What’s Best For Wine Consumers?
What set of regulatory circumstances "results in the best situation for a state's wine consumers"?
This is the underlying question in a Memphis Commercial Appeal article written by Fredric Koeppel that considers the impact of locally-owned alcohol wholesalers that are bought by larger, multi-state, non-local companies. Just such a thing has occurred a number of times n Memphis. Where this southern city once hosted six, family-owned, local distributors of alcohol, now, after successive buyouts and consolidations, only two remain.
The article quotes Scott Smith, an owner of a wine shop in Memphis in which Smith worries about the impact of the consolidation and non-local ownership:
"I have some concerns that these large companies will not be amenable to carrying products that are not high volume or that don't advertise. At this store we try to carry products from smaller and perhaps unknown wineries. When they were independent, the local wholesalers would bend over backward to bring in wines that we had read about or seen elsewhere. I worry that that won't be the case now."
Scott Rawlins, President of Glazers Memphis, part of a large multi-state wholesaler company, responds with a Not-to-worry attitude:
"I've heard that argument, but it's our feeling that our reliance on local leadership to represent us in the marketplace along with our depth of knowledge as a multi-state distributor results in the best situation for the consumer."
It' an interesting response because it begs the question, just what is "The best situation for the wine consumer?"
I think I know
CONVENIENT ACCESS TO THE BROAD ARRAY OF PRODUCTS AVAILABLE.
In a nutshell this is what's important to the wine consumer marketplace not just in Memphis, but in every market in the United States. Wine is unique as a product because of the huge diversity of wines that exist in the United States. No other product category has within such a diversity. Giving consumer access to this diversity is paramount. To do so means the following and this is the prescription for a well-functioning, consumer-friendly marketplace:
1. Access to wine in grocery stores where consumers buy food and meal ingredients.
2. The existence of a diversity of wine specialty shops where consumers can get expert opinion on their purchasing options.
3. A regulatory and legal structure that allows retailers to purchase product from wholesalers or directly from out-of-state suppliers when local wholesalers don't carry a wine (The vast majority of wines sold in the United States are not available from any wholesalers in a given market.)
4. The legal ability of consumers to purchase wine from out-of-state or out-of-market wineries and retailer and have the wine shipped to them.
This is what's needed to create "The Best Situation for the Wine Consumer" in any given state or local marketplace. What's interesting is where points #1, 3 and 4 do not exist, wholesalers oppose changes to allow these conditions—including Glazers. Glazers, other wholesalers some retailers and many in the alcohol regulatory establishment oppose a consumer-centric wine regulatory system in favor of a wholesaler/middleman-centric regulatory system. It represents a conceptual failure in which the perspective of the customer is relegated to secondary and even third-place status.
In Memphis and the rest of Tennessee, wine consumers may not buy wine in grocery stores. Nor may they have wine shipped to them from out-of-state wine retailers. And it was only recently that Memphis consumers finally won the right to have wine shipped to them from out-of-state wineries.
Tom and bloggers: Why not ask Glazers, Southern, National etc. to post their lists by state? By month. No prices. Or, wholesalers send the lists to whomever asks. (This has never worked for me).
Transparency in wholesale states would be the “best [interim] situation for the consumer.” Consumers would be able to see what is available. It is then up to the consumer and retailer to determine what is best and at what price for the marketplace mix.
This is not odd as it is possible to see what is currently on shelves and what is coming into control states. (My experience was with OH and PA).
Of course, your four-point program is good for consumers but, until then, a magnum of transparency to show this depth of knowledge would be a good start.
Tom,
I mostly agree with your conclusions, but disagree on an important point. When and if wine goes into grocery stores in TN, the selection and availability of most wines will suffer in a drastic way. Major chain grocery operators will see wine in largely the same way that the national wholesalers do: if we don’t sell x amount of a given wine without expending any effort to do so, get rid of it. This way of thinking can only serve to homogenize the offerings down to the usual suspects, rather than make wine more available; especially the wines that matter to someone who has more than a passing interest in wine.
Scott, I think in more rural areas or smaller towns, the wine choice will reflect the demand. However, I suspect in the larger metro areas, grocery stores will meet the challenge of greater call for diversity. And still, you will have specialty shops for those looking for something much more unique. However, without access to out of state retailers, wine consumers are ultimately at the mercy of wholesalers…as usual and who rarely have any incentive for providing access to small production wines at a price that suppliers or importers can afford to offer it.
I live in Tn and have been fighting for the rights of the consumer for years. The hold that distributors have here on what comes in is maddening. Now that is is not illegal to have wine shipped directly to our door from the winery we do mostly that. I would love to support my local wine shops more, but quite frankly, where I live there are maybe two stores that even care about getiing those small-production wines, and the distributors have no interest in that area nor much knowledge about wines, period. In other markets large and small in many other states I have seen grocery stores and small retailers co-exsist quite well, so the argument that allowing grocery stores to carry wines here doesn’t fly with me. Besides, in this market it is NOT wine that is the main revenue generator in liquor stores. I think allowing grocery stores to carry wine would be good, and those shops that really say they are wine focused could be just that..focus on educating their customers and selling better wines. Getting the distributor lobby broken up here is the key. They have a stranglehold on this area and there are also way too many of them for TN. Probably a point already made here by others but very KEY to reforming the market to be more consumer focused, and when you educate the novice enthusiast who’s choices are more driven by budget than palate, you can gradually sell more and more higher priced wines.
Susan,
I hope you can find it in your heart to support those “maybe two stores that even care…” and that you do so. If they really do care about anything other than mass market wines, they are fighting apathy from two directions: working with distributors who probaly don’t care about wine, and trying to sell to end consumers, 95% of whom don’t care about wine. If customers for whom wine is important forsake them, even those two stores will dry up. I would think they are doing in-store tastings now that it’s no longer verboten in TN.
As an ex-Memphian I have to comment…it’s just a damn shame that for years I was unable to send wine (I and two of my sons are in the business) to my relatives, and now that interest in wine has grown, they can’t get what they want on their own. Hopefully our consumers will get organized and keep pushing!
harvey
Let me tell you what is happening in Oregon and Washington to show everyone what may happen eventually in the wine industry. My family has had a winery for 40 years and we have seen in the begining due to state laws and lack of technology a very inefficient wine market. With these inefficiencies it created a gap where wholesalers and wine shops were able to set up to distribute and sell wine to the public. Now with the emergence of technology and new laws that enable small wineries to sell directly to retailers we are seeing increased efficiencies that reduce the cost of wines by up to 40%. By eliminating the wholesale markup and wine shop markup we are able to get wine to the consumers for only 15 to 20% more than our wholesale cost. So on a $20 bottle of wine we make at least $16. in the past on a $20 bottle of wine we would only make $10. This is a game changer in our business.
In markets where we have to use the 3 tier method we would be able to use the power of our retail partners to reduce the wholesalers mark up to 10 to 15% so there will still be savings.
In the Northwest this will mean the end to high mark up independent wine shops. This is a good thing for both consumers and to small wineries.
Our business is to produce top quality wine and sell to consumers where we make the most money. By eliminating inefficiencies like high mark up specialty wine shops it will ensure small wineries can survive and even prosper in the future.
Mike,
Your point is well taken. The fact is when suppliers have choice of how to get wine to market, when retailers have choices on how to serve customers, and when consumers have choices on how to procure wines, then various purchasing and sales models emerge that serve everyone. Well done!