Sleepless in Olympia:
I–1183 in Transition
Presented by:
Pat Kohler, Agency Director
March 7, 2012
Agency Goals:
• Orderly transition by May 31, 2012.
• Meet the timelines and the requirements
spelled out in the initiative.
• Advert harm to contract, tribal and military
stores.
• Maximize reasonable value for our assets.
2
I-1183 Timeline
• December 8, 2011
– I-1183 becomes law
• March 1, 2012
– Distributor and COA’s licenses active
• May 31, 2012
– State business operations close
• June 1, 2012
– Spirit Retail licenses active
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Implementation Project Teams
Audit Team
Legal & Policy
Team
Product Supply
Team
Employee
Transition Team
Communication
Team
State Liquor
Store Team
Contract Liquor
Store Team
Asset Disposal
Team
Reverse
Logistics Team
Warehouse
Hibernation
Team
State Store
Auction Team
Warehouse
Regulatory
Team
Organizational
Structure
Rulemaking
Team
Sale Team
IT Team
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Key Activity Timeline
Activity
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Store Audits
State Store Auction
Store Closures
Reverse Logistics
Employee Layoffs
Asset Disposal
Warehouse Hibernation
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Key Agency Challenges
• Administering layoff of over 1,000 employees under
two complex collective bargaining agreements.
• Providing full retail services through May 31, 2012,
yet ensuring that inventories are depleted at the end
of the day.
• Conducting audits of over 300 store locations in eight
weeks.
• Auctioning of State Store Rights at locations that are
owned by 3rd parties.
• Changes to the existing regulatory system.
6
Supplier Buy Back Agreement
• 124 suppliers established agreements,
representing 99% of spirits.
• Only 96 of 424 (22%) listed beer, wine & mixer
products will be covered by an agreement.
• 2,225 of 2,850 (78%) special order spirits will
be covered by an agreement.
• Reversed logistics.
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State Store Auction
• A successful bidder owns the exclusive right to apply for a
spirit retail license for the existing location.
–
–
–
–
Allow for liquor sales at a premise under 10,000 sf2
Location is not subject to local jurisdictional challenge
The “right” is sellable, transferable, and re-locatable
No obligation to operate a liquor licensed business
• Public on-line auction.
– Individual store locations
– All system bid
– 45 day window
• Maximum reasonable value.
–
Criteria to determine total revenue factoring in cost avoidance
8
Regulatory Changes
Uniform Pricing:
• Is repealed for spirits and wine (No sales below acquisition cost).
Ban on quantity discounts:
• Is repealed for spirits and wine (No sales below acquisition cost).
Ban on Central Warehousing
• Is repealed for spirits and wine.
Ban on Retail to Retail Sales:
• Is repealed for spirits and wine to a degree (24 liters per sale to
an on-premises licensees).
Liquor Markup & Taxes:
• The markup is removed.
• Removes the 15% discount on the purchase of spirits by retail
on-premises spirits liquor licensees.
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Current 3-Tier System
Producer/Manufacturer
Typically a brewer, winery, or distillery
Distributor
Companies specifically designed to sell specific products
to restaurants, bars, stores, etc.
Retailer
Grocery & liquor stores, bars, restaurants, etc.
Consumer
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I-1183 Model
Producer
Distributor
Off Premise
Retailer
On Premise
Retailer
Consumer
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Producer
In State Producer
• Privileges
– Sell to Distributor
– Sell to Retailer
– Sell to Consumer at the
Distillery
• Costs
– 10% distributor fee on
sales to Retailers
– 17% retailer fee on sales
to consumers
Out of State Producer
• Privileges
– Sell to Distributor
– Sell to Retailer
• Costs
– 10% distributor fee on
sales to Retailers
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Distributor
• Privileges
– Sell to Distributor
– Sell to Retailer
• Costs
– 10% distributor fee on sales to Retailers (first
two years)
– 5% distributor fee on sales to Retailers
– $150 million distributor assessment for
“holders” of a distributors license (for the period
March 2012 – March 2013)
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Retailer
Off Premise
On Premise
• Privileges
• Privileges
–
–
–
–
No Uniform Pricing
Quantity Discounts
Central Warehousing
Retail to Retail Sales (limited
to 24 liters/day)
• Costs
– 17% retailer fee on all spirit
sales
– No Uniform Pricing
– Quantity Discounts
– Central Warehousing
• Costs
– 17% retailer fee on all spirit
sales
Additional Requirements: Must maintain 10,000 ft2 of retail space
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I-1183 Model
Producer
Distributor
Off Premise
Retailer
On Premise
Retailer
Consumer
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Current Applications by License Type
License Type
Applications
Spirit Certificate of Approval (COA)
24
Authorized Representative COA (Foreign & US)
77
Spirit Distributor
39
Spirit Retailer
789
Contract Liquor Stores
66
Wine Seller Reseller Endorsement
284
As of March 1, 2012
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Q and A
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