Little Whiny Boys Inhabit The Wine and Beer Industry

Another round of childish whining by beer wholesalers appears to be underway. This time in Florida.

The issue that brings the beer wholesalers to tears? The protectionist system of alcohol distribution from which they benefit and that allows them to coast along without answering to anyone or any competition is being challenged. Boo Hoo.

The primary reason for this new round of childish whining by beer wholesalers is a result of MillerCoors challenging Florida’s “Franchise Law”. You know what a franchise law is? It’s a state law that makes it nearly impossible for a winery, brewer or distiller (large or small) to move their business from one wholesaler to another. Under these laws “just cause” is necessary for a producer to take their business to another wholesaler. It doesn’t matter how incompetent the original wholesaler is. It doesn’t matter if the original wholesaler forgot about the producers brand and no longer markets the brand. It doesn’t matter if the original wholesaler is swallowed up in a sale to a huge wholesaler that the producer has no interest in working with. In order to take their brand and go to another wholesaler, the producer must practically show that the original wholesaler is using their products for target practice at the local shooting range.

Franchise laws protect no one…except wholesaler profits. In fact a working paper produced for the Federal Trade Commission demonstrates that Franchise laws like that being challenged in Florida “are associated with harming consumers in the form of higher prices and reduced out-put”.

Yet this isn’t how wholesalers see it. An association of beer wholesalers in Florida calling themselves “Beer Industry of Florida” (seems like a name that is a bit too inclusive for just a handful of middlemen shuffling kegs around in trucks) sees franchise laws this way:

“State-based beer franchise laws are a critical component of the three-tier system in dozens of states across the nation.  They are proving to be one of the few remaining protections for local, family-owned, beer distributors against the undue influence of foreign-owned, mega-brewers who control 80 percent of the world beer market… America’s communities deserve the protections provided by state franchise laws and the three-tier system.”

According to the beer wholesalers, “America’s communities” are protected when beer wholesalers are protected from having to put in a real effort on behalf of the alcohol producers they represent and are protected from having to compete in a free market. But there is also a dirty little lie inside the beer wholesaler’s claim that protection of their profits are good for “America’s communities”. It’s this:

“State-based beer franchise laws are a critical component of the three-tier system in dozens of states across the nation.”

The “Three tier system” referred to by the Florida beer wholesalers and held up by all wholesalers of beer, wine and spirits as the savior of America, mom, apple pie (and profits) has nothing to do with franchise laws. Protectionist franchise laws bare no relationship to what the so-called three tier system actually is at its core. Maintained in a number of states after being devised almost 80 years ago for an American alcohol marketplace of the 1930s, the “Three tier system” amounts to merely two things: 1) separation of ownership of producers, wholesalers and retailers and 2) the requirement that alcohol move through all three tiers before arriving in the consumer’s hand. That’s it. Even the Supreme Court as noted that these two simple rules is what defines a “Three tier system”. Franchise laws are not part of this system. They are simply ways by which wholesalers are given protection from competition and given a means of not having to perform, yet still get paid.

But whining about a challenge to their coveted Franchise law protections isn’t quite enough for the Florida beer wholesalers. In a recent press release decrying MillerCoors challenge to the state franchise laws, the wholesalers also choose to take on the direct shipment of wine to consumers:

“Recent investigations reveal cracks in the current system of alcohol regulation as a result of a steady stream of lawsuits by companies pushing Internet alcohol sales and the destruction of the three-tier system…Beer distributors are dedicated to keeping alcohol out of the hands of minors and we oppose alcohol sales on the Internet.  We encourage companies engaged in the production and sale of alcohol to stop the endless line of lawsuits designed to tear down the system of alcohol regulation that protects our children and our communities.”

What’s not said here is that there has never been a study that shows minors are using the internet to obtain alcohol in significant number. Furthermore, no member of law enforcement nor any member of the alcohol regulatory fraternity has ever announced they are dealing with a problem of minors obtaining alcohol via the Internet.
As they have been now for more than 20 years, wholesalers are blowing smoke about the direct shipping. In the course of trying to prevent consumers from actually obtaining the wines they want, wholesalers have made various claims, none of which have come to pass. They have said direct shipping will kill the wholesaler. It hasn’t. They have said that direct shipping will destroy the three tier system. It hasn’t. They have said direct shipping will put alcohol in the hands of minors. It hasn’t. They have said direct shipping will result in lost tax revenues for states. It hasn’t.
Mitch Frank of the Wine Spectator recently explained perfectly why direct shipping from wineries and wine retailers is critical to today’s wine consumers when he wrote:

the wine world is so much bigger than it was when Prohibition was repealed. Tens of thousands of bottlings are available in the United States. However, the average wine consumer doesn’t see the majority of them in their local market. Wholesalers don’t carry them all. For good reason: It’s not profitable to carry a small winery’s product that only a few people want. Shouldn’t those people be able to order it from somewhere?”

It remains remarkable that beer and wine wholesalers, after years of seeing their dubious claims debunked and being ridiculed over and over for those claims, that they continue to whine out loud, even issuing press releases in which their whining is on display. It’s my view that these protectionist and rent seeking boys finally grow a pair, stop hiding behind “children and communities” for whom they serve in no way to “protect” and move with the rest of the world into the 21st century.


7 Responses

  1. Clark Smith - September 28, 2012

    Another thoughtful and much-needed rebuttal, Tom. Clearly these guys are pulling the wool over our eyes when they equate their monopolist franchise regs with the three tier system itself, so not much credibility there. But you didn’t speak directly about the U.N.C. study the screed quotes:
    “An independent, online alcohol purchasing study conducted at the University of North Carolina by Rebecca S. Williams, MHS, PhD and Kurt M. Ribisl, PhD, found that: “Of the 100 orders placed by the underage buyers, 45% were successfully received, 28% were rejected as the result of age verification.”[1] More recently, the television news program “20-20” aired a story in which a 13 year-old boy successfully ordered five bottles of vodka off eBay.[2]
    PR Newswire (
    [2] Eamon McNiff and Alice Gomstyn, eBay Begins Removing Alcohol Listings After ’20/20′ Report on Teen Buyer, September 21, 2012. Accessed at:
    PR Newswire (

    Instead you say no such concern exists in the law enforcement community. Is this study legit?

  2. Jeffrey Katrencik - September 28, 2012

    I couldn’t agree more with what you write. Thank you for taking a stand and expressing it so forcibly. We all want to have fun with our alcoholic indulgences, but at some point we too must wake up and take a stand. Cheers, Jeff

  3. Tom Wark - September 28, 2012


    How are you? Thanks for the comment. I only half responded to the citation of the North Carolina study. The fact is, minors can obtain alcohol online. They can also obtain alcohol from brick and mortar stores. They can also obtain alcohol from their parents house. The question is whether this justifies shutting down all brick and mortar sources of alcohol as well as shutting down parents.

    I also responded to the study directly when it was first released:


  4. AC - September 29, 2012

    Prediction: within 5 years wholesale distributors will be in the direct shipping business in America (and the world).

    Makes sense. Less brick and mortar, additional sales channel, deliveries are outsourced and salespeople wont be needed as much.

    Mark my words – it’s coming…

  5. Mike - October 1, 2012

    Hey Tom! Just picking nits here, but the folk that work on the distribution side of beer and wine, do not work ‘in the industry’. They work in distribution. Lumping those cry-baby-wet-pants kiddies in with those of us that actually do work in wineries and breweries is a bit of a slap in the face. At least that’s how I see it. Excellent writeup btw!

  6. Mike - October 1, 2012

    Hey Tom! Just picking nits here, but the folk that work on the distribution side of beer and wine, do not work ‘in the industry’. They work in distribution. Lumping those cry-baby-wet-pants kiddies in with those of us that actually do work in wineries and breweries is a bit of a slap in the face. At least that’s how I see it. Excellent writeup btw!

  7. Tom Wark - October 1, 2012


    I appreciate your perspective. I understand not wanting to be lumped. And yet, we all—producers, wholesalers, retailers, etc—are in the same business of wine. But, I get it.

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