Why Are Wine Wholesaler Middlemen Liars?
I don’t know if it would come as a surprise to readers of FERMENTATION, but it most certainly would come as a surprise to state Alcohol Beverage Commissions as well as state law enforcement agencies to learn that it’s actually America’s middlemen wholesalers that are “the state police force when it comes to making sure a licensee (wine store) is not selling to kids for example or that a bar is not just pouring a drink down someone’s throat till they get so drunk they can’t walk”.
This is according to Mr. Jim Purucker, the executive director of Wine and Spirits Distributors of Indiana.
Why is he lying?
Mr. Purucker’s insane claim came in response to a legislative proposal in the state of Indiana to allow Indiana wineries to sell directly to restaurants and retailers, rather than being required, as they are now, to sell their wine to a middleman wholesaler who then sells the wine to the restaurant or retailer down the street from the winery.
The situation that Mr. Purucker and his middlemen are defending exists in most states across this nation. Most states prohibit wineries from selling their wine directly to retailers and restaurants, but must are required to sell to a middleman wholesaler. If the economics of this bizarre but standard rule are not apparent, let me spell it out for you.
• Winery X gives its wine a retail price of $20.
• Winery X would sell this wine directly to a retailer for $15, so the retailer could mark it back up to $20 on the shelf
• Winery X however must sell its wine to a middleman, who requires the price they pay to be $10.
• Winery X could sell 200 cases of this wine to retailers and gross $36,000
• Winery X is required to sell these same 200 cases to middlemen and gross $24,000.
But here is the real kicker. The kicker that makes the way the law currently works and makes the middlemen’s position so enormously unfair, absurd, and indefensible: The middlemen wholesalers in Indiana are in no way obligated to buy and distribute the wines of Indiana wineries. Yet if a winery can’t find a middleman who will agree to distribute their wine to stores and restaurants, that winery’s product are essentially banned from being sold in stores and restaurants. It’s tempting to call this situation inherent unethical.
But let’s not forget, if this situation is changed, kids will be buying wine by the boatload in Indiana and drinks will be poured down patrons’ throats until they can’t walk.
I want to mention one other thing that Mr. Purucker, of the Indiana Middlemen Association, said about this proposal to let wineries finally sell directly to retailers and restaurants: “The group also says the proposal would put distributors out of business.”
One wonders how middlemen wholesalers in California, Illinois and Washington State, where wineries are legally able to sell directly to retailers and restaurants, have stayed in business. One also wonders what possesses these Indiana middlemen wholesalers to lie. No wholesaler will go out of business if Indiana wineries and even if out-of-state wineries are allowed to sell directly to restaurants and retailers. Consider that just one wholesaler in Indiana, Southern Wine & Spirits, sold more than 1 million cases in a 12 month period ending in June 2011. Again, one wonders why Indiana middlemen are so content on lying in order to keep Indiana wineries under their thumb.