Oregon Liquor Control Commission

Oregon Liquor Privatization Shaken, Not Stirred Again

For the second election cycle in a row, a grocer coalition has backed away from an initiative to privatize Oregon liquor sales. Grocers say they will focus on defeating a gross receipts ballot measure, but opponents say they ditched their initiative because polling showed it would fail.

For the second election cycle in a row, a grocer coalition has backed away from an initiative to privatize Oregon liquor sales. Grocers say they will focus on defeating a gross receipts ballot measure, but opponents say they ditched their initiative because polling showed it would fail.

The grocer coalition, pushing for liquor privatization in Oregon, has withdrawn its initiative and says it will focus instead on defeating a labor-backed initiative to impose a gross receipts tax on corporations with large revenues. 

Opponents of the liquor privatization measure say the real reason Initiative Petition 71 was pulled is because it didn’t poll well enough to win in this November’s general election.

This is the second consecutive election cycle that Oregon liquor privatization boosters have backed off initiatives after Washington voters approved a similar measure in 2011.

Meanwhile, the Oregon Liquor Control Commission has expanded its pilot program by allowing liquor sales in 14 additional Portland-area grocery stores. The OLCC said the 14 retail licenses it issued represent the largest liquor expansion in Oregon since Prohibition.

For those unfamiliar with liquor regulation, Oregon is considered a “control” state. The OLCC, which is a state agency, buys and distributes distilled spirits through state-licensed liquor stores. The arrangement dates back to post-Prohibition and is rooted in a policy mindset that liquor consumption can be moderated through limited access and higher prices. Those higher prices feed generous amounts of cash into the state General Fund and city and county budgets and fund mental health and substance abuse services. 

As you might imagine, liquor sales is big business. In the 2013-2015 biennium, distilled spirit sales in Oregon totaled $1.06 billion. After paying for inventory and compensating state liquor store agents, there were net revenues of $435 million. The lion’s share ($247 million) went to state coffers, $77 million went to cities and $39 million went to counties. More than $17 million went directly to community mental health and substance abuse service providers.

Those revenue numbers explain the reticence of public officials to surrender control of the liquor supply chain. They don’t explain why Oregonians are ambivalent about moving liquor sales in part or totally over to private enterprise.

Nigel Jaquiss of Willamette Week reports that Oregonians for Competition dropped IP 71 because after spending $1 million it still didn’t poll well enough to win in the fall election. Jaquiss obtained four relatively recent polls, all funded by opponents of liquor privatization, that showed support for privatization ranging between 32 and 41 percent. The most recent poll, which surveyed 800 Oregonians last month, showed 54 percent opposed IP 71, while only 41 percent favored it.

Dan Lavey, who is advising privatization opponents, said grocers should be concerned about the gross receipts tax, but added, “There are two reasons why people abandon or never start campaigns – lack of money or you don’t believe you have a path to victory. The grocers don’t lack for money.”

Pat McCormick, spokesman for the coalition that pushed for IP 71, said its polling showed “voters are ready to allow Oregonians to buy liquor in grocery stores, alongside beer and wine, like consumers in most states.”

Grocers can be expected to take another run at legislation in the 2017 session. But it does seem clear the landscape for privatizing liquor in Oregon is different than it was in Washington. First off, the Washington initiative passed – opponents would say rammed through – because of a $20 million contribution to the campaign from Seattle-based Costco. Second, privatization in the Evergreen State has been met with mixed reviews. Liquor is available in more places, but at higher prices.

Another factor is the flexibility being shown by OLCC, under the leadership of Chair Rob Partridge, to experiment with different approaches to enhance consumer convenience, including permitting the state’s craft distillers to operate tasting rooms.

“I don’t think Oregonians want a liquor store on every corner. I don’t think they want every gas station and convenience store to have bottles of liquor – that’s not what I hear from Oregonians,” Partridge told KATU News.

He said Walmart, which received four of the 14 new retail licenses, says it plans to offer a limited variety of liquor in its stores compared to what is available in state liquor stores. “Sometimes you buy things for convenience,” Partridge said. “Other times, you’re shopping for that great unique specialty product. So, there’s room in the market for both.”

The Process of Regulating Pot

Marijuana edibles are just one of the significant differences and public health challenges facing regulators in Oregon who now regulate liquor.

Marijuana edibles are just one of the significant differences and public health challenges facing regulators in Oregon who now regulate liquor.

With voter approval of marijuana use comes the challenge of regulating it. Liquor regulation provides important precedents, but may not go far enough.

There will be similarities in regulating where marijuana can be sold, requiring accurate labels and preventing sales to minors.

But marijuana poses other challenges that have been highlighted by people knee-deep in developing original regulation in Colorado and elsewhere. For example, the amount of alcohol and its effect on individual adults can be roughly calculated arithmetically. That may be less true of the potency of different types of marijuana.

Marijuana edibles represent a significant challenge. Candy is sold with small amounts of liquor, but they convey far less of a potential jolt than a marijuana cookie, which is designed to transport the buzz offered by marijuana.

Another unique challenge is how to integrate the cultivation and sale of medical marijuana with recreational marijuana .

Rachel O'Bryan, cofounder of Smart Colorado, a nonprofit formed to weigh in on marijuana regulation, wrote in an op-ed in The Sunday Oregonian that someone who represents public health concerns, especially for youth, must be at the table writing rules for Oregon. She wrote: 

"Provisions that likely would not have existed but for Smart Colorado included: potency and contaminate testing; health warnings and a universal marijuana symbol; childproof packaging; per-serving and per-package THC limits; and restrictions on marketing and advertising targeted at youth." 

The backdrop for the regulation of marijuana is not law enforcement versus recreational drug users. Legalized marijuana is a hot new product category that financiers and corporate interests are pursuing. They will be the big rollers in the room when rules are discussed and their motivation, O'Bryan says, will be to sell product and turn a profit.

Oregon is a so-called "control" state for distilled spirits. The Oregon Liquor Control Commission sets the rules, with a strong influence from a constituency that includes groups such as Mothers Against Drunk Driving, which counterbalance pressure from liquor manufacturers, liquor agents and others who would like to sell liquor. O'Bryan argues a similar constituency will be needed to keep marijuana regulation in balance.

Privatizing Liquor Sales – Is Oregon Next?

Expect politicking to begin in Oregon following Washington voter approval Tuesday of a Costco-bankrolled ballot measure to privatize state-run liquor stores and allow consumers to buy booze in grocery outlets.

Oregon has a similar liquor monopoly that purchases, distributes and sells distilled spirits. Despite grumbling and enterprising residents who pick up a trunk load of their favorite liquors in California or Nevada, there hasn't been much effort to remove the state monopoly. With the victory in Washington, don't be surprised to see that grumbling bubble to the surface in either significant legislation or a like-kind ballot measure.

Costco, which is based in Issaquah, Washington, dropped the lion's share of the $23 million contributed to pass Initiative 1183. It hasn't given any indication it will look to Oregon next, but most observers think it is logical to assume it would so it can consolidate purchasing for all of its West Coast outlets.

Joe Giliam, president of the Northwest Grocery Association, attributed the success of the initiative to convenience. "The voters would really like to have this convenience," Gilliam said.

Convenience is the reason why the Oregon Liquor Control Commission has experimented with placing state-run liquor stores inside grocery stores. OLCC has expressed interest in broadening the experiment, and the Washington vote on I-1183 probably provides additional impetus.

Passage of the Washington ballot measure may not be the last word. Washington operates 328 liquor outlets, about half run by state employees and the rest through contractors. State officials must close 164 state-owned stores and lay off more than 900 employees, who are members of a union. The 159 stores managed by private contractors may compete for licenses to continue to operate.