Bruce Ramsey / Times editorial columnist
Initiative 1183: Thar she blows, Captain Sinegal
Seattle Times editorial columnist Bruce Ramsey explains Costco CEO Jim Sinegal's support for Initiative 1183, the measure to privatize Washington state liquor sales.
Seattle Times editorial columnist
My favorite comment on Initiative 1183, from a political observer who shall remain unnamed, is that the state liquor stores are "Jim Sinegal's great white whale." Sinegal is chief executive of Costco Wholesale. The person who compared him to Ahab in "Moby Dick" knows Sinegal, and I think he has a piece of the truth.
The battle was personal — and Sinegal has won.
What was the motive for spending so much money on I-1183? Many who support it assume the motive is corporate: company profit. Opponents insist on it. "They've done the math," one TV ad bellows. "They stand to line their pockets with hundreds of millions in increased profit ... "
Profit, yes. There will be profit. But how much? Hundreds of millions? What is the math?
For Fred Meyer, QFC, Albertson's, Walmart, Sam's Club, WinCo and every other major grocery chain in Washington except three, the math of I-1183 is intoxicating. Their return on investment is impossible to calculate. You would have to divide by zero.
Safeway and Trader Joe's chipped in $50,000 each — nickels and dimes. Costco shoveled in $20.9 million.
Why would one company do that? As a business investment? What is the math?
Here's my finger-on-the-bar arithmetic. Assume Costco's 29 stores get 10 percent of the state's revenue of $870 million a year. Assume its after-tax profits on liquor are the same as on other goods it sells. To make back the money it spent on I-1183 would take Costco 14 years.
That is not a good return on investment. Nor is that Costco's entire investment.
Last year, the Issaquah-based company spent $3.6 million on Initiative 1100, a measure written by someone else. That effort failed.
Over the years, Costco has spent many thousands of dollars on attorneys' fees to fight the state of Washington's economic regulations on alcohol in federal court. On one occasion it pursued an appeal to the 9th U.S. Circuit Court of Appeals, which mostly failed.
Most retailers don't do this sort of thing. In matters of public controversy, they are chickens. A year ago, George Bartell publicly opposed the state income tax, but he was an exception. He was bolder than his fellows, and even then he was playing defense.
Usually when retailers would influence the law, they do it through trade associations, away from the news pages. Yet Costco plunked down $20.9 million, and has fought the battle over I-1183 under its own flag.
Why does Costco still price a hot dog and soda at $1.50? Because Jim Sinegal wants to. Sinegal co-founded the company. He has been CEO for 28 years. He turns 76 on Jan. 1, and has announced his retirement for that day. He is wrapping up a career.
Coming in to his last year as CEO, one piece of unfinished work was his battle with the state of Washington over alcohol. It was a war in which he had fought and lost.
He wanted to win.
Did he put some of Costco's Washington business at risk? Maybe, but the ads charging it with "lining its pockets" were overstated.
People like Costco.
Some say it is bad for one company to spend $20.9 million to change state law. I don't think so. The voters needed to know Costco's view, particularly when the other side, funded by the Wine & Spirits Wholesalers of America Inc., was trying to spook them with duplicitous ads about the evils of drink.
Costco spent about $15 per voter. It was a good fight, and its ads were clean.
Bruce Ramsey's column appears regularly on editorial pages of The Times. His email address is firstname.lastname@example.org