets on Race.
Eshagi submitted a $125,100 bid at state auction earlier this year for the license to operate the Port Angeles liquor store.
He said the main the reason for moving was the cost of renting the 6,000-square-foot space.
“It’s a much lower rent,” he said of the new digs.
“It could allow us to basically survive and make money.”
Voters kicked the state out of the liquor business by approving Initiative 1183 in 2011.
Bidders collectively paid more than $31 million for the rights to 167 former state stores.
Singh, Eshagi and others who won the auctions are struggling with competition from the big stores and the 17 percent fee they must pay the state on each transaction to account for lost revenue from liquor privatization.
“Seventeen percent of our gross sales goes to state licensing fees,” Eshagi said, adding that 17 percent is the difference between a struggle and a nice profit.
On top of the 17 percent fee, which was stated in the initiative and explained to prospective buyers, the state charges retail customers a 20.5 percent sales tax and a $3.77 per liter tax at the register.
“The other issue is we can’t compete with the pricing of the larger box stores,” Eshagi said.
As for the Port Angeles liquor store, Eshagi said his business is “doing OK.”
“Obviously, the sales are not what we expect them to be,” he said.
Eshagi is experiencing similar challenges with the store he licensed in Puyallup. He is also in a landlord dispute over his liquor store in Bothell.
Eshagi, a 46-year-old former airline pilot and Seattle nightclub owner, said he is optimistic that the smaller location at a busy Port Angeles intersection will keep his store profitable for the long term.
Meanwhile, a new organization — the Washington Liquor Store Association — has been formed by concerned store owners like Eshagi.
“I don’t think there’s anyone who bought a retail liquor store who’s making any money,” Jasmel Sangha, interim president of the organization, told the Tacoma News Tribune.
“There’s just a lot of pain out there.”
Sangha, who paid $75,000 for the rights to the state liquor store in Belfair, estimated that at least 50 percent of those who invested in the state stores are out of the business.
Seven months ago, bars and restaurants had to get their booze from state liquor stores.
Now, they can purchase liquor from distributors who are not subject to the 17 percent fee.
Distributors pay a 10 percent fee on liquor they sell to stores, bars and restaurants, and can charge whatever price the market will bear.
The state Department of Revenue reported that liquor sales were up 2.9 percent though the first four months of privatization, from 13.2 million liters of spirits in June through September 2011 to 13.6 million for the same period this year.
Prices are up 11.6 percent since privatization, the News Tribune reported.
With taxes, the average retail price of a liter of booze was $24.09 in September of this year compared to $21.58 at state liquor stores in September 2011.
State liquor tax collections were up 25.5 percent in July, 19.6 percent in August and 6.2 percent in September compared to the same months in 2011, the revenue department said.
The Olympian reported this month that at least 20 teenagers had been charged with stealing bottles of booze from Thurston County grocery stores since liquor privatization took effect.
Reporter Rob Ollikainen can be reached at 360-452-2345, ext. 5072, or at email@example.com.
Reporter Charlie Bermant contributed to this report.
Last modified: December 16. 2012 10:37AM