“The Big Lie” About Virginia Wine

Posted by Tom Wark on Dec 28, 2006

I read something Interesting Today:

"The laws that underpin our alcohol controls established a three-tier
system to eliminate corruption and chaos predominant before
Prohibition. For more than 70 years, this system has served the nation
well. What has been called an antiquated system and monopoly, by some,
provides a broad selection of affordable products and an orderly market.

This system should evolve, but citizens must be careful not to
dismantle it solely for those with recently emerging business interests
or those few who are outraged at not being able to find a specific
bottle of wine. We must try to accommodate them, but the system was not
established to rain on anyone’s parade. It has a larger, more important
purpose."
James Archer
Executive Vice President, Sales and Marketing—Blue Ridge Beverage Co (wine distributor)

It has been a long time since I’ve seen such a profound and perfect example of "The Big Lie".

"The Big Lie" is a a phrase that refers to a statement that, though false, is offered up over and over and over again until it becomes accepted as the gospel.

In this case the BIG LIE is the idea that anyone, be they wineries, consumers or retailers, are looking to "dismantle" the three tier system of alcohol distribution.

Archer heads up a wine distributor in Virginia, a state in which wine wholesalers were instrumental in removing wineries’ 20+ year old right to sell direct to retailers and restaurants rather than being forced to sell their wine to distributors at a much lower price, who then sold to the same retailers and restaurants. Virginia wineries, which exploded in number while able to distribute themselves, now find themselves in dire straights because of the lost revenue directly resulting from the new law that prohibits them from selling to retailers and restaurants.

And Archer claims that people want to "dismantle" the system that keeps HIM in cash???

How could such a law that is so positively detrimental to the Virginia wine industry be passed? Simple.

Between 2003 and 2005 Virginia Wholesalers contributed approximately $1.67 Million to Virginia politicians. James and his company were happy to pony up more than $21,000 in that same time frame. And that doesn’t count the 1000s of dollars they contributed to the Virginia Wine Wholesalers Association who gave LOTS of money to politicians.

So let’s be clear about what James Archer is talking about. He and his fellow wholesalers are involved in a conspiracy to dismantle the system that allowed Virginia wineries to flourish. When he writes that the 3 tier system of selling only through wine wholesalers "has a larger, more important
purpose" he’s correct. That purpose is to provide wine wholesalers with as much profit as possible.

If Virginia wineries were given back the right to sell directly to restaurants and retailers, the Commonwealth of Virginia indeed would have to give that same right to out-of-state wineries. Archer and the wholesalers have convinced Virginia’s legislators (and how hard is that sales job after $1.6 Million in campaign contributions) that such a turn of events would mean the dismantling" of the 3 tier system.

Not So. Not even close.

All it would mean is that the Wholesalers would have to demonstrate their value in a free market economy where wineries have alternative ways to get their wine to market besides wholesalers. Furthermore, the State of Virginia would have no problem collecting any taxes and fees they’d like to impose on wineries shipping to retailers and restaurants from out of state. It’s called electronic transfer. Hell, I’m sure out of state wineries even possess checkbooks.

The only folks capable of dismantling the Wholesaler’s Monopoly called the "3 Tier System" are the wholesalers. If they can’t demonstrate they offer a valuable service in the midst of a free market then the system will die on its own.

In the meantime, Archer and his fellow wine wholesalers will continue to contribute millions of dollars annually to assure they don’t have to face a free market, while at the same time pleading for calm among the Virginia wineries who are currently seeing their 20 year battle to establish their industry dismantled by the checkbooks of the wholesalers.