Why the November Election Matters to the Wine Industry
The upcoming November 2nd election is among the most important for the American wine industry in a very long time. Two issues should be watched closely by the wine, beer and spirits industry: 1) the outcome of the race for control of the House of Representatives and 2) the outcome of Initiative 1100 in Washington State.
CONTROL OF THE HOUSE OF REPRESENTATIVES & H.R. 5034
Despite the 137 Co-sponsors of the Wholesaler Protection Bill known as H.R. 5034, the beer and wine wholesalers who support the legislation that would give state the legal and Constitutional ability to discriminate against out of state commerce have a difficult road to travel to get their bill passed. Standing in their way is House Speaker Nancy Pelosi who has reportedly said she does not support the legislation and would work to keep it from passing.
The Speaker of the House has great influence over what legislation moves to the floor of the House for a vote, despite what happens in committee. Were the wholesalers able to get the bill out of committee, they still would have to deal with the power of the Speaker's office.
However, if after the November 2nd election Republicans take control of the House of Representative, we are likely to be introduced to Speaker of the House John Boehner. Currently the House Minority Leader, Boehner has delivered the keynote address at the Beer Wholesalers of America's Annual Legislative Conference as well as accepted many 1000s of dollars from the very same wholesalers. There is little doubt that if elected Speaker of the House under a Republican controlled House that H.R. 5034 would move to the floor for a vote.
INITIATIVE 1100 IN WASHINGTON STATE
All you have to know about this initiative is that that if passed by the citizens of Washington State it would allow producers of spirits to sell directly to restaurants and retailers and not have to go through a wholesaler. In addition, Initiative 1100 would take the state of Washington out of the business of selling spirits at retail and put that job in the hands of the private sector.
As you can imagine, wholesalers are against such a change. It removes their unnecessary monopoly and with it some of their political power. Wholesalers across the country have contributed millions of dollars to defeat the bill, including $1,000,000 from the National Beer Wholesalers Association.
While wholesalers argue that getting rid of the archaic, prohibition-era, state-mandated three tier system is bad public policy, what they are truly afraid of is that Initiative 1100 will be a movement that will spread to other states. To quote from a recent Associated Press piece on the initiative:
"National wholesaler and liquor distributor groups are closely
watching the outcome of the campaign, with some saying that it could be
the first step for Costco to try and change the system in other states.
"They'll try to replicate the rules in Washington state across the country," [Craig] Wolf [president of the Wine & Spirit Wholesalers of America] said."
One can only hope his fear is validated. The single most insidious thing that is preventing the development of artisan beer, wine and spirits industry from growing in the United States is the requirement in most states that producers of these small production brands are required to sell to a wholesaler to get their products on store shelves and into the hands of consumers. When wholesalers are the state-mandated choke point for the products that get into a state, you always have a severely diminished selection of goods since wholesalers are not required to carry brands. It means they have the final say on what products are available to consumers in a state. And the majority of wholesales, the most powerful ones, have no interest in seeing small production goods make it to market.
Under a system by which producers in any state may choose to sell their products either through wholesalers or directly to restaurants, retailers or consumers you get a distribution system that is fair and consumer friendly.
Every producer of artisan wine, beer and spirits ought to know this is their dream scenario.