NACHES -- You might want to stock up on tequila and rum if margaritas or mojitos are on your summer menu, because prices likely are going up at many retailers this week -- and prices are just one of several big changes in store when Washington abandons its long-held place in the liquor business.
Voters approved Initiative 1183 last fall, allowing stores larger than 10,000 square feet and some smaller stores to sell liquor. Supporters touted the initiative, backed by warehouse giant Costco Wholesale Corp., as a free-market reform for an industry monopolized by the state since the end of Prohibition.
Under the measure, restaurants and bars were allowed to begin buying liquor directly from distributors March 1, and they can begin buying directly from retail stores June 1.
However, the initiative also imposed an additional 10 percent distributor fee and a 17 percent retail fee on spirits to reimburse the state for millions of dollars in lost revenue.
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Big-box stores like Costco can negotiate volume discounts for some products or sell their own labels. But distributors have exclusive rights to distribute some spirits, and volume discounts for those products may not be as widely available.
Some say that likely means higher prices for consumers, regardless of where they buy their spirits.
"Sky high. They're going up very, very high," said Melody Kennett, manager of a contract store that closed over the weekend in Naches, about 10 miles west of Yakima. "Sure, big-box stores will be able to negotiate some discounts by ordering in bulk, but the initiative included higher fees to the state for everybody. Prices will go up for everybody."
Pricing still is in flux for most distributors, wholesalers and retailers, because it's the first time in 70 years the private parties have been in the liquor business, said Joel Benoliel, Costco senior vice president and chief legal officer.
"Costco is determined we will be competitive, maybe a little lower, than the state was," he said. "We want to buy cheaply, distribute more cheaply, and take a little shorter margin. That's what we do on all our prices."
But he also noted that nobody should be expecting California prices, because Washington has much higher taxes and fees.
Most distributors and retailers have been wary of sharing their new prices in advance of the switch Friday, but price lists provided by two distributors to an independent grocery store offer a glimpse into what consumers can expect at many stores.
The state's current charge for a 750-ml bottle of Absolut Citron Vodka: $22.95. That price includes all fees and taxes.
The distributor's price per bottle for a case of the same product: $18.27. Then add in an industry-average 20 percent markup for the retailer to cover costs and make a profit -- this will vary by store -- and a 17 percent fee required under the initiative to recoup lost revenue to the state, a 20.5 percent retail sales tax and a $2.83 liter tax. Price per bottle: $33.74.