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The OLCC’s Retail Innovations Task Force: Initial Impressions

The OLCC’s Retail Innovations task force has been meeting since October 4, 2013. The purpose of the task force is bring the various stakeholders together to discuss how the OLCC’s retailing and distribution of distilled spirits may be changed, improved, or modernized. The group has met five times and was scheduled to meet for a sixth time on December 13, 2013. The OLCC recently postponed the meeting date for the upcoming meeting for a date to be determined in January.

The task force has selected a very complicated problem to resolve. The problem is complicated by the fact that some don’t even see a problem to be solved. The threshold question of whether the current system is broken or not can easily sidetrack discussions. That being said, the real reason that the problem is so difficult to nail down and, at times, even discuss is that there is so much at stake. There is the potential for there to be big winners and big losers, particularly from a financial perspective.

The task force has identified the following as key considerations (not necessarily in any particular order):

• Revenue stream to the state;
• Consumer access and experience;
• Public safety; and
• The interests of industry members.

OLCC Revenues. The OLCC distributed $202.6 million to the state during the fiscal year of 2012-2013, including$115.4 to the state general fund, $78.8 million to cities and counties, and $8.1 for mental health, alcoholism and drug services. The state, cities, counties and social service providers do not want their revenues to be cut and would even like a bigger slice of the pie, if possible.

Consumer Access. Oregon has fewer liquor stores per capita than other comparable states and some have suggested that the nature and quality of the retail experience at Oregon liquor stores could be enhanced. Others have suggested that a majority of Oregon consumers are happy with the status quo and are not demanding change. Washington’s ongoing experience with privatization is not a secret and many Oregonians may be reluctant to follow suit.

Public Safety. The public must be protected and any changes must not expose the public, law enforcement, or any other group to increased risk or danger. All parties agree on this issue and any major changes will likely include a renewed focus on public safety efforts, including increased financing.

Industry Members. The interests of the various industry members must also be considered. Existing industry members have all invested heavily in their Oregon operations and their investment should be considered. Any change to the current system for distributing or retailing distilled spirits will have winners or losers, at least financially speaking, particularly if state revenues must be preserved. Industry members include retail agents (the operators of liquor stores), manufacturers, wholesalers, and retailers. Even within a particular category of industry member, interests can diverge dramatically. More on this in later posts.

The pink elephant in the room is a potential initiative that would privatize the OLCC, similar to what happened in Washington with I-1183 in 2012. Many anticipate that such an initiative will appear in the near future. In addition, broad policy considerations involving the free market economy, prohibition, tied house issues, the appropriate role of the state in economic activities, and even the legalization of marijuana surface in discussions.

OLCC staff are currently working on putting together models of various alternatives to the current system and it was anticipated that they would be unveiled at the December 13th meeting. Given the complexity of the task, a delay in producing these models is not surprising.

Look for future posts about the potential alternative models and other thoughts on potential changes to the OLCC.

For more information, go to the OLCC’s website here.