Politics, Wine and the Prison of the Tiers

ShakeThe recent wine scandal in New York, where giant wholesalers are attempting to make life difficult for small wholesalers with the passage of an "At Rest" law, is an object lesson in how the industry has politically balkanized itself in ways that make no sense given the current marketplace reality.

Small wine wholesalers in New York are up in arms over legislation in Albany that would force them to move their warehousing operations to New York. The "At Rest" legislation requires that any wine sold to a retail shop or restaurant in New York must spend (or be "at rest) at least 48 hours at a New York-based warehouse, before being delivered to the restaurant or retailer. Currently, many New York wholesalers store the wines they distribute in a NJ warehouse for the simple reason that it is less expensive and more convenient given the proximity to the docks where imported wines land. Big wholesalers like Southern Wine & Spirits and Empire, which have their warehouses in New York, think causing this kind of problem for small wholesalers is a good thing and will help them secure more business as smaller wholesalers are hurt by the burden imposed by the proposed law.

The information I've received is that this legislation will be going nowhere. It appears that recent meetings have convinced some of those involved that it's not worth pursuing the legislation.

The most remarkable thing about this dust-up, however, is not that the large wholesalers would try to hurt others in the industry. That's par for the course. What was fascinating is how the smaller wholesalers thought their plight was so dire they needed to reach out other sectors of the alcohol beverage marketplace (retailers and restaurants in particular) and ask for their help because they were being put upon. Harmon Skurnik of wholesaler Michael Skurnik Wines in New York was particularly pro-active in reach out to retailers, restaurants and wineries to help him oppose the law. Other small wholesalers set to be harmed by passage also reached out or commented publicly, asking for help stopping the bill wherever they could find this help.

I received a number of communications from retailers and wineries, all of which went like this:

"All of a sudden wholesalers come to us asking for our help in stopping big wholesalers from harming their business? Where were they when we needed brave wholesalers to stand up for us when we went looking for wine shipping rights"?

The indignation that dripped off the emails I receive and in the phone calls I took could have filled up an oak barrel. And I understand this.

The wine industry organizes itself politically along the lines of the three tiers. Where political battles are concerned, producers stick with producers, retailers stick with retailers and wholesalers stick with wholesalers.

For example, there may be wholesalers somewhere in the U.S. that actually don't oppose the idea of a winery shipping wine directly to a consumer across state lines. There may be wholesalers that do not oppose the idea of an out of state wine store shipping wine to a consumer into their state. But I just don't know about them because they never say such things publicly and when they count.

It may be that wineries support the idea of retailers being able to ship to consumers the same way they do. But the public expression of that support is rare, whether from wineries or their associations.

There may be wineries that support Franchise Laws that make it nearly impossible for producers to switch wholesalers, but you'd never know that because wineries never speak up in favor of Franchise Laws.

Yet these and other tier by tier allegiances don't account for the realities for the current marketplace.

Nearly ever regulatory/political battle today is about access to goods and markets.

The "At Rest" legislation is all about access to a marketplace. Big wholesalers sought to diminish small wholesalers access to the NY marketplace. The retailer and winery direct shipping battles were about consumer access goods and sellers' access to marketplaces. The privatization battle in Washington that led to spirits being sold in private stores, rather than by states, was about sellers access to goods.

The point is that natural political alliances, that for the past 75 years have lined up on a tier by tier basis, no longer makes sense.

For example, it should be clear to the small, boutique wholesalers in every state that they have no friends among the large Big 5 Wholesalers. These two groups of wholesalers deal in different kinds of goods and often different kinds of markets. Their political interests don't necessarily mesh.

Wineries and retailers should recognize that their interests are not served by avoided coordination or support for each other in the political arena. Retailers should not oppose direct to consumer shipping by wineries as it builds brands that are likely to show up on their shelves as demand for these wines grow. Likewise, wineries should support retailer to consumer shipping rights for the obvious reason that retailers sell their wines.

Wine consumers, who have no political voice currently, ought to support any tier that is willing to help them gain more access to wine.

Yet years of thinking about ourselves as a member of a tier and thus simply going along with what the most powerful within that tier choose to do with their political activities ultimately can come back to bite as realities of the marketplace and realities of the economy change.

The retailers and producers I talked to should have been first and foremost very excited to do what they could to work with the small wholesalers in NY to stop the "At Rest" legislation and the big wholesalers that were behind it. Perhaps many were happy. But I know for a fact that many saw the call to help from someone who had never reciprocated when the chips were down to be a bit cheeky.

The lesson is that principles rarely drive ones political activities where business is concerned. There rarely are principles involved where money is at stake. This means that there is really not too much hard thinking about bigger issues. Wholesalers have tended to do nothing to help the political aspirations of retailers and wineries because it has always seemed to work out best for them when they oppose broadening access to markets that might touch on their bottom line, despite the fact that direct shipping is clearly in the interests of wholesalers. That kind of single-minded, tier-based thinking is archaic…as the small wholesalers in New York discovered.

My hope is that the memory of the small wholesalers reaching out to retailers and wineries won't fade away. My hope is that the wineries and retailers generally welcomed the trans-tier call for help and gave it. My hope is that small wholesalers will reciprocate when the time comes for retailers or wineries to reach across the tier and ask them for help.

6 Responses

  1. Tom - March 13, 2012

    I agree that retailers ought to help the small wholesalers fight against idiotic legislation like this in an effort to benefit consumers. But I hope you don’t see anything wrong with extracting a promise of help with future pro-retailer legislation at the same time? That’s only fair, after all.

  2. Tom Wark - March 13, 2012

    I’ve actually seen emails to that effect on this very issue. It ought not be necessary, however, it is par for the course given past history.

  3. Bob Davis - March 15, 2012

    If the small wholesalers have few common interests with the big ones they ought to form there own association and drop out of the WSWA. They could then persue their common interests and use their bribe money (that’s what it is) for purposes that may be less harmful to their buying public.

  4. moin shaikh - July 30, 2012

    i love your post ,it is so informative.keep it up

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