NPI's Cascadia Advocate

Offering commentary and analysis from Washington, Oregon, and Idaho, The Cascadia Advocate is the Northwest Progressive Institute's unconventional perspective on world, national, and local politics.

Friday, December 9th, 2011

I‑1183, if implemented, could generate $81 million plus in annual sales for Costco

Ever since Cost­co and its exec­u­tives first start­ed mak­ing noise about dereg­u­lat­ing and pri­va­tiz­ing our state’s liquor con­trol sys­tem, it’s been appar­ent that their dri­ving moti­va­tion for push­ing pri­va­ti­za­tion is because they want our state’s liquor stores’ busi­ness for them­selves — not because they think “get­ting the state out of the liquor busi­ness” (which is a favorite catch­phrase of theirs) is good pub­lic pol­i­cy.

Cost­co and oth­er alco­hol prof­i­teers spent more than $6 mil­lion last year try­ing to dupe vot­ers into dereg­u­lat­ing liquor, after hav­ing failed to per­suade the Leg­is­la­ture to do so. Vot­ers reject­ed both Cost­co’s I‑1100 and a com­pet­ing mea­sure, I‑1105, by sig­nif­i­cant mar­gins. But despite being told no, Cost­co was unde­terred. It came right back this year with I‑1183. And when it became clear that I‑1183 — like I‑1100 and I‑1105 before it — would have vig­or­ous oppo­si­tion, Cost­co opened its check­book and start­ed writ­ing check after check.

In the end, Cost­co spent around $19 mil­lion, set­ting a new record for spend­ing on a statewide bal­lot mea­sure. (Pre­vi­ous­ly, the dis­hon­or had belonged to the Amer­i­can Bev­er­age Asso­ci­a­tion, a cor­po­rate front for Coca-Cola, Pep­si, and the Dr Pep­per Snap­ple Group, which spent $16 mil­lion sell­ing I‑1107 in 2010).

$19 mil­lion may sound like a lot of mon­ey, and it is. $19 mil­lion is more than our Wash­ing­ton State Parks sys­tem gets from the state’s gen­er­al fund. $19 mil­lion could com­plete­ly off­set Gov­er­nor Chris Gre­goire’s pro­posed cuts to adult hos­pice care and ear­ly child­hood edu­ca­tion ($10.5 mil­lion and $6.1 mil­lion, respec­tive­ly).

But $19 mil­lion turns out not to be that much when com­pared to the prof­its that Cost­co stands to make. The Seat­tle Times has a sto­ry today about Cost­co’s I‑1183 spend­ing, which was twice what its chief finan­cial offi­cer had been plan­ning for. Despite going over-bud­get with I‑1183, Cost­co still stands to prof­it hand­some­ly from its pas­sage… as long as the mea­sure isn’t over­turned in court.

Spir­its sales account for about 2 per­cent of Cost­co’s over­all sales in states where it sells liquor cur­rent­ly, [Cost­co Chief Finan­cial Offi­cer Richard] Galan­ti said.

That could eas­i­ly top $81 mil­lion a year in Wash­ing­ton, where Cost­co has 27 ware­hous­es that tend to do bet­ter than the com­pa­ny­wide aver­age of $150 mil­lion in annu­al sales.

Do the math, and it’s easy to see why Cost­co was will­ing to shell out so much for I‑1183. $81 mil­lion over ten years works out to $810 mil­lion. Over twen­ty years, it works out to $1.6 bil­lion. Cost­co’s exec­u­tives no doubt fig­ure that if they suc­ceed in dis­man­tling Wash­ing­ton’s liquor con­trol sys­tem, it will stay dis­man­tled, allow­ing them to prof­it indef­i­nite­ly from their one-time invest­ment.

Despite what Cost­co claimed in its adver­tis­ing, I‑1183 was nev­er about con­ve­nience, choice, or more rev­enue for pub­lic ser­vices. It was (and is) about greed. The pub­lic safe­ty and pub­lic health ram­i­fi­ca­tions of increased avail­abil­i­ty of alco­hol are not prob­lems that Cost­co cares about. When its exec­u­tives talk and think about laws regard­ing the sale of alco­hol in Wash­ing­ton, they see dol­lar signs.

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8 Comments

  1. Cost­co, or any­one in busi­ness knows alco­hol sells.….and who cares who sells it.…it will cost less buy­ing it, and for the con­sumer, sav­ing 20–30% is a good deal. This arti­cle makes busi­ness look bad. I am sor­ry, but I am very excit­ed for the state to get out of a busi­ness they have been “cash cow­ing”.

    # by JWB :: December 9th, 2011 at 4:36 PM
    • So cheap liquor is more impor­tant to you than safe neigh­bor­hoods?

      Nice pri­or­i­ties you’ve got there.

      # by Andrew :: December 9th, 2011 at 9:08 PM
  2. Give it up, Andrew. The major­i­ty has spo­ken, loud and clear, for what­ev­er rea­son, and you and I were not in it.

    # by ivan :: December 10th, 2011 at 6:34 AM
  3. Take a good look at who fund­ed the oppo­si­tion to 1183. They have suc­ceed­ed in brain­wash­ing oth­ers in believ­ing this will be a pub­lic safe­ty issue. In a time of bud­gets cuts to health and human ser­vices, The state needs to focus on enforce­ment, not sales, so there will be no more pub­lic safe­ty issues than exist today.

    Will Cost­co and oth­ers prof­it? Prob­a­bly and Of course. To write arti­cles try­ing to “sum it up” that prof­it is the moti­va­tion is ludi­crous and unfound­ed. Show us the his­tor­i­cal data that proves Cost­co is that type of com­pa­ny or pipe down. Your kind of rhetoric is just try­ing to keep a cam­paign alive that was defeat­ed. And, your type are just look­ing for inflam­ma­to­ry hot but­tons the pub­lic reacts to by say­ing big busi­ness will prof­it while we all suf­fer. If your kid is out there try­ing to buy liquor, be a bet­ter par­ent and quit look­ing to blame oth­ers. Again that fear was man­u­fac­tured by The indus­try that makes the prod­ucts which they were cam­paign­ing against. Pro­tect Our Com­mu­ni­ties was a joke and fund­ed by the wine and spir­its asso­ci­a­tion. Can any­one see this? Sneaky snakes.
    Yes, Cost­co spent a pret­ty pen­ny on this cam­paign but did they have a choice when one indus­try has been invok­ing pub­lic fear? Cost­co rep­re­sents real peo­ple and gives them a voice WAY more than the Wine and Spir­its Asso­ci­a­tion of Amer­i­ca, the backer of the oppo­si­tion to 1183. If you asked every vot­er for the mea­sure if they would have paid $6 on their Cost­co bill that month to get this passed, i bet they would have over­whelm­ing­ly said yes. Don’t blame Cost­co for basi­cal­ly being a voice for real vot­ers. It’s sad that it takes $21million to coun­ter­act a neg­a­tive cam­paign In which less than 50% even come out to vote on. One old state monop­oly sys­tem down and bust­ed, more to go.

    # by DB :: December 10th, 2011 at 8:22 AM
    • “The state needs to focus on enforce­ment, not sales, so there will be no more pub­lic safe­ty issues than exist today.”

      That’s why we have state liquor stores, friend… so the state can focus on enforce­ment. It’s much, much eas­i­er to police a few hun­dred state stores sell­ing spir­its than thou­sands of big box marts, con­ve­nience stores, and gas sta­tions.

      I‑1183 does noth­ing for enforce­ment. Did you even read the text of the ini­tia­tive before you vot­ed for it? I‑1183 does not increase the num­ber of inspec­tors, nor does it ded­i­cate any new rev­enue to enforce­ment.

      The state has not been los­ing mon­ey oper­at­ing state liquor stores. To the con­trary… the stores bring in rev­enue for the state. Bring­ing up the bud­get short­fall is a smoke and mir­rors argu­ment.

      You have a pret­ty good dou­ble stan­dard. In your view, it’s noble that Cost­co kept on fight­ing to pri­va­tize and dereg­u­late liquor even after it had been defeat­ed last year. But now that Cost­co has won, its oppo­nents should “pipe down”, you say.

      Not gonna hap­pen.

      Final­ly… it’s obvi­ous that Cost­co’s moti­va­tion is prof­it. If their moti­va­tion was some­thing else, then they would­n’t be doing right by their share­hold­ers, would they? They’re a for-prof­it cor­po­ra­tion.

      # by Andrew :: December 10th, 2011 at 12:38 PM
  4. This would not be so sen­sa­tion­al if the author dis­cussed net prof­it and not rev­enue.

    Please do some math and come back with a piece that is not so inter­est­ing and poor­ly sup­ports your agen­da.

    Cost­co man­age­ment ripped off their share hold­ers with their Wash­ing­ton liquor strat­e­gy. The Cost­co “win­ning” strat­e­gy had a neg­a­tive NPV.

    Edi­tor’s Note: This com­menter’s screen name was cho­sen by NPI, and the com­ment was edit­ed to com­ply with NPI’s Com­ment­ing Guide­lines.

    # by Danio :: December 12th, 2011 at 2:09 PM
    • Actu­al­ly, Danio, the post talks about sales from liquor. Not rev­enue. (The word sales is even in the title). If you’ve ever stud­ied account­ing, then you know there’s a dif­fer­ence between a busi­ness’ sales and a busi­ness’ rev­enue.

      In order to pin­point what Cost­co’s prof­its would be, we’d have to be able to esti­mate gross prof­it and expens­es, so we could come up with an edu­cat­ed guess. All we got from the Seat­tle Times was a fig­ure for sales. If you add up the sales over a few years, it gets to be a pret­ty impres­sive num­ber pret­ty quick­ly.

      Cost­co’s exec­u­tives cer­tain­ly seem to think there’ll be some prof­it left over for them to pock­et after all is said and done. They do sell hard spir­its in oth­er states, so they’ve got a base­line from which to do their own cal­cu­la­tions.

      # by Andrew :: December 12th, 2011 at 2:59 PM
  5. What I don’t under­stand is an over­whelm­ing major­i­ty of my cus­tomers are dis­ap­point­ed and angry that it passed. Before the elec­tionm, 95% said they were vot­ing no, while last year it was the com­plete oppo­site. How could it have passed? And why did the state approve it in the first place when it was an ille­gal ini­tia­tive. How many of those hold Cost­co stock, like Ken Eiken­ber­ry, who while in office was vehe­ment­ly against priv­i­ti­za­tion. And by the way, those in the “yes” com­mer­cials were actors. Nice!

    # by Maj :: December 13th, 2011 at 11:02 AM

One Ping

  1. […] I‑1183, if imple­ment­ed, could gen­er­ate $81 mil­lion plus in annu­al sales for Cost­co […]

    Ping from Morning Rundown for December 12th, 2011 :: December 12th, 2011 at 10:06 AM