Killing the Last Vestige of the 3 Tier System in California

craftdistillers“Wholesale industry officials did not comment for this story prior to deadline, despite repeated attempts,wrote Santa Rosa Press Democrat business reporter Bill Swindell.

And it was a simple question he had for them too: Do you support California Assembly Bill 1233 that would allow distilleries in the state to sell direct to the consumer from their distillery premises?

This shouldn’t sound like a novel concept. Both wineries and breweries and CraftSpiritsCharbaycideries are able to legally offer samples to consumers and sell them bottles of their product on their premises. This most basic of economic models (Make it, Sample it, Sell it) has worked for decades and in recent years has been the driver for the explosion in artisan wineries and craft brewers.

AB 1233, sponsored by Marin County assemblyman Marc Levine (D-San Rafael) would finally give California distilleries the right to sell 3 bottles of their gins, vodkas, whiskeys and Ryes to visitors on their premises.

Really the only reason this proposal is not already law is due to the relatively recent emergence of the craft distilling industry. This growing industry is following on the heels of wine and beer by giving consumers small batch, hand crafted spirits that turn on very high quality and very small quantities. But consumers are snatching the stuff up. Large distilleries never have had much need for anything other than middleman wholesalers to get their large volume production of commercial spirits into the stores. Small distillers need the extra margin gobbled up by wholesalers in order to make a good living. If Levine’s bill passes, expect to see California’s craft spirits industry explode.

craftspiritsStGeorgeStill, there is that nagging fact that “Wholesale industry officials did not comment for this story prior to deadline, despite repeated attempts.”

Why they would not return Mr. Swindell’s call to say simply, “of course we support AB 1233 since it is a commonsense, market-driven, business supporting bill that will allow consumers to have more access to hard-to-find products and allow small businesses to flourish.”

I’m sure they are planning to say this when the bill gets a hearing probably craftspiritsStillwatersometime this spring. I mean, what are they going to say? Do they dare make the outlandish argument that distillers ought not be able to sell their product to the public because it will be one more attack a three-tier system that has served the state so well for 80 years? Do they dare suggest that, “spirits aren’t like beer and wine insofar as it possesses a much higher alcohol content and selling direct will lead to fatal accidents? Or might they say that distillers selling direct threaten the remittance of taxes that wholesalers are so adept at remitting to the state?

The thing is, California doesn’t actually have a three-tier system at all for beer or wine. Wineries and brewers can sell to wholesalers, retailers, restaurants or the public. The fact that distillers now must, by law,  continue to sees such a large percentage of their legitimate profits siphoned off by middlemen is nothing more than an economic vestige of times long gone.

The Swindell article in the Press Democrat is well worth reading. And AB 1233 is well worth supporting. If you live in CA and have literally 5 minutes, call you assembly person and senator and ask them to support AB 1233


2 Responses

  1. Edward J Donegan - March 25, 2015

    Wholesalers will be in support of this bill, its there minor-league. Allowing the brand to grow until it makes fiscal sense for a wholesaler to then represent the brand. Wholesalers do not have any interest in infancy-brands.
    I managed a $50M wholesaler back east and we would work with many nano-producers so they were successful in the infancy stage. Once enough consumer demand was established we would then talk about a possible statewide distribution plan.
    Why they did not return your calls, bad manners.

    • Cris S - May 5, 2015

      Wholesalers are in fact, not in support of our bill. They have recently gone on record as being against the bill, and Tom’s statement above about their need to support 3 tier is the reason. Your correct in proposing that tasting room sales help develop a brand to then move to distribution is an enlightened approach. Unfortunately, that is not the situation we currently are living within.

      We are not going away, and AB 1233 is a worthy piece of legislation… let’s hope it can come back and move forward.

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