A simple question…

A simple question:

A number of states across the country are in the process of prohibiting their in-state wineries from being able to sell directly to retailers and restaurateurs, a privilege they have usually enjoyed for some time.

If wineries are forced to go through a distributor to sell to restaurants and retailers, shouldn’t the state also force the wholesalers to represent any winery that wants representation?

Your thoughts and and comments are encouraged..

Posted In: Shipping Wine


8 Responses

  1. TheFatMan - January 25, 2006

    That’s a slippery slope even though we’d love for it to be cut and dry.
    That would mean that a wholesaler who wants to represent only small wineries and develop a clientele that shops for them would be forced to represent the larger companies that have the cash to throw around.
    I know that this appears to be about the wholesalers vs the wineries (which it certainly is), the question of regulating the wholesalers opens up whole new cans of worms.

  2. Bradley - January 25, 2006

    As long as we’re doing some forcing . . .
    Shouldn’t wholesalers/distributors be forced to supply any wine a consumer wants from/through his local retailer? If you’re taking away access through the winery cellar door, shouldn’t there be some other system for getting that product?

  3. David - January 25, 2006

    Tom, it’s pretty sad that it’s gotten to the point where you need to pose the above question. My answer, however, is yes.
    I say abolish laws supporting the three-tier system in the US and let the Wine Makers and consumers decide how they want to sell / buy their wine.
    My question is, why have liquor laws at all to regulate the sale and distribution of wine? We need to instead strengthen the penalties for Drunk Driving, buying for minors and underage consumption. Of course this could hurt the wholesalers so no lawmaker will ever get those laws put through. End Rant.

  4. Zinman - January 25, 2006

    I think you are off the mark here. It’s not that distributors refuse to represent wineries it’s that little wineries can’t or won’t pay the margin necessary to operate.
    Distributor ownership has overreacted to this issue and is now burning it’s political bridges, but even if they burn them to the ground and the wineries win (a likely scenario in at least some states)the fact remains that the alcolhol beverage business contributs enormous tax revenue to most states.
    Politicians are wary of pushing big changes that might reduce that flow, particularly when they can twist the distributor’s arms for reelection cash.
    For the 3 tier system to go away the change must be proven to be revenue neutral for the states.
    Believe it or not that not all that easy to do.

  5. tom - January 25, 2006

    I’m going to disagree. If the STATE tells a winery that you must use a distributor to get your product to market, then the state really should demand the distributor offer a route to market for the winery.
    Think about it. The state outlaws self distribution to retail and restaurants. They they outlaw all types of direct sales except at the winery. They are essentially saying, do whatever the distributor wants or you shall not be in business. It’s simply an absurd and utterly unfair situation
    And when you consider that wineries built businesses on shipping direct in-state and selling to retailers and restaurants in state, it seems terribly unfair to tell them now, sorry your business model is no longer legal.
    As for the collection of taxes, there is zero loss of taxes under a system in which the anyone can sell direct to retailers and consumers…unless you assume that wineries are incapable of collecting taxes. But that’s something they’ve done for decades.
    It is purely a matter of who has the money to pay the legislators.
    No one is suggesting the three tier system be demolished. How couuld it be. The vast majority of wine is not going to be sold direct all of a sudden. But there currently does not exist a compelling reason, let alone a compelling state interest in tilting the laws in favor of wholesalers.

  6. Zinman - January 26, 2006

    How does the State determine which distributor is required to take a winery?
    Assigned wineries would be treated like outcasts, so to me it’a not a good solution
    Why don’t the wineries set up a distributor of their own? In most states there is no law saying that you have to deliver on a distributor owned truck. Just outsource sll the delivery functions.
    Surely there is a way to do this even in states with tied house laws (Gallo did it for years)
    In todays IT world the transaction database would be cheap and reliable.
    No sales force required, as the orders come into the wineries via phone or the web.
    Each winery is billed based on what services they used.
    Somebody ought to try it.

  7. Harry Mac - January 30, 2006

    There is a solution out there to aid the plight of unsold wine – http://www.rethinkwinetrade.com – a technology driven cure for non-distribution and an efficient way for wholesalers to give market access to more brands than their logistics would typically allow. Why would a wholesaler not want to be involved in a transaction that is ordered, paid for and actually fulfilled without involving much of their resources?
    Change is coming to the wholesale channel and about time too. This really is more about customer choice – be it consumer or retailer – and the landscape is set for something to happen. Its a fact!

  8. RED RED WINO - February 2, 2006

    HUGE National Wholesalers “Killing Virginia’s Agricultural Golden Goose”!
    Monopolistic wholesalers take the cash to the bank while VIRGINIA WINE CONSUMERS LOSE both access and bucks as Small Family grape farms and wineries go out of business.
    The National wine and beer distributors insist their main concerns are to protect the state’s sales tax collections and prevent minors from buying alcoholic beverages. But the Supreme Court decision dismissed those concerns. The states “provide little concrete evidence for the sweeping assertion that they cannot police direct shipments by out-of-state wineries,” wrote Justice Anthony Kennedy for the majority.
    Consumers, wineries and the media were willing to call out the wholesalers’ blatant attempt to game the system and institute a monopoly for themselves on sales of wines in Virginia.
    In 2006 large national wholesaler giants across the country are attempting to have laws passed that FORCE wineries to sell their wine to wholesalers if the wineries want their bottling on retail shelves or restaurant menus.
    Huge national monopoly like wholesaler chains are FORCING Virginia family wineries to use Wholesalers to sell Virginia’s agricultural wine products.
    This would mean: 1) significantly lower profits for the wineries, 2) loss of control of their branding and marketing, 3) probably far fewer sales of their wine, 4) the likely demise of many small wineries all across Virginia and 5) much higher cost of wine to consumers.
    If lawmakers are going to get back in the wine game, they should promote competition and protect consumers from unnecessary middlemen and their markups that will kill the “Virginia agricultural industry’s golden goose.”
    If Virginia’s legislators do not pass HB1288 or something better—
    Virginia consumers will be at the mercy of the wholesalers who will decide what wines to bring into the state. Virginia farm wineries will lose their right to self distribute to local retailers and restaurants and will be forced to sell wine through a wholesaler, rising the price to consumers and cutting margins to wineries. Small family owned Virginia small farm wineries could go out of business because they will lose ~25% of their revenue.
    Yet the wholesaler will not be forced to represent the Virginia wineries. How is this right?
    FYI-Massachusetts has a new bill working in this legislation session that allows wineries of any size to ship and self distribute. Governor Romney’s legislation requires the state to act on wineries’ license applications within 30 days. Wholesalers are not necessary for wine distribution.
    I ask that you support Virginia HB1288 that will help keep our Virginia wineries in business so that our lands, and the lands of the small vineyard (Grape Farmers) owners from whom we purchase fruit, can remain dedicated to agricultural enterprise, and so that Virginia can continue to benefit from the tourism and tax dollars that Virginia Grape Farms generate.

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