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Saturday, June 2, 2012 - Page updated at 09:00 p.m.

The day liquor went private and prices stumped the public

By Amy Martinez
Seattle Times business reporter

"Booyah!" said Albert Matriotti as he held up a 1.75-liter bottle of vodka on sale at Costco for $29. "It's way cheaper than we thought it would be."

Matriotti, 33, who works downtown, joined several co-workers on a lunch trip to see the new liquor section at Costco's Seattle store Friday. Snapping photos with his iPad, Matriotti cheerfully explained he was on a "reconnaissance mission for the guys back at work."

"I've gone to Los Angeles and Vegas and brought back Kirkland Signature scotch in my suitcase," he said, referring to Costco's private-label brand. "Now I don't have to do that."

Hundreds of supermarkets, drugstores and mass merchants in Washington began selling liquor Friday, ending the state's 78-year control over spirits sales.

Last fall, voters approved Initiative 1183, allowing stores bigger than 10,000 square feet and some specialty shops to sell spirits. Since then, more than 1,600 stores have applied for liquor licenses in Washington, up from roughly 350 state-owned or state-contracted locations (the state-owned stores are switching to private operation).

Many consumers Friday praised the convenience of being able to buy liquor at stores where they also get their groceries, pick up prescriptions and take care of other household errands. But price confusion reigned as consumers struggled to decide what's a good deal under privatization.

In contrast to the old state stores, private retailers don't apply liquor taxes until checkout, and those taxes can be hefty. Matriotti, for instance, said he spoke too soon about the $29 bottle of vodka.

After reading an explanatory sign posted nearby, he figured he'd have to pay an additional $12 at checkout — $5.94 for Washington's 20.5 percent spirits sales tax and $6.60 for a liter tax.

"That's not so great after all," he said. "There might be more trips to California in my future."

At Safeway in downtown Bellevue, local resident Greg Kramer, 55, pushed an empty shopping cart down the store's new liquor aisle.

"Now, we start to compare prices," he said, studying the price tag on a 750-milliliter bottle of Jack Daniel's whiskey. Safeway listed it for $22.99, or $18.99 with a loyalty-club card. After taxes, the lower price comes to about $25.70, almost a dollar more than he would have paid under the old system.

"I don't think there will be any big difference, but it's going to depend on the specials," he said. "The regular prices do look about $4 or $5 higher."

Costco, a major backer of I-1183, attracted a steady stream of curiosity seekers to its Seattle store Friday. Like Matriotti, many customers took photos to share on Facebook and Twitter.

"It's exciting — just the option of being able to get liquor at my favorite Costco," said Kellie Landry, 37, of Covington.

Opponents of privatization filed suit to stop I-1183 from taking effect, arguing it violated the state's "single-subject" rule by including a provision to set aside $10 million for public safety. But the state Supreme Court upheld the measure Thursday, removing the final roadblock to privatization just before its June 1 start.

"We're glad to see it's come to this point," said Ron Vachris, senior vice president of operations at Costco's Northwest stores.

He said any sticker shock customers feel at the register should ease as they get used to distinguishing between "retail" and "final" prices for liquor.

"It'll take a little bit of time for people to understand the new structure," he said. "But we have people here to explain it, and I've heard of no issues at the register."

More than 100 people gathered at Metropolitan Market in Seattle's Lower Queen Anne neighborhood late Thursday to celebrate the exact moment when spirits sales became privatized.

"This is a very, very historic night," said Metropolitan Market Chief Operating Officer Todd Korman, using a bullhorn.

He then led the crowd in a raucous, 10-second countdown to midnight, at which point the curtains came off roughly 500 liquor products.

Joe Jeannot, a restaurant manager, grabbed a bottle of vodka in one hand and a bottle of gin in the other and ran to the store's lone open register. "Who's first!" he shouted, handing over cash for his $72 purchase.

Jeannot, 45, with a receipt stamped 12:00 a.m., would seem to be the first person in Washington to buy liquor under privatization.

"I've been in the restaurant business for 30 years, so this is a big day," he said. "At some point, I'm going to have a shot."

One of Jeannot's purchases, a 750-milliliter bottle of 80-proof vodka produced by a local distiller, cost about $10 more than at the state's liquor stores.

The new law imposes 27 percent in fees on wholesalers and retailers to compensate the state for closing its lucrative liquor business. (While the wholesalers' fee drops to 5 percent from 10 percent in 2014, the retailers' fee stays at 17 percent.)

Mo Heck, who owns the Project V distillery in Woodinville, said she hopes the increased visibility of being in a grocery store will offset the higher price customers must now pay for her products.

"It's really scary — the number of people that will be asked to pay $10 more. If we make it through the summer ... " she said, punctuating her sentence with a thumbs-up gesture.

Darrell Vannoy, vice president of sales and merchandising at Metropolitan Market, said hard-to-find products like Heck's will make up about 70 percent of the grocer's liquor offering.

"It goes along the same lines as the beer business. People were forever loyal to the Buds and Millers, and slowly they began converting to craft beer," Vannoy said. "We think that's the way spirits will go. At least, that's what we're hoping."

Jeannot said he's not bothered by paying more for liquor.

"It is what it is," he said. "Phones are expensive, but people still buy them."

Amy Martinez: 206-464-2923 or amartinez@seattletimes.com

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