Business

Future uncertain for contract liquor stores

GRANGER -- The girl didn't know how insightful she was.

After translating a question for her mother, she asked shop owner Gail Johnson a question of her own: "Is it true they're going to tear this down?"

"The teen gestured to Johnson's combined liquor store-barber shop in a Main Street building that is about as old as the town of Granger itself.

"No, not necessarily," Johnson answered with a smile.

But many things about Washington's liquor business will be torn down, namely the state's monopoly, once Initiative 1183 takes full effect on June 1.

When voters overwhelmingly approved the measure on Nov. 8, they opened the floodgates to a sea of change. Distilleries will market directly. Bars and restaurants will shop around for their own suppliers. And customers will pick up a fifth of tequila as part of their weekly grocery shopping.

The state managed stores will close.

But the fate of the state's 160 contract liquor stores -- the quirky rural businesses that sell Jack Daniels next to greeting cards or Willow Tree statuettes -- is uncertain.

What's ahead?

Johnson has about $25,000 worth of spirits lining the south wall behind a counter of her bedroom-sized business, which used to house a pharmacy as well. Her family has nicknamed the business Clip and Sip, but it's technically Stanton's Family Barbershop.

And yes, some of her customers come for a bottle but stay for a haircut, she said.

Like most of the 22 contract store managers in southcentral Washington counties, she wants want to stay in business but doesn't know if she can afford to and doesn't know what changes she needs to make.

"This is all so new and overwhelming," said Johnson, who has owned the shop for 24 years. "I'm in shock."

Johnson said she at least will keep her barbershop open until she turns 62 and can collect Social Security payments. She's 58 now.

Her husband is disabled and unable to work, she said. They have one adult son and three grandkids.

Liquor sales account for a little more than half of her business. That's low compared to other stores, who put it at 80 percent or 90 percent. The rest is cigarettes, snacks or gifts.

Divesting ahead

The state Liquor Control Board plans to continue normal operations through the holidays and begin "divesting"-- getting rid of their inventory -- after New Year's Day. But contractors worry state supplies then will start to dwindle, leaving them nothing to sell until June.

The board will try to make the transition as seamless as possible, said Brian Smith, an agency spokesman. Officials are asking the state's suppliers to keep delivering liquor to stock contractor store shelves then buy back unsold inventory, even pick it up, once the contractors switch to their privately purchased liquor. The board has received no promises yet.

The supply is not the only unanswered question.

A clause in the initiative allows stores with more than 10,000 square feet of floor space to sell liquor.

In Sunnyside, Theresa Hancock said five retailers near her qualify, giving her a lot of potential competition for her liquor store and gift shop, which she calls "Funny Farm."

Hancock expects to lose all her wholesale business as restaurants and bars that used to purchase from her now will seek their own suppliers, who might deliver cheaper.

She has not made up her mind whether to continue.

"It's a nightmare how to figure out if we're going to stay in business," Hancock said.

If she closes, it will mean another empty storefront for downtown Sunnyside, which struggles to attract economic activity in its historic core. A bar and a restaurant destroyed by a fire earlier this year still have not been fully cleaned up, much less rebuilt.

Adding to the uncertainty, the initiative's size standard is dropped if no other stores in the area are that big. Then others may apply. But the initiative makes no mention of how far that "area" stretches.

"That still has to be defined," Smith said.

The board plans a series of meetings for contractors early next week to try to answer questions.

Opportunities

Not everybody has a gloomy forecast.

The owners of Granger's Pronto Market believe the size exemption will allow them to sell alcohol. The store, right across Main Street from Johnson, is 6,600 square feet, the biggest in town, said owner Paul Lakhenbal.

Lakhenbal's family owns six small, corner shops in the Valley. They purchased Pronto's about two months ago and are in the process of converting it from a convenience store to a grocery with produce and meat.

More products mean more customers, Lakhenbal said. Liquor is another product.

"The overhead expenses (of the store) are not going to change," he said.

Even a few liquor contractors are excited about changes.

Take Amy Paddock, who owns the Union Gap liquor store less than a mile from Costco, the retail giant that has its own private spirits label and backed the initiative.

"I should be the most worried and I'm not," said Paddock, 47. The store has been in her family for 12 years and is the sole source of income for her and her husband Craig.

Paddock's math tells her she could lose half of her regular customers and still make more profit through private sales than she is now with state-set markups.

The state Liquor Control Board sets store profits on a sliding scale based on volume. The more the contracted stores sell, the lower their profit margin. The owners -- and the market -- will control that after June 1.

"It gives us the opportunity to make more money," Paddock said.

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