Answering Questions From Wine Blog Readers
We get mail here at FERMENTATION. Often that mail is from good folks who just have questions that need answers. I'm always happy to oblige. For example, I recently received this email from a happy reader who obviously follows this blog:
Tom:
I want to know who made you the king of wine sales? If you don't like the three tier system and distributors then why don't you find another country where you can Flack for your shitty wineries and leave the rest of us alone?
You have no idea what distributors do. Wine drinkers wouldn't have anything to choose from if distributors were run out of business like you want to see happen.
You are so interested in mocking distributors ands the WSWA, why don't you show up at the WSWA convention? Id' love to see the reception you get.
The reader didn't leave their name. But I'm still happy to answer their important questions.
Dear Happy Reader:
Thank you for writing. I'm always happy to answer readers' questions when I can. Let me see if I can help you with your questions.
One is not made or appointed "King of Wine Sales". If I'm not mistaken, it is a hereditary title. For the record, I am not actually the King of Wine Sales. It turns out my father worked in construction and never actually held the "King of Wine Sales" title. So, obviously I could not be the King of Wine Sales.
I too would be interested in discovering the reaction that would be afforded me were I to attend the Wine & Spirit Wholesalers Annual Convention. However, to answer your question I am not attending this year because I have other commitments. Yet, I'm sure that were I to attend, a number of interesting and provocative conversations would unfold between myself and wholesalers from across the country that are attending. For example, I'd love to speak to a various wholesalers about this particular admission by WSWA's Director of Public Relations Nancy White:
"We are dependent on the three-tier system. Our members
exist because there is a three-tier system for alcohol distribution."
Discussing this admission might at least enlighten me as to "what distributors do", since I know you are concerned that I understand this a little better.
I hope I've been able to answer your questions. Please don't hesitate to write again if you have other questions.
Sincerely,
Tom Wark
What an amazingly well-informed response you gave. You never cease to amaze me with your capacity to learn new things about this crazy wine industry. Who would’ve thought that the reason distributors exist is because of the three-tier system.
That being said, there’s lots of other industries where distributors exist between manufacturers and retailers. At the same time, I have this amazing Internet thing that lets me go online and buy direct from manufacturers, or from retailers who are large enough to get products direct from manufacturers, passing the savings along to me, the humble consumer.
Best of all, some online retailers have such a shallow supply chain that they forward my order to the manufacturer, who ships their product from *their* warehouse direct to my door.
It’s amazing what today’s free market economy is capable of. Wouldn’t it be something to have that kind of flexibility in the wine industry?
Wow, someone woke up on the wrong side of the bed.
First an admission, I work in the three tier distribution network. That being said I believe there are valid reasons for the system. Internet sales may be growing but there is no way a winery making 5000+ cases a year could self distribute. Restaurants typically order by the bottle or single case due to storage and financial concerns and most would probably have to buy from the remaining retailers at their marked up price resulting in higher not lower prices. Finally who is to say with the “middle man” removed prices would go down? Wineries are in the game for profit as much as any link in the chain. Oh, one more thing, how would the wineries like to have chase down buyers who buy on terms then don’t pay? They may have 50 distributors now but imagine the increase if they sold direct to stores/resturants/individuals? COD only? Not feasible for the trade without out of stock problems. Not to mention the various charitable things all involved do outside the industry.
Gerry:
Fair points.
One question: How do all these points you make speak to the fact that the wholesalers argue that the 3 tier system’s integrity is so important that consumers ought not to be able to purchase wine from retailers over the internet and have it shipped to them.
Actually two questions, why shouldn’t a winery be allowed to try to self distribute if it wants to, despite the problems you cite.
Most current laws prohibit either of these things.
@Gerry and all other distributors
The point isn’t to end distributors and the three-tier system. We’re just trying to open the lines so that consumers can order wines they want from where they want.
I’m sure distributors will be just fine and go on serving their retail and restaurant clients. That’s okay with us.
Tom, like your response about not being King of Wine Sales, father in construction bit. Made me laugh on that one!
Great post Tom! As a resident of the state of Texas, I have renewed energy for this topic, after an Appellate Court decided that us Texans shouldn’t be able to buy from out of state retailers.
For people who live in places that don’t have very good wine stores, such as my hometown, this system causes a ridiculous limitation on the amount of choices that I have as a consumer. If I want anything outside of extremely common varietals of wine, I’m pretty much screwed now. I have zero sympathy for the distributors, when them getting their way means that I can’t order a bottle of Brunello, something I can’t find anywhere here in Lubbock, from an online retailer.
I have a blog troll that I wish I could attempt responding with such a diplomatic and on target come back…of course you are the king of wit in my books…
There are some really, really clear examples of why the 3 tier system is broken how it is currently constructed.
-Met a winemaker on my last Napa trip whose father owns several restaurants in a no ship state….can’t get a distributor to place his wines at his dad’s restaurant.
-I can’t ship my wine club wines to relatives in Texas…how exactly does that make sense, especially since they can ship wines to me?
-The most idiotic of them all. We have placed a wine we featured in our club at a local restaurant whom we reworked their wine list. We had to buy from the distributor instead of the winery because of their distribution agreement. Yeah, the distributor really deserved their cut there.
Jack-is Lubbock still a dry county? I thought that was suppose to change for tax reasons.
Well I think most in the industry would rather the winery to keep the majority of the profit, as opposed to what amounts to the current system.
You might be surprised how many restaurants could, in fact store enough wine to make it worthwhile to buy by the case.
That being said I agree that distributors have a place in this industry and they do serve a vital purpose. Stopping direct shipping to individuals though is just going to make the entire network look both backwards and corrupt.
‘do not hesitate’…I think the writer already did not hesitate.
as far as consumers buying from out of state retailers we would probably not lose any sales as we have a very agressive set of retailers in our state. my opinion is that purchasing across state lines will someday be universal based on previous court rulings. a winery currently does have the right to self distribute in [i think 33 states] but i don’t know one winery and i know quite a few, that would want to go it alone. imagine the phone call from a winery in sonoma to a high profile zagat rated restaurant on the east coast trying to make a sales pitch. ps often it is the wineries who dictate who we sell to. thanks for reading and not knee jerking some anti-distributor diatribe.
on your first point, it’s funny there was a lawsuit about just this, turned out by the time the case came to court the winery was distributed in the state. also, we taste 300 wines a month for consideration and most are not worth the price for the quality. do i have to accept every wine that is offered? let the winery peddle they wines through their clubs and online specialty sites but i want to bring quality and value to our state.
Gerry, what your distributorship decides to represent is your business and should be your business.
But, distributors and their associations, because they are given a special, state-mandated place in the middle of the three tier system, means that wholesalers have been able to use the wealth that position has generated to help assure consumers are not allowed to buy wines from out of state RETAILERS. That means that there are thousands upon thousands of wines consumers can’t get their hands on because members of your industry have worked hard to prevent this.
Not very consumer friendly.
Lots of times I read folks like you that comment on this blog as distributors saying, “well, I really don’t think direct shipping by retailers or wineries would hurt distributors and I’m not against it.” Yet I’ve never heard anyone like you ONCE stand up and say this in an environment where it matters. You don’t write your state legislator, you don’t tell the media this, nor do you tell this to the Associations that represent you.
I think there must be some anticompetitive clause which is legal in territory definition contracts of distributors. Working in retail in an exclusively defined territory affords limited choice, although, as gerry mentioned, at least there is some [blindered] spectrum. I guess there are different intensities of pro-choiceness, from a retailer perspective.
i am guilty for not standing on a soapbox proclaiming the ills of the industry, but my responses are personal. i also happen to live in a state with many excellent retailers and choice does not seem to be a problem. if consumers in a state with limited choices were allowed to buy out of state would we then hearing how they were putting local shops out of business? or if the distributors are the problem, wouldn’t they be forced to try and distribute more brands to compete with out of state selections? i am not sure whether the battle is over someone being able to get something not locally available versus someone wanting that same wine cheaper versus those who want to buy directly from the winery no matter whether it is already distributed or not.
I don’t know why distributors get so upset. There are only two kinds of distributors:
1. Bad distributors with more wine brands to sell than is possible.
2. Good distributors with more wine brands to sell than is possible.
As all off them have more wine than they can sell they should just leave direct shipping alone.
As usual, your enthusiasm outruns the facts. “most states prohibit…” Bullshit. Only 14 of 50 states prohibit direct shipment, according to Wine Institute, two put significant limits, 32 allow direct shipping while squeezing high license and tax-related fees from the wineries.
Are wineries slapped with high license fees and the like…of course. It is taxed, it is tough to track without the wholesaler link. So if a winery wants to ship, they must face the same requirements as the wholesaler. The wine industry is self-delusional, thinking they aren’t part oof the alcohol industry. They sell food that is that has nothing to do with the beer-guzzling, whisky-shooting heathens in fly-over country!
As for out-of-state retailer to consumer, it is about taxes, pure and simple. Figure out an effective way for a state to track and collect taxes from out-of-state retailers and you’ll wine your case. As for the guy who can’t get his son’s wine distributed to his restaurant…that’s called cherry picking your horror stories. Distributors can do the same.