Sixty-Six Million and the Big Wine Story Never Told
Various wine-related Year-End and Decade-End stories have been published and posted at blogs, in magazines and in newspapers. Yet none of these wrap-up stories have addressed the one development over the past decade that probably had the most impact on the wine industry and wine drinkers. That development is this:
MONEY CONTRIBUTED TO STATE-BASED POLITICAL CAMPAIGNS
BY SECTORS OF THE ALCOHOL INDUSTRY (2000-2009)
Alcohol Retailers: $3,219,398
Beer Producers: $20,300,278
Wine & Spirit Producers $18,019,867
Beer & Wine Wholesalers $66,533,450
Some thoughts on the impact of this enormous amount contributed by American beer and wine wholesalers to politicians and political campaigns:
1. It has taken the funding of numerous lawsuits and the multi-million dollar cost of a Supreme Court challenge to overcome a small part of the impact of these contributions
2. Why do wholesalers need to contribute $66 million+, but alcohol retailers, of whom there are many more, only contributed $3 million?
3. Who would have thought it would only have cost $60 million dollars to a system of alcohol distribution that has failed on every level to address even the simplest needs of Americans and the industry in 2000-2009?
4. It goes to show: If you win an argument, buy it.
5. I've often wondered if the lawmakers who have taken wholesaler money and done their bidding are satisfied with the million and millions of dollars they've taken out of the hands of their constituents.
6. Anyone who has ever scratched their head over or complained about the extraordinary inconvenience that surrounds buying the wine they want, can look to these campaign contributions as the reason why.
7. The amount of money retailers and artisan producers have lost or never made because of the corrupt impact of these campaign contributions is far more than the amount of the contributions themselves.
8 This enormous number doesn't take into account the millions of dollars wholesalers have spent on lobbying, not to mention campaign contributions to federal candidates.
9. The story of how the entire alcohol industry is controlled by a very small number of wholesalers who control access to a market through corruption brought on by their own campaign contributions is the biggest story ever told by the wine or mainstream media…OR BY BLOGGERS.
10. Consider that Beer Producers and Liquor producers tend to support the same state-mandated three tier system. Now look at how much beer producers have delivered to State political campaigns where regulations governing how wine is sold and distributed are made.
Tom – it’s great that you’re highlighting this stuff. If I could sum up what I’ve learned by watching how this had played out within my home state of PA with the PLCB, it would sound like this:
“You don’t have to worry about what the U.S. Constitution or the Supreme Court has to to say, so long as you bring in enough money to the State coffers and to its legislators.”
I’m beginning to think that George Lucas had bodies like the PLCB in mind when he dreamed up the Galactiv Empire…
Tom:
Though the total amount of contributions by wholesalers is significant, the conclusions you draw in this post are not logically supported by the evidence presented here. All you present is the amounts, without proving that those monies actually had an impact. For example, though you allege corruption, you offer no evidence of such.
If you have previously given evidence to support those allegations, you should have provided links to such within this post.
I would have numerous questions about the contributions. What has the yearly breakdown of contributions? Based on that breakdown, have contributions been increasing or decreasing over the past 10 years? Is there a breakdown by state of where those contributions have been sent? Are specific states the main targets of wholesalers?
Which politicians have received the most contributions from wholesalers? Are they more Democrats or Republicans? How many of the candidates the wholesalers have supported have gotten into office?
There would be more questions as well.
Thanks.
Richard, That’s a lot of smart questions.
I have one for you: why do you think the wholesalers are making such large contributions, be it to democrats, republicans or both?
Tom, whoever reviews your points, and raises doubts, is obviously someone who enjoys the protectionism of wholesale tier legislation. The argument of the wholesale tier that a three tier system supports safer alcoholic consumption by restricting access to minors is blowing smoke and mirrors to confuse the issue at-hand. At no point in time does a wholesaler have the ability to require adult verification. Wineries already ship directly into customers. Why can’t retailers? Because of the TAXES AND because it would potentially change the comfortable situation that wholesalers have lobbied for and paid for years to acheive. I am sure that as a wholesaler, I would make the same argument. Its much easier to get power when there are fewer participants that make the majority of the money within a specific industry (isn’t the definition of an oligopoly or monopoly?)!
Taxation can be overcome by simply requiring retailers to register with each state, pay for a license and require reporting so that each state can collect its taxes due. Fly-by-night operators can be eliminated by requiring insurance umbrellas that would satisfy any high-risk policy (something that is not easy or cheap to obtain). Shipping carriers can make more money by requiring adult verification, but more importantly, states can make more money by collection sales taxes.
WHY DOESN’T IT STILL CHANGE? WHY CAN”T THE US GOVT AND STATE GOVT collect on this even as the Constitution dictates the right?
Beer & Wine Wholesalers $66,533,450
That’s why. Thats the cost of looking the other way. That’s the cost of putting a couple lines of text into a bill that has nothing to do with winery-direct legislation. That’s the cost of allowing retailers to have the ability to ship wines into a state, but requiring them to PURCHASE FROM AN IN-STATE WHOLESALER.
Tom – Nice timing on your post…
http://wswa.org/content.cfm?sectionID=20&detail=100
I just pulled out an old Bev. Journal from CT. (pop. 3.5 million) 48 wine wholesalers. Not much of a monopoly… literally hundreds of new wines PER MONTH coming into the state, all available at local warehouses for next day delivery. If an artisinal producer cannot make a case to one of 48 wholesalers in the market, maybe that should look more closely at what they are doing.
On point #3 above, how can you possibly say that wholesalers have failed on every level to meet the consumer’s simplest needs. They have, in fact, met almost all consumer needs, save for the tiny percentage of consumers who want wine shipped to their homes.
Point #5 – how has money been taken out of the hands of the constituents?
Wholesalers typically line up against grocery store sales because those measure are usually defeated, and they do not want to oppose their existing retail customers who fight to retain their exclusivity.
For the record, I have worked in all three tiers, including 5 1/2 years as a wholesaler.
To put the numbers in perspective, the Service Employees International Union alone spent $60.7 million on the President’s 2008 campaign, and was rewarded with 2 very pro-union cabinet appointments. Yes, that’s over $60 million on one candidate in one election.
Morning James. Thanks for commenting.
48 wholesalers or not, it’s a monopoly when by law all wine sold in the state must go through wholesalers hands, whether the retailer or producer need the wholesaler.
And as for the producer who can’t find a wholesaler in CT, consider that they have to give away an astounding 50% of retail to work with wholesalers. Furthermore, what of the producer that only wants to sell to 5 or 10 restaurant accounts. Why in the world would they want to work with a wholesaler. But they have to.
The most basic requirement of a distribution system is to allow customers to obtain the products they want. The vast majority of wines in the United States are not available in CT because residents of the state may not buy wine direct from retailers outside the state who have access to all the wines not available in the state. That’s a distribution system that has failed on the most basic level.
By not allowing and taxing sales of wine from out-of-state retailers, the state of CT loses out on collecting thousands of dollars in taxes from those out of state retailers who would happily pay the tax. But out of state retailers may not do this. Why?
In the end, what is the reason for protecting wholesalers? There is no reason. The better questions is why do politicians continue to protect a class of businesses whose service is unwanted by so many of the people that are FORCED to use them?
If I was a state legislator, who should I support? Local businesses that employ thousands of state residents, or an out of state retailer who wants to ship into my state?
And in states that currently do allow out of state shipping from retailers, what’s the percentage of compliance with licensing and tax collection? Who here has bought a wine online from an out of state retailer and paid sales tax??
James:
At least you and I agree that the decision by state legislators to support consumer access to wine via retailer to consumer shipping is not one of consumer interest, but one of protecting industry from competition. If you support this kind of protection, why not support laws that make it illegal for residents of a state to have a book or car or cloths or anything else purchased from outside the state and shipped in?
Your other questions about sales taxes is out of left field. Do you have any reason to believe out of state retailers are more or less likely to obtain the appropriate permits and pay the appropriate sales taxes than wineries are. I’m unaware of any retailers that have gotten a license to ship that have not paid close attention to the rules and regulations and tax collection requirements that their permit demands. But if you have information that retailers are less likely to do this than wineries or information that shows they are doing this as a matter of course, you should probably let the ABC officials in the appropriate states know about it. Or at least make it public in some way.