Why Are America’s Wine Wholesalers Giggling?

“We have a system set up in this country for distribution (of wine) that is
designed to create accountability and responsibility. Amazon to their
credit tried to abide by the laws that created accountability. When
they found out they were unable to do so in a cost effective way, then
they had to at some point bail out. The larger issue
is if Amazon and its resources couldn’t do it legally, obviously these
other companies aren’t doing it legally and taking advantage of the
lack of state enforcement.”

Craig Wolf, CEO, Wine & Spirits Wholesalers Association

Mr. Wolf should be extraordinarily proud of the success that he, as CEO of the largest wine wholesaler organization in America, and individual wholesalers have achieved in their attempt to limit as much as they can consumer access to wines. Their latest victory is Amazon.com's retreat from selling wine on-line. The inane, archaic, and wholesaler-supported regulations that define the three-tier system are what Amazon.com was up against. America's wine wholesalers support these anti-consumer, anti-competitive regulations precisely to be able to blunt and stop entry into the wine business by companies like Amazon who might be able to demonstrate the nonsensical nature of much of the three-tier system, not to mention the redundancy inherent in having state's mandate the use of wholesalers to get wine to market.

However, that said I think it's important to look closely at the statement above, made by Mr. Wolf in an interview with Wine & Spirits Daily.

“We have a system set up in this country for distribution (of wine) that is
designed to create accountability and responsibility."

Even if this were true, what are the odds that a system designed in the 1930s, when there were hardly any wines being produced in the United States, when Americans rarely drank wine and when it was impossible to ship wine across the country without ruining it, would have any relevance to today's wine market? That's a rhetorical question. What was once a system set up to give states accountability and promote responsibility has turned into a welfare and bailout system for America's wine wholesalers. "Designed to create accountability and responsibility" is really just a euphemism for "a system that guarantees wine wholesalers control of the market at the expense of wineries, retailers and consumers".

"Amazon to their
credit tried to abide by the laws that created accountability. When
they found out they were unable to do so in a cost effective way, then
they had to at some point bail out."

Wholesalers has spent millions and millions of dollars that only they in the middle tier of the three tier system could afford to spend, to influence legislatures to pass and keep in place laws that make it as difficult as possible for companies like Amazon to safely bring wine to the consumer; wines that the wholesalers have no interest in bringing to the consumer. What Mr. Wolf does not say is that there are any number of ways the regulations concerning the distribution of wine could be changed that not only allowed for accountability, but also provided consumers with real choices, created a fair playing field for all parts of the three tier system, promoted competition, and forced wine wholesalers across the country to actually work for the money they make rather than having it handed to them on a government issued plate.

"The larger issue
is if Amazon and its resources couldn’t do it legally, obviously these
other companies aren’t doing it legally and taking advantage of the
lack of state enforcement.”

Mr. Wolf is making statements here about which he knows nothing. He doesn't name the names of those that he says are shipping illegally for a very good reason: he's a lawyer and knows better than to make that kind of reckless accusation. But more importantly, he gets the whole issue wrong. The larger issue is not about illegal shipping. The larger issue is why wholesalers spend millions of dollars to preserve a system that in states across the country produces terrible selections of wine relative to what's really available in the U.S. Market? Why do wine wholesalers ALWAYS oppose proposals that allow consumers to access the vibrant selection of wines in the U.S marketplace, forcing them to choose from the rudimentary selection that wholesalers want consumers to stick with?

The bottom line? Right now, across the country, wine wholesalers are jumping with joy, laughing and giggling uncontrollably because they were able to successfully thwart a program that would have given consumers better access to wine.

Yes, I know its just more bitching and moaning. Fine. If you want to do something about this there are some options.

1. Find out who your STATE legislators are and write them telling them you want to be able to have wine shipped to you from both wineries and retailers.

2. Educate yourself about retailer-to-consumer shipping laws and politics.

3. Educate yourself about winery-to-consumer shipping laws and politics.

4. Become a Facebook Fan of Specialty Wine Retailers Association

5. Write Craig Wolf and express yourself regarding wholesalers' agenda.

41 Responses

  1. Kevin - October 28, 2009

    Well said. I was once a retail wine buyer here in GA, one of the most protected of all states when it comes to the distributors power. I still wanted to see the ability for customers to order wines online, even though I knew it would hurt us in certain ways, we’d adapt to the marketplace conditions. People aren’t going to stop buying wine in their local store b/c they can order them online, they’ll just change what they order. If the online big boys can sell Caymus or Silver Oak cheaper, then we’d either stop carrying them and offer alternatives or lower our margins. Competition is always a good thing and right now, the crazy web of laws that govern alcohol in this country are stifling it.

  2. Thomas Pellechia - October 28, 2009

    “…these other companies aren’t doing it legally and taking advantage of the lack of state enforcement.”
    What a marvelous statement, coming from someone who represents an industry that throughout the country has members who get caught regularly paying off legislators, circumventing rules, and generally practicing strong-arm tactics to keep their hold on distribution.

  3. Mark Storer - October 28, 2009

    I’ve been dealing with this in a small way at my company, biorganicwines. Our marketing model is indeed online, but we won’t be taking on wholesalers or laws–in essence, we’ll market the wines and provide links to purchase those wines. In the end, though–the wineries themselves are, of course, limited as the where they can ship those wines and that’s an obvious problem and a stifling of competition.
    Mr. Pellechia’s comment seems somewhat odd considering the circumstances. I only wonder this, Mr. P.–do you think if competition were more open and the playing field more level that there might not be any need to be in contact with state legislators, etc.? At the heart of this debate is the same thing at the heart of all consumer driven debates–just how big a role should the government play? I submit that whatever your answer, we could all agree that many industries would be far better off without so much regulation. But then again, it’s hardly ever been tried–so who’s to say?

  4. Thomas Pellechia - October 29, 2009

    Why does my comment seem odd, considering the circumstances? I’m talking about an industry that came right out of Prohibition (with the same players) and over the years has a record across the country of collectively having been caught numerous times breaking the legalities it so proudly wants to preserve, legalities that also stem from, and were created as the result of, Prohibition activities of the same industry.
    To your question about competition: Unfettered commerce among the states was decided a long time ago in the Constitution. What the 21st Amendment did was to create a one-sided exception to that commercial right.

  5. Randy Sloan - October 29, 2009

    Tom, thanks for writing about this. Your observations are spot on.

  6. 1WineDude - October 29, 2009

    Tom, I had the same reaction to Amazon’s news as you did.
    And I blame wine lovers.

  7. Raj - October 29, 2009

    “Most Americans were satisfied with the system [the wine distribution system] as it is except for a small, very vocal segment who say they can’t get their bottle of 1997 whatever.”
    Craig Wolf, Wine & Spirit Wholesalers Association New York Times – January 30, 2008

  8. Gary - October 29, 2009

    I just came to your blog after reading that Wine Enthusiast just gave Harvey Chaplin a Lifetime Achievement Award. I guess well deserved, just not for anything that has anything to do with promoting fine wine.

  9. Thomas Pellechia - October 29, 2009

    “Wine Enthusiast just gave Harvey Chaplin a Lifetime Achievement Award”
    Oh my, I can imagine what Steve Heimoff’s blog comments might look like if this gets out…

  10. Steven Mirassou - October 29, 2009

    Distibutors and small wineries could peacefully (and perhaps profitably) coexist quite nicely if we (writing as a small winery) simply had direct shipping access to all states.
    The big distributors serve their constituencies (they are not going to sell my small brand anyway); consumers who want a bottle of wine tonight can go out and get one from the local wine shop/grocery store/state store; consumers who want a special bottle of wine, one that they enjoyed on their trip to California, can pick up the phone and get it shipped. FEDEX and UPS will check IDs; the state makes the tax revenue that we’d gladly pay; the gov’t gets the reports and excise tax it wants, the consumer would have the special bottle she wants, the big distributor makes his cut for just taking an order for the every day wine. Eezy Peezy, Life is Breezy.
    If only…

  11. tom merle - October 29, 2009

    One has only to observe the situation in California where all the channels coexist to validate Steve Mirassou’s comment. Actually, we Californians are even more enlightened=market friendly. Producers the size of Steve’s winery–StevenKent/La Rochelle–often do use distributors in CA while also selling wine online, and without ruffling the feathers of their distributor.

  12. Scott - October 30, 2009

    Hey Everybody:
    With all respect for anyone’s right to express any opinion on any subject, I will now rain on the parade of alcohol deregulation yabbos presented above.
    There’s the way things are, and then there’s the way you think things oughtta be. Sadly, in life, these two don’t often coincide. May I present the reason that widespread availability of wine online will not happen in the lifetimes of anyone able to type sentences into this blog:
    99.9% of America doesn’t care about this issue! And believe me, speaking as a resident of a Southern state with some of the tightest restrictions surrounding this question, anybody who does want wine they can’t get at a local wine store still finds a way to get these wines.

  13. Randy - October 30, 2009

    Having written to Mr Wolf, I feel better about myself, but Scott might have a good point. What if most consumers don’t care? What if they’re ok with the crappy gallo/kj spin off labels available at their locals markets?
    Not for anything, I can ship legally to 49 states. Through a third party shipper, we can get into the tough DTC states. Why isn’t anyone talking about this?
    It costs more for my clients, but we do it weekly. So it is possible to go direct now, however it simply costs more.

  14. Steven Mirassou - October 30, 2009

    That’s exactly the point…all the wineries, for whom the direct shipping channel is really important, need just the .1% (although, I think you’re way off on the percentages).
    What kind of argument is “99.9% of the people don’t even care about the issue, but we’re going to make it illegal anyway”?

  15. Michael - October 30, 2009

    Just to pile on… there is a sufficiently large portion of the country open to direct shipment and DTC wine sales still are nowhere (except for a couple dozen WS/WA anointed icons).
    IMHO, spending more time trying to open up 20% more of the country is a waste of time compared to trying to address the underlying consumer indifference about online wine sales. And to do that, you have to address the reality that the online wine sales experience is crap.
    It’s a shame for the entire industry that state regulations killed the Amazon initiative.

  16. Tom Wark - October 30, 2009

    Did you know that while wineries can legally ship to 37 states, wine stores and wine retailers may only legally ship to 13? And those 13 do not include TX, NY, FL, IL, OH, CA, WA, TN, MA, NJ.
    This situation works well for wineries and members of winery wine clubs. But if you want to buy that Austrian Gruner or and older Bordeaux or buy wines at an online auction or even purchase a variety of domestic and imported wines from any number of the GREAT wine stores across the country, then you probably have a real problem with the current state of affairs.

  17. Phil - October 30, 2009

    It is silly to continue to demonize the wholesale networks for this issue. Of course they are going to do everything to protect the make share they have. Would you turn around and give up 5-10-15% of your business tomorrow just to be “fair”. The real slime bags are the elected politicians taking the “bribes” to or succumbing to the coercion to let the bill’s pass or not having the spine to make changes to the system.
    I think gorilla in the room is how few wineries really take action on this issue. That said I am sure many wineries do not want to upset the wholesalers they have by strongly taking up the issue.
    While consumers are the core supporters of opening the markets until we have wineries, retails and possibly some importers fighting for more open markets it is unlikely. And in this astoundingly complex and fragmented industry (even outside of the regulation aspect it is complex) I just do not foresee a solid force that will be powerful to make the change happen.

  18. Scott - October 31, 2009

    It’s also of interest to me to hear very sophisticated folks from parts of the country that really have their palates on the cutting edge of wine culture cry about us poor slobs in the hinterland who can’t get our hands on Gruner or older Bx. Chx….
    It might interest you and prevent you sobbing into your Reidel Lachryma Christi stem to know that I live in a very restrictive Southern state, and I have not experienced any trouble finding any wine at my local retail shops. The only exceptions to this would be the Super-All-The-Rage Napa Cabs that I’d have to wait for years to earn my way up the mailing list to get anyway; that’s even if DTC were an available option to me. Hey, most of us even have indoor plumbing and television-sets nowadays. Will wonders never cease!
    Take whatever position those who pay your salary tell you to, Wark. But please don’t pretend to be acting selflessly on behalf of the helpless wine consumer. We’re actually not having any problems buying wine.

  19. Steven Mirassou - November 1, 2009

    The reality is that there are THOUSANDS of wines that you can’t get at your local retailer. The fact that you don’t know about them yet or that you are satisfied with this situation doesn’t change it.
    I come at this issue with a purely selfish motivation: as a small winery owner, the fact that I cannot ship a legal product into a third of the country is simply wrong. I may never do a good enough job to get a case of my wine directly into the hands of someone who lives in your state, but the opportunity to be rewarded for the effort should be available.

  20. Mark - November 2, 2009

    I think he is going under one blatantly false assumption, that a referral from a corner store(wine store, whatever) is better then something you read about on the internet. These days, it simply isn’t true.

  21. Scott - November 3, 2009

    FYI, although I neglected to mention it while beating my chest about our new-fangled tech gear, we do also have the internet nowadays….and I don’t think a local wine shop’s recommendation or one from a blog or website is inherently more valid than the other, just depends on the abilities of the recommender.
    Although, to update a classic: perhaps in today’s wine culture those who can, do; those who can’t, blog….

  22. bobzaguy - November 3, 2009

    It isn’t 99%, I think it’s much closer to 65% of the adult public who doesn’t have an interest in wine. Not to mention other alcohols.
    Of the remaining 35% who do have a range of interest in wine from “once a month” to “once a day”, possibly as many as up to half drink wine “once a week” to “once a day”. Half of those could be considered as pro-active enough to consider joining any shipping revolution.
    So: (very unscientifically, pardon)
    and it doesn’t line up well, sorry.
    2008 US pop. 304,059,724
    under 21 (26%) -79,055,528
    225,004,196 possible alcohol consumers
    78,751,468± possible interest in wine
    39,375,000± drink some wine variously
    19,200,000± drink a fair amount regularly.
    This (19.2M) is a possible number of very serious wine drinkers in the country. The number is growing each year, probably by the same 1% or so as does the population overall.
    This is more realistic than the numbers cited. It is a great number of people who could be addressed towards this issue with hopes of some sort of public support.
    I am sure somewhere there are real numbers that are available, but I couldn’t find any in Google.
    I don’t mean to achieve anymore than add to the serious debate about a positive position on the shipping issue.
    Obviously the wholesalers, wine, spirits and beer combined, are of a singular interest to stop any and all types of shipment through the internet. Their business is shipment. They don’t anyone to mess with that. A God-given right at this point in time.
    The gov. interest is in the timely collection and depositing of their tax money. Which the wholesalers claim as their work.
    All the other presented issues are smoke and mirrors.

  23. Joe - November 4, 2009

    Get some facts straight!
    1- Amazon had no interest in selling the small obscure brands that a small wholesaler like myself sell. We take the risk by finding the winery buying cases then going out and selling them to the retailer. Then we have to go to the store again and sell it to the public for them so that the brand gets some recognition. Most of my brands can’t pay WS $30,000 for ad space and get 91pts for an average wine.
    2 – Only the big brand owners like Constellation, Diagio or KJ can afford to bring their wines to market and cut out a layer, these are billion dollar + companies that shill a lot of mediocre brands that the public knows and wants because of the marketing $. The small 1,000 to 10,000 case winery needs a small boutique wholesaler to be passionate about their winemaking vision and sell that vision to the retailers and restaurants in their area.
    3 – Blame the uneducated wine drinking public and score whores for this. If you drink Manage-A-Trios and think its good which 80% of the public do, they need the large wholesalers to get their branded wine into every corner 7-11 for their convenience. The score whores will buy anything that gets 90+ and up and those are the wines that will sell online at and Amazon or Wine.com. They are not going to look for or find well crafted small winery wines that don’t have the buying power to buy ad space in WS or the interest in making formulaic sell your soul to get Parker point wines. These small wineries need the boutique wholesaler to get out and promote their brands to the buyers and the public. Most of the wines I sell will never make it to Wine.com or any other national web based website.
    4 – The smart small winery sells their wine to the public online for the approximate same price that it will sell in their most expensive market. They can then discount their wineclub members, etc and bring down the cost for those who buy direct on a regular basis.
    5 – I and most of my small wholesaler friends have no problem with direct shipment. We like seeing our brands grow.
    6 – Lest we not forget the specialty retailers and esppecially the restaurants out there get a hefty mark-up too which I think is relatively fair but the restaurants are the ones who are really screwing the public. Lets look at a typical wine that retails for $20 and sells at the restaurant for $50 to $70.
    Winery sells to wholesaler for $9 a bottle, wholesaler sells to retailer/restaurant for $13.33 a bottle, retailer sells to customer for $20.00 a bottle, the restaurant sells to public for $50.00 to $70.00 a bottle.
    Who is making all the money here???? Sad thing is most wineries are desperate for the restaurant to promote their wines and are happy with the way it works!
    Just some random thoughts from a small wholesale sales guy who loves promoting and selling interesting well made wines and I am not laughing my way to the bank!

  24. Scott - November 4, 2009

    You hit the nail on the head regarding restaurant wine markup. While the wine blog universe frets over direct shipment, every time anybody buys wine at a restaurant or hotel they get cleaned and gutted by the unreasonable wine prices in on-premise channels.
    We can all argue over how many people are adversely affected by a perceived inability to access of certain wines whose marketing/sales people seek excuses for their ineptitude. But there is no question that ALL wine drinkers are adversely affected by usurous restaurant markups. Where’s the furor in Blog City over this issue?
    How about it, Tom Wark? Wanna take a position on this subject and strike a blow on a front that legitimately is a problem?

  25. Tom Wark - November 4, 2009

    You’re kidding right? The reason we “fret” about wholesales working their hardest to prevent wineries and retailers from servicing the market is because of marketing ineptitude?
    We fret because the state mandated three tier system is discriminatory, diminishes the vibrancy of the American wine market, keeps consumers from getting the wines they want, artificially props up the wholesale tier when it couldn’t be sustained as well on its own and is one of the culprits in creating higher prices.
    What if restaurants and retailers could purchase directly from the winery? But in most cases they can’t because of the state mandated three tier system.
    As for high wine prices, I think if you do your research you’ll find it is a regular discussion among bloggers as well as traditional wine media. When certain restaurants present fair wine pricing they tend to be praised.

  26. Scott - November 4, 2009

    In a sense, you are correct when you state your position that the three tier system is discriminatory. It discriminates against wines that cannot be sold, either because the wines are subpar or because the marketing/sales people for certain wines are incapable of creating demand for their product. In the marketing world, I think this would be categorized as ineptitude.
    I suggest that in all or at lest most markets in America, there are small and passionate distibutors of wine who would leap at the chance to represent a product that consumers actually want.
    The failure to recognize this fact and the inability to capitalize on it can only be laid at the feet of those responsible for selling a winery’s product. One can only hope, for their sake, that those signing their paychecks will swallow conspiracy theories easily.

  27. Tom Wark - November 4, 2009

    Scott said:
    “Tom, In a sense, you are correct when you state your position that the three tier system is discriminatory. It discriminates against wines that cannot be sold, either because the wines are subpar or because the marketing/sales people for certain wines are incapable of creating demand for their product.”
    Scott, explain to me the value of prohibiting retailers from shipping wine to consumers direct.
    Second, there’s only ineptitude if you frame the issue as the three-tier system being the only possible way of marketing wine. But of course you know that’s not the case. The quality of a wine has nothing to do with whether or not it is picked up by a wholesaler at 50% off the suggested retail value of the wines.
    Until people like you are willing to support a consumer-centric, level playing field for both retailers and producers, your comments will carry the severely limited value that they currently carry.
    And until the “small and passionate distributors” that you speak of actually stand up and speak out publicly against the anti-consumer positions taken by the larger, presumably less passionate wholesalers that so completely control the beverage politics agenda in most states, your suggestions and pleas will be taken with the grain of salt they deserve to be taken with.

  28. Scott - November 4, 2009

    In my mind, there is no value in prohibiting retailers from shipping wine directly to consumers provided the retailer is licensed by the state to do so. The problem I have is with a more basic assumption of your argument, and that is the question of why this needs to be made possible. I do not agree that there are consumers who are being prevented getting the wines they want by malicious forces in the wine business.
    Without delving too deeply into junior high economics, with which I presume you have some familiarity, when there is demand for a product, there is supply. Here’s something you can explain to me. Why do you believe any wholesale company, regardless of their size or affiliations, would prefer not to sell and profit from a portfolio of wines that the consumer wants to buy? It is frankly too ridiculous to take seriously.
    And, to address another point you tried to make, I know that small and passionate distributors speak up every chance they get against the way multi-state distibutors do business and the kind of wines they sell.
    My comments carry just as much value as yours, I think. If you don’t have any grains of salt handy, perhaps you’d rather prevent anyone who disagrees with your views from commenting on your blog.

  29. Tom Wark - November 4, 2009

    Of course consumers don’t have access to the wines they want. Can the collection of any state’s wholesalers really distribute every wine available in the American marketplace? of course not. In particular 1000s of imported wines available in the U.S. marketplace are not available in IL. Yet IL consumers are prohibited from having a retailer in another state that carries it sell it to them and ship it to them. The same is true in 35 other states.
    In every case where a proposal to allow this is put forth in state legislators, wholesalers bring their considerable weight toward blocking it, claiming children are at stake. And guess what, those small, passionate wholesalers NEVER stand up and say we think consumers should be able to buy from out of state retailers. NEVER.
    As for you producer who has no demand, why would a producer, who can’t get the time of day from wholesalers, even market their wines in states they can’t get their wines into. On the other hand, once they start shipping direct in that state, bypassing lazy wholesalers, and develop a direct market at full margin, THEN the wholesaler wants to represent them and wants to buy the wine at half price.
    The three tier system is not the kind of supply and demand model you make it out to be. There is no competition when producers are required to sell to wholesalers and retailers and restaurants are required to buy only from wholesalers.
    Scott, I’ve working on this issue for 3 years. Ive been to numerous states where the issue of out-of-state retailer shipping was being considered in the legislature. In every case the local wholesaler associations come out strongly against it. AND NOT ONCE, has any small distributor showed up to testify in favor of the bill, sent out a press release supporting the bills, offered to help get the bill passed. NEVER. So please, don’t tell me small distributors speak up on this issue. They never do.

  30. Joe - November 4, 2009

    To clarify a bit!
    1 = I have no problem with direct shipping, nor would and boutique wholesaler. It is the SWS and Wirtz people who do.
    2 = Most passionate small wholesale salespeople have no interested in selling KJ, Menage A Trois, Ch St Michelle, Mondavi, Beringer, Gnarly Head, Edna Valley, etc. These wines are mediocre and boring and what 98% of the public wants. I represent the small wineries that could never sell direct, don’t have ace marketing teams or the budget for them. How many 1,000 to 10,000 case wineries afford to staff a company in all the markets they want to be in? ZERO. Restaurants and retailers want there wine next day. They are not going to buy 20 cases of a small production expensive obscure syrah and hold on to it so they rely on the boutique wholesaler to inventory it and deliver it when they run out. We are there JIT system. No restaurant will wait for delivery and want to pay the cost to overnight a case, nor will they want their wine shipped in the summer or winter by any method.
    Go ahead and get rid of the three tier system, that is fine by me but something will fill the void or there will be a lot of great wine sitting in warehouses in California because they will have no one in Chicago, New York or Florida to do the leg work for them.
    Also I don’t think Wine.com or Amazon are good for the wine buying public. They may drive down pricing but they are not doing anyone a favor by primarily selling over marketed wines or high Parker Points wines.
    The smart wine consumer finds a good retail shop, gets to know the buyer and takes there recommendations. Why by wines that are marketed at all, the only reason they have crack marketing teams is that they are mediocre wines to begin with! Can anyone say Santa Marghreita?
    As to the 1,000’s of imported wines that are unavailable in IL, it costs $45 to get an IL distribution license!
    Come on down.

  31. Scott - November 5, 2009

    Meet Joe. He is exactly the kind of distributor I’m talking about. He’s willing to take on a tremendous challenge by offering for sale small-production, hand-crafted wines against the tyranny of the Big Guys. Perhaps you can provide his contact info to your hand-wringing benefactors who “can’t get their wines into Illinois”. It would be of great benefit to the yearning masses of neglected consumers there.

  32. Tom Wark - November 5, 2009

    When someone calls for changes is laws allowing consumers to buy direct from out of state wineries and out of state retailers, or for changes that allow retailers or restaurants to be able to buy direct from wineries, why do wholesalers, big and small, assume this means the end of the wholesale tier and start defending the three tier system and claiming it needs to be in place?
    I think the reason is that for decades wholesalers have been given a government granted welfare entitlement. Do wholesalers really need the state to MANDATE their use? By law? If their services are so critical, as you suggest, then why do you need the state to mandate by law that your services be used?
    And tell me, if your services are so important, then why fear direct shipping of wine by out of state retailers and producers? Why do small wholesalers NEVER stand up for the consumer and support laws that would give consumers and retailers anywhere the right to do business together. Why?
    And why in the world would you tell an IL or WA or NY or consumer anywhere that in order to simply buy a bottle of wine not distributed in their state they should have to get a license to do so? Why not stand up for the consumer? Why not give the consumer some respect and advocate that they should be able to buy wines from whatever licensed entity they want?
    The reason is that small wholesalers act just like big wholesalers. They want government protection from competition.

  33. Tom Wark - November 5, 2009

    Yeah, I met Joe. He also appears to be a wholesaler who only has an interest in retaining the laws that have the state protecting him and other wholesalers from competition. When will wholesalers large and small, stop leaning on the government for state-granted welfare and protection from competition?

  34. Scott - November 5, 2009

    I can’t speak for Joe, but I’m sure he would tell you that he has plenty of competition. Hopefully he can depend on the big checks he receives from his state-granted welfare if the huge risk he took in opening his business doesn’t pan out.
    Tell us, Joe: are you “protected” from competition?

  35. Tom Wark - November 5, 2009

    How many other industries, Scott, have the state mandage that it must be used by suppliers?
    How many industries have Franchise laws?
    And what about those producers and retailers who take risks in opening their businesses?
    Seems to me if the state is going to mandate by law that producers sell to wholesalers, then wholesalers ought to be required to represent any brand that wants into the state.

  36. Steven Mirassou - November 5, 2009

    Let’s say there is a small winery in California that consciously chose to limit the number of wholesale markets into which it sold its wine. Instead, the winery catered to visitors that came to its Tasting Room. Some of those visitors are from out-of-state, like the wines, and want to join the winery’s wine club. Yet, it is illegal for the Winery to ship wine to a potential wine club member in a third of the states. How is that right? How is that damaging to even the smallest wholesale in a state?
    The Winery passed your smell test: it competently marketed its product to a wine buyer. Why should the three-tier system have any standing in this kind of transaction?

  37. Joe - November 6, 2009

    None of the wineries I represent are complaining, without us they would have nothing here.
    There are 70 licensed distributors in IL, none of them including SWS and Wirtz can sell all the wine they have so there is no shortage of wine in the market.
    I have no issues with direct shipping but that does not solve the major issues for small wineries. I have stated that twice now but you are so involved in believing your own myth that you don’t read or listen and instead insult my integrity. You obviously have your own agenda and I guarantee you make more money beating this drum than I make humping a bag every day trying to sell wine in a competitive over saturated market.
    I will tell you also that I represent one of the finest small books in the area and this job is tough. My wineries need me or someone else like me or else they won’t get the placements they need. We have plenty of wineries looking for representation and there are some pretty big names looking, the problem is there is too much wine and it offers very little value.
    As to all the great wines waiting to be imported, you have a serious problem with the Euro rising costs through the roof. Maybe we should get rid of the importers too and let the little Italian or French wineries travel to every market and sell there wines. Good Luck With That.
    I am pretty new to this business and don’t have all of the answers but learn every day. There are very few people that have issues with the way the system works.
    If you get rid of the laws here the wineries will still need people like me to get their message out. Your company can offer all of the marketing and strategy they want but the best investment any winery can make is getting samples in the hands of a wholesale sales person and have them work the wines and the relationships to get the placements. Small unknown wineries depend on my relationships for most of their placements, even my well known wineries depend on my relationships to get those placements.
    So register with the state, pay $45 and self distribute.
    There are wineries doing it in IL but they are owned by rich guys who have plenty of money to loose to get there ego wines out in the market. The old adage goes “How do you make a small fortune in the wine business? You start out with a large fortune!”
    Steven, as far as I know, you can ship wine into IL. I believe that is confirmed in Tom’s group IL FAQ’s.
    Explain to me how the wineries out there are going to get their wines placed throughout the market without the wholesaler or a broker or whatever system that would fill the void of eliminating the 3 tier system?
    The one winery I know of that has their own distribution license here in IL is only cherry picking a few restaurants and country clubs and have no market penetration beyond that.
    Also, I was not on the wholesale side when the laws passed but I contacted my state rep to tell them I was not for it. If I owned my company, I would certainly put my companies name out there as being opposed to the silly shipping laws that were created.
    My only argument here is that most of the wineries out there need me or someone like me regardless of the system in place. What most don’t need is SWS or Wirtz or the other versions of them around the country, 95% of their sales people sell boxes and could care less whats in them. 95% of the small wholesalers care what is in the box and that is the difference!

  38. Scott - November 6, 2009

    I actually don’t know the answer to your first question, regarding other industries which are licensed by states and who are required to observe and follow the somtimes onerous paperwork and tax-collecting duties incumbent on them to make it legal to do business in the state; I can’t believe there aren’t other regulated types of business for which a state’s government doesn’t have the ability to enforce these requirements outside its borders.
    As to franchise laws, even though that’s not the point of this ongoing conversation about direct shipping, I actually couldn’t agree more whole-heartedly with you on this question. If a supplier isn’t happy with the relationship with its distributor in any state, they should be free to go, or at least this should be a negotiable point between the two parties without outside interference.
    When it comes to risks taken by producers and retailers as compared to those taken by new and independent distributors, the same conditions should apply to both. Any business that opens and hangs a shingle knows what the rules are. A business plan to operate under conditions wished for but not actually in existence is a bad idea. If the producers or retailers you refer to based a plank of their future success on selling wine across state lines into states where that’s not legal, they should win a Darwin Award. And they will.
    Steve: see last paragraph.

  39. Tom Wark - November 6, 2009

    It doesn’t matter how wineries would get their wines placed in restaurants without a broker or wholesaler.
    Why, when there is a suggestion that out of state wine stores ought to be able to ship into a state or that wineries ought to be able to sell direct to restaurants and retailers, do wholesalers start talking like the suggestion is “let’s ban wholesalers”.
    That’s not what’s being suggested. What Im suggesting is that the STATE MANDATED use of a wholesaler by wineries and the BAN ON OUT OF STATE RETAILERS SHIPPING INTO THE STATE are both nothing more than protectionism for wholesalers in the state.
    If you are needed so badly by wineries, then why worry if all wineries can sell direct to restaurants and retailers.
    And why not stand up for the consumer, just once, and say publicly that they ought to be able to buy their wine and have it shipped to them from any in-state or out-of-state source.
    Wholesaler, big and small, never give an inch on these issues because they don’t have to because they are sitting in the easy position of being protected by state law.

  40. Steven Mirassou - November 6, 2009

    The point isn’t whether a business plan is well thought out. I posited a scenario that fulfilled your criterion: this winery competently created a relationship with a wine buyer…it did all the work, absorbed all the expense, and had a customer willing to pay for its product.
    The questions that I asked, and that you didn’t answer, had to do with the “rightness” and “wrongness” of the state system that would make that transaction illegal. I understand that it IS illegal, I am wondering why you think it should be so. Most of your posts on this topic are of the “stop whining” variety. Why is the status quo better than the a system that allows for both direct shipment and wholesalers? Why is “following the rules,” even if those rules are discriminatory and anti-consumer, preferable to changing the system?
    We can ship to Illinois, my comment was in regard to those states to which we can’t ship.

  41. Scott - November 7, 2009

    So Steve,
    Your point is that rules are discriminatory against those who choose not to follow them? I think any rule or law could be perceived in that way.
    If the consumer wanted the wines so badly from your imaginary producer, had distributors calling to ask how to get into business with him (which he would if people in other states actually sought out the wines), and the producer still insisted on saying no thanks and attempting to market his wines in a way for which there is no legal way to do so; I think you’d have a hard time drumming up much sympathy for anyone so myopic and unrealistic.
    The fact is that states regulate and tax the wholesalers and retailers within their own boundaries very heavily, and often at a large manpower and fiduciary expense to the state AND those businesspeople licensed by it. The other fact is that municipalities and states own the right to choose for themselves on such issues, as they should. They should and will also decide when and how to alter the rules of the game. This doesn’t mean I don’t think you should voice your opinion on such matters, but I think you’ll find most state legislators have bigger fish to fry than to enact new laws to benefit businesses in states they don’t represent.

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