Privatization of alcohol sales puts craft distillers in limbo
State stops buying small producers' products as it turns over sales of booze to business
Photos by Dan Bates / The Herald
Ryan and Julie Hembree of Snohomish
started their own distillery earlier this year. They say the state
stopped ordering their products even before voters approved Initiative
1163 in November.
The Hembrees make Skip Rock vodka from Yukon gold potatoes grown in Skagit Valley.
SNOHOMISH -- Some craft distillers say they're
struggling ever since voters passed Initiative 1183 reforming how people
buy and sell hard liquor in the state.
Skip Rock Distillery
owners Julie and Ryan Hembree in Snohomish say the state stopped buying
their potato vodka even before the measure was approved in November. All
the state's small distillers were supposed to be allowed to market
their liquor beginning this month, but that's been pushed back until at
least March 1 as officials figure out how to get the state out of the
"We're in a state of limbo. I look
forward to seeing more special orders come through the state's ordering
process," Ryan Hembree said. "But the state's initial reaction to 1183
passing was to kill all orders from newly established craft distilleries
After calling state liquor board chairwoman Sharon
Foster last week, Ryan Hembree said he believes the state continues to
value craft distillers and that special orders should continue until
"We just need it to happen sooner than later," he said. "We can only sell so many Skip Rock T-shirts, sweatshirts and hats."
I-1183, the state ran the liquor system and bought and distributed all
of the hard liquor sold throughout the state. The state will continue to
run liquor stores until next summer when it has to get rid of its stock
and allow private business to take over. Only retail stores that are
10,000 square feet or larger will be able to sell hard alcohol. Since
the measure passed, the state Liquor Control Board and the state
Department of Revenue have been working to establish new rules that mesh
with the new law.
"It's very complicated stuff," said liquor
board spokesman Brian Smith. "And the initiative did not take the craft
distillery model into account."
Just a few years ago, the
Legislature allowed small distillers to make spirits and even offer
tastings at their distilleries -- a first since Prohibition. But
distillers had to actually buy back their own booze to pour in their
Starting this month, local craft distillers were
allowed to serve from their own bottles at their shops without the state
intervening. However, distillers now have to pay a 10 percent
distributor license fee and a 17 percent retail spirits license fee on
gross sales. And they have to wait until March 1 to be able to sell
directly to licensed retailers.
Though the Hembrees are
optimistic about the future of their business, things look a little
bleak right now. A bottle of their vodka costs $33.95 in the liquor
store. What the Hembrees and their business partners make on that bottle
is about $3. If the state continues to impose high retail and
distribution fees, the chance to make more on their product is thin.
are a small business. Just to handle all the paperwork from the state
is costly," Julie Hembree said. "We've invested in a lot of education,
expensive German-made equipment and permits. We can't walk away from
The Hembrees don't have a tasting room set up yet. For now,
they are encouraging restaurant owners in Snohomish and Skip Rock fans
to buy the vodka at state and contract liquor stores in the county and
hang on to the hope that enough of their vodka will remain available.
Skip Rock Distillery partners also are participating in regional food
events where they can sell their vodka and are considering selling it in
Oregon and British Columbia.
"We hope that companies such as
Costco will consider showcasing local products in their liquor sales,"
Ryan Hembree said. "We would love to talk with them."
owns RBDL distillery near Marysville. Jensen, a building contractor by
trade, would like to turn his distillery hobby into a money-maker. He
doesn't have any faith that a big warehouse store would ever buy his
"I can't compete against the big vodka companies or
Costco's Kirkland brand," Jensen said. "For the small guy, the way the
state had it set up before 1183 was really the best, even though people
hardly made any money. Everybody took their products to the single
distributor, the liquor stores. It was a tough go, but now I think we
will see a lot of distilleries just shut down."
Some members of
the Washington Craft Distillers association have complained that state
attorney general's office is directing the legal interpretation of the
initiative to favor big business distributors, making it even more
difficult for craft distillers to survive.
"We are trying to keep things as equitable as possible," Smith said. "And that means keeping craft distilleries in mind."
The Hembrees produced their first bottle this past March and just earned a 2011 international gold medal award for Skip Rock vodka from the Beverage Tasting Institute
in Chicago. Skip Rock is among just seven distilleries in the country
that make potato vodka, and the only one that makes the spirit from
Yukon gold potatoes grown in Skagit Valley, Ryan Hembree said.
potatoes are ground, cooked in a pot still, fermented, refined,
condensed, filtered and bottled into a special square bottle with the
blue Skip Rick label, complete with a drawing of the ripples caused by a
rock skipped into still water.
"We are foodies and we prefer
Yukon gold to Russet potatoes. The golds are buttery and that is evident
in our vodka," Julie Hembree said. "We've been told there is a comfort
food quality to our vodka. We would like to keep sharing this with
Distilleries around the state are urging people to ask
liquor store managers for a craft products and order local spirits from
their bartenders, the Hembrees said.