Wine Industry: Know Your Friends.

KNOW YOUR FRIENDSTHE POLITICAL AND FINANCIAL INTERESTS OF THE WINE TRADE ARE NEARLY IDENTICALLY ALIGNED WITH THE POLITICAL AND FINANCIAL INTERESTS OF CONSUMERS.

The wineries have Wine America, The Wine Institute and numerous other advocacy groups to look out for their interests.

The retailers have the National Association of Wine Retailers, American Beverage Licensees and numerous other state-based organizations to look out for their interests.

The Wholesalers have the Wine & Spirits Wholesalers Association as well as numerous state based wholesaler organizations that press the interests of distributors of wine.

The wine consumers. They have…..themselves and nothing else. That is to say, if you want to understand why there are so many laws and regulations that seem to completely ignore the interests of consumers, take note of the fact that there is no organization that represents the interests of consumers.

It is interesting to note that in almost every case the interests of wineries and retailers align quite closely with those of consumers. Yet still, in state after state consumers are still prohibited from having wine shipped to them from wineries or prohibited to have any imported wines shipped to them or prohibited from buying a bottle of wine at the grocery store or prohibited from buying wine on a Sunday or prohibited from bringing a bottle of wine into a restaurant.

One of the ways this disparity in representation plays out is by noting just how rare it is for any wine consumer, let alone their representatives, to testify at hearings when bills impacting consumer access to wine are in play in state legislatures. I’ve personally testified in numerous states on behalf of the National Association of Wine Retailers (formerly the Specialty Wine Retailers Association) and in all that time, with one exception, can I recall a single consumer or consumer organization testifying in support of consumer rights.

When a national wine consumer rights organization does launch, and it will, one would expect and hope that those members of the trade who have an interest, financial and philosophical, in seeing consumer wine laws liberalized will support consumers. That support ought to be financial, logistical, philosophical and moral.

 

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8 Responses

  1. Casidy Ward - June 17, 2013

    States rights have always seemed like a good idea to me. I like the idea of states being a laboratory for new ideas. Alas – in wine laws, this rarely seems to be the case. So many wine laws are old, unchanged for many decades, seem to have minimal benefit and raise business expenses for small businesses.

  2. Thomas Pellechia - June 17, 2013

    Tom,

    You may have hit on a good subject for the next wine blogger conference. After all, what are most bloggers but consumers–well, the ones who don’t live off the free samples anyway ;)

  3. Tom Wark - June 17, 2013

    Thomas:

    Good point. Relating to your point, really, we are all consumers unless we have another interests in thwarting consumer interests.

  4. Noel Kaplan - June 18, 2013

    Sadly, with the money generally goes the power – so the wholesalers will get their way too often. They even rate a capital “W” in your post, Tom. Is that your Freudian slip showing?

  5. Roger Sterling - June 18, 2013

    Tom, while I sympathize to a degree with your thoughts on this matter as well as the overwhelming and unbalanced power of the wholesalers, I do think that you simplify things a bit. And I do think that the California wine industry uses a “blame the distributors for all ills” mentality as a psychological crutch for issues that are far more profound and serious as to why their wines are struggling if not facing an outright backlash in the market.

    Here in Chicago, small California wineries are allowed to get a “direct to trade” license and bypass the three tier system. One group of wineries banded together a year or so ago and did just that. The results weren’t promising if not an outright failure for several reasons. I know did business with this group as well as knowing the “partner” on the ground in Chicago during this misadventure and here were my observations.

    First of all, divorced of an import portfolio in an import dominated market, there was absolutely no traction for these wines (many of whom were “secondary cult wines” and had long track records of mid-90s scores from Mr. Parker). Few people–particularly the on-premise accounts that the wineries put particular importance in–were willing to do business with a new company (and from a billing/invoicing perspective 12 new companies) just to buy California wine. There was plenty of that being offered from their normal distributors who also had the European wines that were actually selling.

    Secondly, the wineries refused to make enough of an investment to ensure proper and consistent representation on the ground in Chicago. In fact, they felt that simply paying the Chicago person as a commission-only, 1099 contractor was quite sufficient–despite the fact that he was not only a salesman but also the warehouseman, delivery person and bookkeeper. It took about 8 months for this person to walk away from a horrible situation. After that, some wineries still presented themselves to me, yet when I ordered wine would take two or three weeks to be delivered. There was no sense of apology on the California end. Rather, I was the one to be grateful for taking part in their grand experiment.

    From my perspective, the whole thing imploded from its inefficiencies, the greed and selfishness of the wineries vis-a-vis the person upon whose shoulders the venture would actually succeed or fail and the fact that they were selling a product that was not what the market wanted.

    • Martin Cody - June 18, 2013

      I think Roger brings up some interesting points and Tom’s reply also addresses a thought I had. Very few in California know about DTT. While a potentially good idea on paper, quite difficult to pull off as it appears you found out Roger. As I own a bricks and mortar wine store in the city of Chicago, I personally seek out the small wineries producing exceptional wine and without Chicago distribution. The distribution companies have incredible power, often wielding this power blindly, incorrectly and harmfully as evidenced by my 7 years of experience and the dwindling number of distribution companies able to gain a foothold, and it becomes a struggle for both retailer and winery. Very soon it would appear the 7 or so distribution companies will control 80 or more percent of the wine market in the US. Similarly, only 3 companies now own 50% of the wine being moved through these companies. And, if I may be so bold, I think what Tom is saying is it would be better if the wine consumption decisions, laws and regulations for those individuals of legal drinking age shouldn’t be made by ten companies and handful of paid legislators, but that the consumer should actually have a say.

      I agree the wineries probably didn’t make the necessary investment and neglected the run rate required for sustainability. Whether or not they have a product the market wants is part economics, part marketing and certainly the tail wagging the dog. Maybe we should share notes over a glass of wine!

      Nice piece Tom and Roger great comments.

      Cheers,
      Martin

      Martin A. Cody
      President
      Cellar Angels, LLC

  6. Tom Wark - June 18, 2013

    Roger:

    This sounds like an indictment of a particular business, rather than of an entire regional industry, let alone the rational concept of direct to trade.

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