How To Kill A Wine Industry
This is the second time in just a few days I’ve seen wholesalers try to explain their attempts to destroy small wineries by saying "It’s good for them".
In Louisiana the local liquor wholesaler association stuck a provision onto a bill concerning liquor retail outlets proximity to churches and schools. The provision states that Louisiana’s wineries MUST only sell their wines through wholesalers. Its effect is that no longer could Louisiana’s small wineries sell their wine directly to restaurants and retailers directly as they always have.
According to George Brown, director of the Beer Industry League of Louisiana, this legislation would protect Louisiana’s wineries from out of state competition. Of course, it didn’t occur to Mr. Brown, who is one of the most powerful lobbyists in the state, to ask any Louisiana wineries if they wanted this kind of protection. No one talked to the wineries or their association before dropping this little addition into the bill.
But now that it is about to get to the governor’s desk, the Louisiana wineries have something to say. They are telling the Governor this legislation would essentially kill the wine industry in Louisiana.
Consider the case of Joe Cazedessus’ small little winery. He makes roughly 1200 cases per year. Currently he sells 3/4 of his production directly to stores and restaurants. He sells them this wine at a wholesale price which is usually about 25% off his suggested retail price. But if he is forced now to sell this wine to a distributor first a couple things happen:
1. He must sell the wine to the wholesaler at 50% of suggested retail price
2. He loses all control over sales (who is more concerned with his brand, the owner or the wholesaler)
So Joe immediately drops 20% to 25% of his annual profit and he no longer has control of his brand.
But, Mr. Brown says this is good for Joe.
It’s the same argument made by the Michigan Beer and Wine Wholesalers Association in the form of a poll question they recently ask in which they suggested that with direct shipping, Michigan wineries would be subjected to competition form "large, international corporations.": Is this good or bad," they asked. Of course, neither the poll takers or the organization that fronted for the wholesalers in contracting the poll could name any of these "large international corporations."
It’s a sham. And it’s a wholesale lie being pushed.
The wholesalers also argue that if they allow Louisiana wineries to sell directly to retailers and restaurateurs, then out of state wineries must be allowed to also, given the recent Supreme Court ruling that state alcohol laws cannot discriminate between in-state and out-of-state wineries. But that’s a bogus claim too. The state could easily restrict wineries over a certain size from selling direct to retailers and restaurateurs and thereby protect the wholesalers and still let small wineries prosper.
But, the wholesalers, whether it’s their national association (Wine & Spirit Wholesalers Association) or state level associations like the "Beer League of Louisiana" have consistently shown they have no concern for small wineries, for minors or for free trade. Their only concern is for amassing profits and paying off politicians to do their bidding.
This particularly ugly episode in Louisiana, led by the particularly offensive George Brown, is just the latest example of the wholesale disregard for anyone or anything but power.
Shame on George Brown and shame on the Beer League of Louisiana, and shame on the governor of Louisiana if they sign the bill.
Not sure you could legally pass a bill that is discriminatory based on a winery’s size (how would you establish, measure and enforce that?), but what out-of-state wineries would bother to sell direct in Louisiana? There’s no profit in that (maybe for Gallo, but Gallo only self-distributes in the larger markets anyway) and its actually one of the benefits of wholesalers in the three-tier system (managing distribution to the 500,000 retailers across the US).
This is just more thuggish protectionism and a particularly despicable example, at that.