Wine Retailers Are Out Numbered At The Table

Posted by Tom Wark on Jun 15, 2018

Every state in America has some sort of Commission, Agency, Department or Board that oversees the state’s alcohol production, distribution and sales. What’s notable about this is that alcohol is the most highly regulated industry in America. As a result, the commissioners, agents, department heads and board members almost never garner an “attaboy” from either those they regulate or those that watch them regulate.

The primary problem these regulators face is they are tasked with overseeing what is in most states a highly archaic regulatory scheme that has little relationship to the modern American commercial landscape and that has been complicated by the accumulation of laws built primarily on the philosophy of rent seeking. The American alcohol regulatory system has been gamed by its most powerful players and primarily in favor of the now statutorily favored middlemen. And there’s very little the regulators can do about this. They don’t write the laws. They carry them out.

For example, among the more absurd laws these regulators are forced to enforce are 1) legal requirements that alcohol producers sell to middlemen and 2) bans on out-of-state retailers shipping directly to consumers across state lines. When you think about these kinds of laws from the perspective of what’s rational, what’s consumer friendly and what’s common in the world of commerce, you realize that more often than not regulators find themselves engaged in rational discussions and actions of very irrational situations.

Next week America’s alcohol regulators will gather for their primary annual meeting: The Annual Conference of the National Conference of State Liquor Administrators. Meeting on the Big Island in Hawaii, the states’ liquor administrators will discuss a number of issues from ethics, the marketplace, and technology to direct shipments, alcohol jurisprudence and even cannabis.

What won’t be discussed (or likely even contemplated) at this conference is the absurdity of the rules, laws and regulations that these folks oversee. Rather, the absurdities are embraced and justified. What other choice is there?

I’ll be attending on behalf of the National Association of Wine Retailers. Of the 160 folks attending who are not part of the regulatory community but rather from the industry, only 7% are from the retail side of the alcohol industry and nearly half of those are from a single company. Putting this another way, the retail tier of the wine industry is highly under-represented at this important conference.

What’s interesting and notable about this lack of attendance by the retail sector is that alcohol retailers far and away outnumber the producers and wholesalers and attorneys and marketers that operate in the industry, but all outnumber retailers at the conference. And yet, all but three of the 15 seminars at this conference directly address the retail tier of the industry. So, to my dismay, it turns out that only 4 of the 66 panelists set to be highlighted at the 15 seminars represent retailers in one way or another.

More than any other sector of the alcohol industry, it is retailers who are faced with a quickly changing marketplace and industry. It is retailers that are on the front lines of a culture and commercial landscape that has radically changed over the past 25 years and continues to change drastically.

Inevitably, because of the nature of an industry that is ruled by a rent-seeking mentality and a wide-ranging set of absurd laws, the regulators and industry people at this conference will focus on how to reign in retailers; how to stop them from keeping up with the marketplace and instead on how to maintain the retailer’s place inside a set of 1930 era laws.

All that said, the annual conference of the National Conference of State Liquor Administrators is not a bust for retailers or for anyone else. It brings together the regulators and the regulated. This is a very good thing. Though the relationship is often adversarial, it is also a relationship that can and often is collaborative.

If retailers are under-represented at this gathering, it’s not the fault of anyone but themselves. And retailers need to know that if they expect their lot to be improved within an industry where no one but themselves will look out for them, they’ll need to take a seat at the table.