How Should Oregon Regulate Alcohol?

The Oregonian kicked off an excellent three-part series yesterday on the thicket of regulations that govern the distribution, taxation, and sale of liquor in Oregon.  Every state has its own strange thicket of regulations, all built on certain goals and assumptions, and until very recently, Oregon's seemed to be untouchable.  But then a funny thing happened: the people of Washington state decided to modernize their laws, bringing them more in line with California, and Oregon is now the West Coast's odd man of booze.

The whole series is going to be worth a read, but today I want to tackle some of the issues raised (and not raised) in part one.  Political writer Harry Esteve penned the series, and he used three main informants about how the system works--A to Z Winery in Dundee, Galaxy wine distributor, and the Oregon Liquor Control Commission.  (Esteve has written about the OLCC before, and it's worth noting that A to Z has long been an OLCC foe.)  Esteve does a fantastic job of illuminating why a bottle of wine costs as much as it does.  It's not because the winery (or brewery) is getting rich.  It's because so many people get a piece of the action along the way:

Each time it's handled, the price of a bottle goes up. The storage warehouse gets its cut. The state gets its cut. Distributors tack on anywhere from 15 percent to as much as 40 percent or more. And retailers tack on their margin.  On a recent delivery trip, Galaxy applied its markup to a bottle of A to Z pinot gris and then sold it to Safeway for $8.99. Safeway put it on sale for $11.99, a 33 percent markup. 

This is a theme he address more fully in today's column (which I'll comment on tomorrow).  The paper also published a great infographic that breaks down the cost of a bottle of wine by percentage:

• 2% - Taxes
• 4% - Bottles, corks, and labels
• 5% - Winery profit
• 7% - Grapes
• 9% - Wine production
• 18% - Sales, marketing, administration, shipping
• 25% - Distributor markup
• 30% - Retailer markup

All of this is fantastic info, and info I'm pretty sure is completely lost on the average consumer when she sees a $30 bottle of Oregon pinot noir made just down the road.   Where Esteve falls down a bit on the job, though, is in buying the OLCC's gilded rationale for its own existence:

Yet it's also one of a dwindling number of states where the government exerts near dictatorial control over an alcohol system designed 80 years ago to prevent the likes of Al Capone from horning in on the trade....

"What's interesting is the OLCC has done such a good job of preventing the abuses that came up during Prohibition," [Cassandra SkinnerLopata, OLCC chair] says. Other countries, and even some other states, continue to see health problems from "adulterated" liquor, including blindness and paralysis. Counterfeit brand-name liquor continues to be a problem, she says. 

 Well, yes, in 1933, Oregon was worried about bootlegging.  But that's not what it was principally worried about.  Here's the full rationale from the 1934 Liquor Control Act that established our system of liquor laws:

(1) The Liquor Control Act shall be liberally construed so as:

(a) To prevent the recurrence of abuses associated with saloons or resorts for the consumption of alcoholic beverages.

(b) To eliminate the evils of unlicensed and unlawful manufacture, selling and disposing of such beverages and to promote temperance in the use and consumption of alcoholic beverages.

(c) To protect the safety, welfare, health, peace and morals of the people of the state.

(2) Consistent with subsection (1) of this section, it is the policy of this state to encourage the development of all Oregon industry.

I have bolded the relevant portions to illustrate the point: the state of Oregon may have been compelled by the 19th amendment to allow liquor sales, but they damn sure weren't going to make it easy.  The OLCC may now see their role as one entirely about law enforcement, but the very clear foundation of the statute is to gum up the production and sale of booze.  Oregon passed its own version of Prohibition in 1916--years before the country did it--and we were still in a mood for restricting alcohol.

This is relevant history, because the OLCC defends its existence on the dubious notion that they're preventing criminality.  But as citizens, we have a right to point out that that's not really why the laws were drafted in the first place.  They were drafted to stifle alcohol sales, and for 78 years they've been doing a bang-up job.