Basic Math

Believe it or not, it has been over a decade since I’ve been anywhere near the city of Chicago. And even my last foray to this neck of woods didn’t take me into vicinity of the city. Now, having been here for a short while, and having taken some time to move around Chicago, I can say without hesitation is is one magnificent metropolis.

This is what a city should look like. The skyline is remarkable, studded with stunning testaments to man’s artistic sensibilities. They Chicagoans have taken great advantage of the water nearby in the form of lakes and rivers and their parks are accessible and used to the hilt.

As for atmosphere, I’ve never been in a more masculine city. It just gives that impression. If they ever enclose this city in a dome, that dome will be lined with red leather and mahogany and girded by steel. And I swear, you can not take ten steps down a street without tripping over steakhouse. Add to all this the fact that they have 2 baseball teams and at one point in the plane’s descent into O’Hare I was able to lay my eyes on ten different golf course…and that from from just one side of the plane.

The only problem is weather: thunderstorms, snow and humidity. Ouch.

My purpose for being here is outlined in the previous post. I just a moment ago finished sitting on a panel with Craig Wolf, president of the Wine & Spirit Wholesalers Association where he and I debated whether or not UPS drivers were capable of looking at an Identification card, finding the date of birth and then doing the math. I suggested the drivers were quite capable of this remarkable bit of mathematics. Craig was not so sure and thought it best to err on the side of caution by not allowing any delivery of wine to a home.

To be sure, the discussion in front of America’s alcohol regulators was a spirited one. Despite my slide into sarcasm on the issue of basic math, I think I was able to communicate to the audience that wine retailers merely want to be regulated. They want the opportunity to subject themselves to states’ legal and regulatory jurisdiction, they want to pay taxes on wines sent into the states, they want to file reports and all for the opportunity to serve the increasing market for fine wines that wholesalers have either no interest or no capability of serving.

And speaking of an increasing market in fine wine, the general counsel for FED EX who took the podium after Mr. Wolf and I confirmed that between 2005 and 2007 their wine shipments have increased 94%. I’ve got news for them…that’s just the beginning.

I did learn something, however. Regulating retailers appears to be a daunting task for America’s Alcohol Regulators. They see the potential of hundreds of thousands of retailers applying for permits if they allow out-of-state retailers to obtain permits to ship wine to consumers in their state. This is a case of their greatest fear being as far from the truth as possible. The fact is, in states where both wine retailers and wineries may ship direct, more than 80% of the permits issues are held by wineries, not retailers. This figure is consistent in every state where this set of licensing circumstances exist. This fact must be driven home.

One thing became clear as Craig Wolf and I went back and forth: wholesalers make their arguments against direct shipping on the basis of fear. Their strategy is to instill fear into the minds of legislators, regulators, police and healthcare workers. If these folks can be convinced that all hell and serious death will break forth if wine lovers are able to have their $40 Zinfandels delivered to them, they figure, they can stave off further direct shipping inroads. Nearly every statement Mr. Wolf uttered was fashioned to instill fear into the mind of the regulators in the audience.

For my part, I tried to talk about two things: 1) The necessity of bringing retailers inside their regulatory orbit so that state regulators could in fact monitor direct shipments from retailers as well as collect much more tax revenue and 2) stand up for consumers, who’s interests and desires are almost never discussed in either regulatory or legislative forums when direct shipping is the topic.

I explained that if their concern is unregulated and illegal shipments, they should probably get over their fear because there is very little they can do to stop consumers from doing whatever they have to do to get that simple bottle of wine not available locally but available in another state. The reason for this is that consumers simply have no respect for laws that they view as arbitrary, protective of certain financial interests and that actually serve in no way to protect the welfare of heath of the citizens of states. At some point, regulators and legislators are going to have to take consumers’ interests to heart. They are, after all, the people the regulators are their to serve. I explained that if they do not take into account consumers’ interests, they will continue to see the laws they enforce, their own enforcement efforts and the legislators that enact these laws ridiculed and dismissed as tools.

I am still convinced that in all but a few cases, consumers will end up earning the right to access the wines they want via direct shipment from retailers only as a result of litigation that forces states to change their laws. What a shame that millions of dollars must be spent on court proceedings only to find out that a far less expensive route could have been taken with simple legislation.

I hope to see a great deal more of this city over the next three days. It is a magnificent place to be.

17 Responses

  1. Paul Mabray - June 30, 2008

    Tom – We are anxiously awaiting how they responded to your comments.

  2. Douglas - June 30, 2008

    It’s always special to read a love note to my hometown from an visitor. There are plenty of issues us Chicago manly men and womenly women complain about, but as I start my tenth year living here, I can’t imagine living anywhere else in the U.S.

  3. Douglas - June 30, 2008

    Tom, have you heard any stories yet about Illinois consumers being “stung” when they tried to order from an out of state retailer?
    Or is it (shh . . . ) still pretty easy to do considering that investigating all the latest shootings, assaults, etc. wlll keep at least the Chicago police busy?

  4. Arthur - June 30, 2008

    There is renewed talk on OWC that is going to get into the wine game.
    If true, how does that figure into the landscape?

  5. Alfonso - July 1, 2008

    Thanks for the update, Tom.
    Regardless of your (or mine) opinions about this subject, there is a huge logistics issue about getting the wine to the consumer in the way you are advocating. I know you are not trying to totally eradicate the role of the wholesaler here, but FedEx etc better get their plan in place before the pearly gates of direct shipment really open.
    (Oh, and $5 a gallon diesel ain’t gonna help that cause)
    Buona fortuna

  6. Scott - July 1, 2008

    I’m interested to know what the posture by FedEx was at the debate on the issue of requiring their drivers to verify legal age for direct alcohol shipments. I believe a court (in Mass.?) recently ruled that the state cannot require general delivery persons to check for legal age when dropping off alcohol. The case, I think, was bruoght by UPS. My impression is that UPS, FedEx, USPS, DHL, etc. want no part of becoming part of the alcohol distibution industry.

  7. razmaspaz - July 1, 2008

    Glad to hear you’re enjoying our fair city. I hope you are getting a chance to check out some of our local wine establishments. Keep us posted on the outcome of your discussions, and have a good time while you are here.

  8. Fredric Koeppel - July 1, 2008

    i get packages of wine from UPS and FedEx almost daily, and this is in a felony state. 75 percent of the deliveries are covered with stickers that say “Adult Signature Required” and “Deliverer May Not Leave Package without Signature.” and they don’t. If one of us is home, we have to sign; if we’re not home (usually the case during the day) the delivery person leaves a door tag, and after three attempts at delivery, I have to go to either the UPS or FedEx station to pick up the packages. my point is that UPS and FedEx take the “adult signature” issue seriously. The wholesalers simply cannot make an issue over that aspect of the process in their scare tactics or teenagers getting their hands on wine. It’s too easy to get access to alcoholic beverages in other ways that the wholesale associations dont’t want to recognize.

  9. Thomas Pellechia - July 1, 2008

    “It’s too easy to get access to alcoholic beverages in other ways that the wholesale associations dont’t want to recognize.”
    They recognize them, Fredric, they just don’t want others to recognize them.
    Tom’s right on: the only argument Craig Wolf has–crying wolf continuously–is fear.

  10. Amanda Lynn - July 1, 2008

    There seem to be two wolfs howling, three if you include yourself.

  11. Heritage Vineyards - July 1, 2008

    You should really check us out here in NJ Tom! We’d love to have you. The Garden State doesn’t get half as much credit as we deserve. It doesn’t get any better than Jersey Fresh Peaches and we demonstrate that with our award-winning Peach Wine, which offers the perfect combination of sweetness and slight dryness. We’ve even beaten out some French and California wines with our Merlot. Our 2005 Chambourcin just took home the Governor’s Cup for Best Red Wine, beating out 22 other state vineyards. You should look into doing a post on Jersey Wines, especially those in the lower region such as Heritage Vineyards. We’re sixth generation family owned 🙂

  12. Thomas Pellechia - July 1, 2008

    I’d respond if I knew what you meant by that remark. Care to elaborate? Or are you content with dropping little fuse-less bombs?

  13. Michael Teer - July 2, 2008

    The irony is that we retailers purchase most of the wine we ship through wholesalers. Why would they not want to increase that business?

  14. John Kelly - July 2, 2008

    I have to say, right on Tom! But you are really howling into a gale against the WSWA, when every word they utter on the subject is punctuated with dollars in the pockets of politicos.
    AFAIK the common carriers have staked out a legal position, supported by recent judgements, that it is not the responsibility of their delivery people to enforce local alcohol laws. However, it seems that they are well on the way to establishing that they will strongly enforce their own internal “signature required” regulations. It is up to local jurisdictions to hold that a nationwide “signature required” stricture satisfies local “over 18” alcohol proscriptions. This is a tough step for local legislators to take, especially when they are being paid not to.
    But frankly the whole thing is moot to me as a small wine producer, so long as I have to (or pay someone else to) generate something like 300 monthly reports to sell direct into all 50 States. What the WSWA fears more than anything else is Federal legislation on this issue, and they have the States with them on this one.

  15. Richard Peden - July 2, 2008

    Great conversation, Tom.
    Since “fear” has been brought up, let’s open the gate. If the carriers are afraid of liability, then the customer/account holder should sign a release to all packages delivered to that address and sign off on liability.
    If Fed Ex/UPS are so afraid, how about embracing the fear and become the delivery source of choice and therefore a monetary positive? This entrenched position of having a chokehold on “perceived values” is so old paradigm. This will change and who is the new, unheard of company that will create a whole, new connection between artist and consumer?

  16. Liz - July 5, 2008

    I ship UPS/Fed Ex quite a bit for the winery I work with, and they both embrace shipping wine. Fed Ex has a section of their site devoted to wine, and a deal worked out with members of the WI in California:
    I have been involved in Direct Wine sales for nearly 10 years, and it has changed drastically. Compliance is a PITA, but each winery (and retailer) can easily do a ROI model to see if a state is worth it. Then there are compliance websites that are great at doing that so you can run your business. DTC and DTT are viable channels that are not going away. Even Amazon is joining in the fun.

  17. Terry Hughes - July 7, 2008


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