The Octopus

I was trying to think of a good way to describe the power that the wine wholesalers have accumulated over the years; a good way to indicate the real heft of their influence; a way to demonstrate what happens when the number of middle men shrink in number while suppliers increase; a way to demonstrate the kind of entity that is created when the state mandates monopoly status on a small number of businesses.

Then, the Dallas Morning News did it for me. From a story headlined "Liquor Wholesalers Ply legislators with Cash" comes this lead paragraph:

AUSTIN – Liquor
wholesalers dumped nearly $1.7 million on Texas lawmakers in the weeks
leading up to the 2007 Legislature while pushing for changes that would
allow them to sell booze directly to restaurants and bars."

The story goes on to say:

They spent nearly five times more on lawmakers in the past 10 weeks than they did in the entire year before the 2005 session."

$1.7 Million!

$1.7 Million!

I typed that twice on purpose.

Wholesalers have every right to participate in the political process, be it by lobbying, giving campaign contributions or trying to influence the public. I would never suggest they don’t have this right.

However, one has to wonder if there is any concern in government circles about the kind of power that would result in $1.7 million being donated in ten weeks and if it is the kind of power the government wants to be granting.

By mandating that liquor wholesalers be given a piece of nearly every alcohol related transaction, legislators are guaranteeing that wholesalers will amass the kind of power that allows them to give $1.7 Million dollars in a ten week period.

Now, consider that wholesalers have been granted a state mandated monopoly for more than 70 years. Consider that the number of wholesalers has continued to dwindle. Consider that the size of the American Alcohol pie has gotten bigger and bigger. Consider that the number of suppliers (wineries, brewers, distillers) that want to access the market wholesalers guard by grant of the state has risen steadily over the years.

Does anyone remember the novel By Frank Norris entitled "The Octopus"? It described the influence and effect of the early railroad barons who were able to obtain enormous power as a result of the monopoly they had over railroad service. It described the power they had over the growing number of farmers that relied upon the Railroad to get their grain and produce to market. It described being at the mercy of a monopolistic band of folks whose power was so great they could dictate the pace of regulation in capitals.


3 Responses

  1. Paul Mabray - January 25, 2007

    What I find most amazing is that wine business is changing at a speed never before seen. The closest thing I can illustrate is the tech changes over the last few years. Instead of spending that 1.7M to find ways to adjust to this new business model (almost like tech investing in R&D), they are fighting it.
    I say find better ways to spend that 1.7M and they can make this whole system better and even participate as it changes.
    Inertia – Powering the Wine Revolution
    —Paul Mabray – CEO

  2. winehiker - January 26, 2007

    Hear-hear, Paul! Yet I don’t think the wholesalers are fighting mad. I think they’re unable to adapt, are throwing money at “the problem” thinking it will go away, and are just plain scared witless. One can only surmise that their tentacles will lose their grasp as fast as their mad money leaves their pockets.

  3. Joel - January 26, 2007

    You said it Paul. Changes are happening and fast…
    Mr. Wine Wholesaler meet Mr. Music Industry…maybe they can teach you a thing or two about how tech changes distribution…

Leave a Reply