Wine Wholesaslers: “Everyone’s Incompetent But Us”

It struck me as I was reading a news report of the dire situation Arizona wineries find themselves in (thanks to wine middlemen) that the wine wholesalers who want to convince legislators to stop all forms of direct shipment and direct sales by wineries are making a very unique argument:


In Arizona the wholesalers are pushing a bill that would forbid Arizona wineries from selling direct to consumers and selling direct to retailers. Arizona wineries have had this right for more than 20 years.

Wholesalers are arguing that Arizona’s and out-of-state wineries would not properly collect and remit to the state taxes they collect on the wine they sell. Now, what makes them think this? Arizona wineries have been doing this for more than two decades without no problems at all.

Then there is Mark Osborn, a lobbyist for the Protect 21 Coalition, a hastily created organization financed largely
by wholesalers that opposes direct shipping of wine. According to a news report Osborne said "there is no way to ensure that wine ordered by
phone or the Internet is actually going to someone of legal drinking

The winery sponsored bill in Arizona, HB 2500, that allows wineries to continue to sell wine direct, requires that delivery people get an adult signature when delivering wine. But, again according to new reports: "Osborn said he doubts busy drivers working for package delivery
services will enforce the provision."

Is everyone incompetent in the wholesaler’s world except the wine wholesalers?

Also from the same article:
"Susie Stevens, lobbyist for Alliance Beverage Distributing, a licensed
wholesaler, said her company is not trying to put the wineries out of
business. She said, though, they should be required to distribute their
product through the same system that applies to virtually all other
alcoholic beverages."

She doesn’t say why this should be the case…probably because that would require she acknowledge that wholesalers believe this should be the case simply so they can make more money. "We want to protect our profits by having government mandate no competition" probably isn’t the best argument in the world.

What’s interesting is that if you look on Ms. Steven’s boss’s website, you’ll see they list no Arizona winery as a client. This Arizona wine wholesaler apparently does not represent a single Arizona winery. Yet, they want to stop them from self distributing and selling directly to the public. It’s an outrageous claim that could only be made by a company so steeped in years of feeling some sort of entitlement and that has not experienced any sort of competitive environment.

5 Responses

  1. weekendwino - February 21, 2006

    It seems that a lot of state legislatures are taking the easy way out and outlawing ALL direct shipments by wineries, prodded in that direction, of course, by the wholesaler lobby. As you have said before, it seems like lack of organization by the wineries and those who are in favor of direct shipping is allowing the wholesalers free reign on this issue in many states. And this may be because, in a lot of these states, the wine industry is very young and does not have enough clout to put up a good fight for votes in the legislature. In New York state where the wine industry is a bit older, they organized a very structured campaign and involved not just the state legislators, but also Heavy-hitters like Hillary Clinton (whether you like her or not, she has power). They invited the heavy-hitters to the wineries for photo-ops and were very aggressive in their campaign for direct shipping. If the public is exposed to this issue, via an organized public relations campaign, I just have to believe they will side with direct shipping. What’s not to like- less regulation, helping the small farmer, and more consumer choice. And if the PUBLIC sides WITH direct shipping, the legislators will follow. Unfortunately, without getting the word out on why this issue IS important, the public will remain apathetic on this issue. The obvious compromise is to allow smaller wineries to direct ship, but keep larger wine-sellers in the tiered system. As you said, the wholesalers don’t want to deal with the small players anyway. After all, the larger players are pretty much available everywhere as it now stands. It’s the smaller wineries and wine consumers that would benefit the most from direct shipping. The wholesalers are just worried about losing those lucrative contracts from the large wine-sellers. It’s a very troubling issue. I am very worried about the small wineries in some of these states. These are very hard-working farmers who, despite what many may think, are struggling on thin margins already. Y’know, maybe it’s that public perception that winery owners are wealthy and the wine business is so glamorous that is hindering getting the public more involved and supportive of direct shipping. I don’t know the answers, but I do know that, if states continue to shut down direct shipping, it WILL hurt many small wineries. Tom, Thank You again for continuing to post about this issue.

  2. zinman - February 21, 2006

    There is a common feature in all States where distributors are fighting tooth and nail to prevent any direct shipment of wine in the state, even if it means destroying the local wineries to do it.
    Each of these (Arizona, and Illinois come to mind) are States where Southern Wine and Spirits owns a distributor. From the beginning Southern has taken a very tough stand against anything that would undermine the mandated 3 tier system.
    In both Texas and Washington where the laws have actually been relaxed there is no Southern owned distributor.
    It’s no coincidence that Southern Wine and Spirits is doing business in the states where the fight to enforce the 3 tier rules is the toughest.

  3. tom - February 21, 2006

    The connection between Southern and the states where the push is on is an interesting one I’ve not looked into.
    However, what I know is this: What’s driving the current round of anti-winery legislation is not direct-to-consumer sales. It’s winery self distribution. It’s becoming clear that a state can not allow their own wineries to sell direct to retailers but ban out-of-state wineries from doing the same. And, the wholeslers are far, far more frieghtened of direct-to-retail or direct-to-restaurant sales by CA wineries than anything else.

  4. Zinman - February 21, 2006

    It’s about winery self distribution because most judges will find it silly to make a distiction between in state and out of state producers, which leads to your earlier post on de-mandating the 3 tier system.
    Direct to retailer sales by wineries scare distributors, but direct to retailer sales by distillers positively send them into a panic. The margin dollars in spirits sales are stunning, allowing the big boys to take home millions every year.
    This entire fight comes down to who gets to keep the distributor share of spirit sales, the retailer, the distiller or distributors.

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