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November 11, 2011 at 11:00 AM

Costco's Jim Sinegal Speaks

Posted by Bruce Ramsey

I was able to reach Jim Sinegal, CEO of Costco Wholesale, after the election. I had written a column about Costco contributing $20.9 million to pass Initiative 1183, to privatize the state liquor stores, while its competitors had contributed essentially nothing. I had argued that it would take Costco years to earn the money back, and had gone beyond the realm of a business investment to a personal crusade. But in writing that, I hadn't been able to reach him.

He hadn’t read the column. He was in Arizona. He agreed that the $20.9 million was more than just a business investment. It was a matter of principle, he said, against monopoly and for the consumer. Also, Washington is Costco’s home state. It’s not Safeway’s or Kroger’s or Walmart’s.

“We’ll probably never break even on this,” he said—a stronger statement than I had made.

I asked him about the act of Oct. 17, when Costco raised the stakes by writing a check for $8.9 million. Its opponents, the Wine & Sprits Wholesalers of America, had to call, raise or fold—and they folded.

“We had to convince our opposition that we weren’t backing down,” Sinegal said.

Costco will have lower prices on liquor than the state stores, Sinegal said, but liquor taxes in will prevent prices from dropping too much. The big drop will come in prices for wine, which was also the subject of 1183. Costco already sells wine in Washington, but it has operated under a state rule forbidding quantity discounts.

“We are the largest wine merchant in the world,” Sinegal said. “In Washington, we have to buy wine like we’re a small candy store, one bottle at a time.” Initiative 1183 wipes that rule away, and also some anti-consumer rules about warehousing.

“We should quickly be able to reduce prices,” Sinegal said.

In the column I had mentioned Costco’s famous $1.50 hot dog — a good hot dog — and soda. Already I was receiving emails from Costco members. Would that go away when Sinegal retires?

“Not a chance,” he said. “It doesn’t just boil down to me. What we do in pricing in general is part of our DNA around here.”

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