REJOICE!! The Debate is Over!

Posted by Tom Wark on Oct 17, 2008

I can’t imagine what I or what the entire wine industry would do without the Wine & Spirit Wholesalers Association (WSWA) being there to let us know when the debate over the utility of the wholesaler tier is over.

Thankfully, the WSWA has announced that any debate over wine distribution in America ought to stop forever because a Texas academician has published a WSWA-FINANCED study that (incredibly) tells us that wholesalers are the best thing since buttered bread!

The new WSWA-FINANCED study writen by David Sibly is entitled, "Dispelling the Myths of the Three Tier Distribution System." The WSWA-FINANCED paper explains that "by passing or eliminating traditional beverage-alcohol wholesalers is
likely to negatively impact alcohol suppliers, local retail businesses
and consumers, and possibly collapse a highly successful system."

I’m still waiting for anyone to suggest wholesalers be eliminated.

Another nugget from the WSWA-FINANCED paper includes the startling revelation that the cost of shipping drives us the price of wines shipped direct to the consumer. Good Lord! How could anyone have missed this amazing new fact? And to think that wineries and retailers who direct ship to consumers have all this time assumed consumers didn’t notice the cost of shipping!

The WSWA press release announcing the WSWA-FINANCED report also notes the following:

"In the study, producers, wholesalers and retailers were interviewed in
order to shed light on the indispensable role of the middle-tier in
building brand equity and promoting and marketing the wide array of
products available to the consumer today."

Anyone notice who is missing from these interviews done for the WSWA-FINANCED report? That’s right. Consumers! Now why would you not interview consumers? If the WSWA-FINANCED report is ever to be re-written, I can point the author to some consumers who would have something interesting to say about consumer access to wine, the benefits of direct shipping, and their satisfaction with being able to purchase wines direct.

The entire WSWA-FINANCED report revolved as round two red-herrings: The idea that there is any debate over whether or not the wholesale tier ought to be eliminated and the false suggestion that anyone is claiming the wholesale distribution tier provides no value. I know of no one who has ever suggested that wholesalers ought to be eliminated. I know of no one who suggests that wholesalers don’t provide value. What’s at issue is whether or not the state-mandated requirement to use of a wholesaler to get wine to market is always the best and most value-infused way to distribute wines.

It clearly isn’t for many suppliers and it clearly isn’t for many consumers.

One of the most remarkable items in the WSWA-FINANCED report, though not the most surprising, is their willingness to straight out lie in the WSWA-FINANCED report:

"The Free the Grapes Foundation also suggests that the elimination of the distribution layer would result in consumer benefits including greater variety for consumers."

Free the Grapes has NEVER suggested that the distributor be "eliminated". Ever. And what’s even more remarkable is that if you look at the footnoted Free-the Grapes statement in the WSWA-FINANCED report (see page 7) that is supposed to underpin this false claim, it becomes even more clear that the author of the WSWA-FINANCED report purposefully misinterpreted the Free The Grapes statement. The question is, what’s the purpose of packaging this lie in the WSWA-FINANCED Report?

The answer is the wholesalers need to manufacture a claim they can successfully argue against and use to create pity for their numbers, while also making their opposite numbers appear radical. Creating this argument and this false impression is more important than stating the truth. And here’s the truth:

No one has ever said it would be a good idea to rid America of alcohol wholesalers nor has anyone ever said wholesalers don’t provide value to many brands. What’s being said is that the STATE-MANDATED REQUIREMENT THAT ALL WINE FLOW THROUGH WHOLESALERS BEFORE GETTING TO MARKET IS OFTEN AN INEFFICIENT SYSTEM FOR MANY BRANDS, RETAILERS AND, PARTICULARLY, CONSUMERS.

No where in this WSWA-FINANCED report is there any mention of the fact that the wholesalers benefit from a state-mandated requirement that wine flow through their hands before getting to market. And no where in this WSWA-FINANCED report is there any mention of the critical fact that under such conditions the wholesalers have the state-mandated power to keep any brand out of their market by simply choosing not to distribute it.

This critical fact isn’t just hidden in the WSWA-FINANCED report, it is absent.

The Wine & Spirit Wholesalers Association have claimed that with the issuance of the WSWA-FINANCED report we now have "most comprehensive analysis conducted on the current economics of the three-tier distribution system." And yet nowhere in this WSWA-FINANCED report is there any substantive or even partial discussion of the impact of how a state-mandated requirement that wholesalers be used to distribute goods impacts supplier access to markets or consumer access to the full measure of the American wine market.

In fact, what we have here is another in a long line of biased and sham WSWA-FINANCED papers that that shed no light on the most important issues that face the American wine distribution system.

One final note. A reader of this WSWA-FINANCED paper must go to a single sentence, buried in a long footnote, on the bottom of page five to discover that, "The authors gratefully acknowledge financial assistance from the Wine & Spirits Wholesalers of America, Inc."