Washington Wineries Debate Privatization Proposal

Associations don't agree about Costco sponsored Initiative 1100

by Peter Mitham
James Mantone Syncline
James Mantone, owner of Syncline Wine Cellars and president of the Columbia Gorge Winegrowers, withdrew his membership from the Family Winemakers of Washington State after that organization endorsed controversial Initiative 1100.
Woodinville, Wash. -- The debate about the potential privatization of the Washington state liquor trade is highlighting fault lines in the state’s fast-growing wine industry. Controversy triggered by I-1100, a November ballot initiative spearheaded by Issaquah, Wash.-based Costco Wholesale Corp. and supported financially by Wal-Mart and Safeway through Modernize Washington, is pitting the Washington Wine Institute and some small wineries against the Family Wineries of Washington State and some of its member wineries.

The Family Winemakers group advocates liberalization of the state’s wine industry and challenges the Washington Wine Institute’s (WWI) role as prime advocate of the state’s wineries with legislators in Olympia and WWI’s privileged relationship with the Washington State Liquor Control Board. Government, for its part, appreciates a unified voice from industry, as Rick Garza, deputy administrative director for the Washington State Liquor Control Board, made clear at an industry meeting in Woodinville last month.

The Family Wineries of Washington State (FWWS) has endorsed the initiative and it would like to see broader consultation with the state’s wine industry, which has grown to more than 600 wineries from just 170 in 2001. It suggests including itself, the Walla Walla Valley Wine Alliance and the Washington Association of Wine Grape Growers (WAWGG) in discussions. (WAWGG has voiced neutrality on the issue, “to better represent the diverse constituency of members who sit on both sides of the debate.”)

Not all small wineries support the initiative. James Mantone, of 5,000-case Syncline Wine Cellars in Lyle, Wash., withdrew from membership in FWWS when the organization backed the initiative in July. “There are good things in there that I could support, but I feel that it tries to encompass too many radical changes under one initiative,” Mantone said.

He is particularly concerned about the potential elimination of uniform pricing and the ban on extension of credit by wineries. “(These provisions) have allowed the Washington wine industry to flourish,” he told Wines & Vines. The issue of credit, while it sounds attractive, he said, would put smaller wineries at unnecessary risk unless safeguards were in place giving them recourse in the event of non-payment by purchasers.

“Without any limits or methods to enforce payment by retailers or restaurateurs, there’s no recourse for wineries if they’re not paid,” he said. “I think that’s a huge giveaway. … It sounds idealistic, but in reality, I have a hard time with extending an interest-free loan that I have to finance with no recourse for me to collect.” (The measure would not force small wineries to extend credit, but wineries that did so might face delayed payments without recourse.)

Mantone, who is also president of the Columbia Gorge Winegrowers, said he’s discussed the issue with other winery principals who are “astounded” that the Family Winemakers of Washington State has come out in favor of I-1100. The Columbia Gorge association, which represents wineries in both Washington and Oregon, hasn’t commented publicly on the initiative.

Mantone added that wineries in Oregon are largely uninformed about the impact of the potential changes on Washington State’s wine industry. “The few that I’ve talked to are pretty unaware,” he said.

The privatization battle is stirring debate not only at the state level but at the municipal level, because proceeds from the state’s liquor revenues are shared with counties and cities. Reports suggest that a city such as Pasco in the heart of the Columbia Valley could lose as much $735,000 annually if the state gets out of the liquor business.

A bid has also been made to remove the Washington State Liquor Control Board from the debate. Seattle’s Stefan Sharkansky filed a complaint with the State of Washington Executive Ethics Board, alleging that Rick Garza and other senior WSLCB officials violated ethics legislation prohibiting the “authorization or use of public facilities in campaigns for or against a candidate or ballot measure.” In particular, Sharkansky charges that the WSLCB, “authorized Garza to travel around the state making speeches urging citizens to vote against the liquor privatization initiatives 1100 and 1105.

Posted on 09.16.2010 - 12:30:36 PST
A very good factual report. One correction though, the Walla Walla Valley Wine Alliance has not taken a position on this issue, nor has it been approached by Family Winemakers. Any reference to our organization by Family Winemakers is just not true.
walla walla, WA USA

Posted on 10.06.2010 - 12:38:10 PST
As a wine making consultant and recent migrant to WA from CA, I can tell you one thing: the television advertisements for and against this measure are as pathetic and confusing as any I have ever seen in either location.
I wish that this article had a link to the actual text of the proposed measure so we could read it ourselves. Surprisingly, the Washington Wine Institute does not include it (at least that I could find) on their website.
Winemaker Paul
Anacortes, WA USA

Posted on 09.16.2010 - 23:48:44 PST
This article has confused several subjects that were discussed at the Woodinville meeting. The suggestion to include the Walla Walla Valley Wine Alliance along with other winery, grower, and retailer associations was only in response to a discussion having to do with legislation that Rick Garza asked WWI to produce on the subject of "What Is a Winery?" This has fundamental and far-reaching consequences for the entire WA wine industry, and having a single person (Jean Leonard) craft the proposed legislation in isolation, and then blatantly REFUSE to discuss the subject, is unacceptable. Her attitude is reprehensible, given that the pending legislation will directly affect ALL wineries in WA as well as have ripple effects on growers, small distributors, and retailers. It's time for ALL small WA winery owners to join FWWS in forcing the WSLCB and WWI to divulge the work done on this subject so far and to acquiesce to our need to be a part of crafting this very important legislation.
John Bell
Marysville, WA USA

Posted on 09.16.2010 - 23:55:35 PST
It's interesting to read about James Mantone's fear about retailers potentially reneging on payment if given extension of credit. I bet James sells his wine through a distributor, and I bet he has at least 30-days-net terms with that distributor. I wonder why James thinks the risk of non-payment from a distributor is different than that from trusted retailers. Interesting...
John Bell
Marysville, WA USA