Lies, Damned Lies and Wine Wholesalers

“I am always surprised when individual wholesalers or their main trade and lobbying group, the Washington DC-based Wine & Spirits Wholesalers of America [WSWA,] fails to chime in on key issues.”
Liza Zimmerman, correspondent for Wine-Searcher

I’m not. After all, when forced to respond to key issues to the wine and spirits industry, wholesalers are forced into a terrible situation: They either must tell the truth of their protectionist ideology (which never goes over well) or lie. That’s not a good choice to be forced to make.

I have a feeling Liza may have a better understanding of why the Wine & Spirit Wholesalers Association usually fails to respond to the media after her interview with Dawson Hobbs, the Wine & Spirit Wholesalers Association’s senior vice president of government affairs.

I don’t know Dawson Hobbs. He seem seems like a nice, good old boy. But he’s a wholesaler lifer, having worked in WSWA’s government affairs department for over a decade (Before that, the NRA). In his interview with Liza, he choose not to take the path of answering questions based on the wholesalers protectionist ideology. He takes another path.

Consider the following from Liza’s interview with Hobbs:

HOBBS: “Some types of changes in technology and consumer demands have raised issues that didn’t exist when we were founded….WSWA members are adapting to the marketplace with three-tier compliant innovations such as our member LibDib.”

LibDib (Liberation Distribution) is a new wholesale company that offers producers’ beers, wines and spirits on a virtual platform and has attracted producers who could not find distribution via WSWA’s members. In fact, LibDib was founded by a former wine producer who was fed up with the inability and disinterest of the state-mandated wholesale tier in various states to represent her brand. So she went around them and started her own wholesale company. In other words, LibDib is a direct response to the incompetence of Dawson Hobb’s members. It is not an example of WSWA members adapting to a changing marketplace. Hobbs Knows This.

HOBBS: “It is likely that without the current regulatory structure the US alcohol market would lose some of its innovation. Preventing vertical monopolies gives small and new brands a chance to get on retail shelves”.

Every single innovation in the American wine and spirits marketplace has been due to the inability of the state-mandated wholesale tier being unable to respond to changes in the marketplace. Directs sales and shipping? Producers can’t get represented by wholesalers who don’t want to represent small producers. Virtual Wholesaler like LibDib? Producers can’t get distribution by traditional wholesalers. Drizly? Consumers want convenience and wholesalers have no way of providing convenience to consumers. Hobbs Knows This.

HOBBS: “The average wholesaler warehouse includes anywhere from 7000 to 15,000 different SKUs. Retailers carry exponentially a greater number of brands because they are served by all wholesalers.”

Retailers carry exponentially more brands today because consumers demand access to a diversity of products and retailers carry a more diverse collection of brands in spite of wholesalers. Wholesalers have absolutely nothing to do with the increase in products in the market over the past two decades. Hobbs Knows This.

HOBBS: “Study after study has confirmed that removing the wholesaler tier would increase costs for suppliers by charging them for the sales, marketing, collection, delivery and distribution costs. It would also increase costs for retailers who would face a barrage of sales people from hundreds or thousands of companies.”

No one has ever suggested that the wholesale tier ought to be “removed”. This is a red herring. What people have suggested is that producers using wholesalers to get product to retail and retailers using wholesalers to obtain their inventory not be mandated by law. Hobbs Knows This.

HOBBS: “Many states allow this type of “self-distribution,” by supplier, the vast majority of whom recognize that once they reach a certain volume they can’t handle any more business above that level and they then need a wholesaler partner to enable them to continue to grow.”

Didn’t Hobbs claim that studies show not using a wholesaler would increase costs for suppliers? Now he’s admitting that in some states producers who don’t use wholesalers do just fine up to a point. Hobbs Knows This.

HOBBS: “Winery-to-consumer shipping laws were designed to give consumers access to products from small wineries that weren’t available nationwide because of their limited production. Retailers shipping products from state to state doesn’t serve this same goal.” 

Retailers shipping interstate serves exactly this same purpose. Consumers buy from out-of-state retailers because wines produced in limited amounts can’t be found locally. Hobbs Knows This.

HOBBS: “If a product is produced widely enough to be available at retail then a consumer can likely find it at a local retailer.”

The vast majority of wine products available in the United States are not available in every market, despite being distributed in a limited number of markets. In fact, all the wholesalers in any given state combined only carry a small minority of products available in the U.S. Hobbs Knows This.

HOBBS: “Allowing widespread, interstate retailer shipping would allow retailers in areas with low storage and labor costs to undercut the prices of retailers in higher-cost areas.”

Not if you add in the cost of shipping wine across the country. Hobbs Knows This.

HOBBS: There are significantly more retailers than wineries in the country and no state has the enforcement capability to audit that many retailers to ensure that taxes have been paid and that the product has traveled through the appropriate supply chain prior to arriving to the consumers.

Ninety-nine percent of American wine retailers don’t ship wine interstate. This is why in every state where both out-of-state wineries and retailers are allowed to ship in to consumers its wineries that hold the vast majority of wine shipping permits—because nearly 100% of wineries in the country ship interstate. Hobbs Knows This.

The very first rule—the one that is inviolable—when talking to the media is a simple and clear one: Don’t make false claims. The reasons for this rule are obvious and important. Your lies will be uncovered. When your lies are uncovered, people stop trusting you. When you lose the trust of others, you become a liability. On top of all this, lying is immoral.

Liza’s effort to get the Wine & Spirit Wholesalers to tell the truth is laudable. Wholesalers remain an important part of the wine and spirits industry who play a key role as movers of boxes. Yet as she wrote up Dawson Hobbs’ answers given to her questions, I have to believe she developed a better understanding of why wholesalers don’t often chime in on issues of the day. When they do, they end up sounding like Dawson Hobbs. They end up spouting nonsense and lies. They end up getting fact checked and looking very bad.

What’s really important to know, however, is that all these consequences appear to be a better option to wholesalers than telling the truth about why they do what they do: Everything wholesalers do, propose and support is meant to support a state-mandated system that relies on anti-competitive rent seeking, allows wholesalers to continue to be the laziest sector of the wine and spirits industry, and by design is anti-consumer.


9 Responses

  1. Jeremiah - October 23, 2018

    I perfectly knew that Liza plays for WSWA, as I don’t see anywhere her arguing their lies.

    WSWA is the “bullhorn” of SGW$S and Breakthru duopoly, not the wholesalers.

    Drizly is the premature child from intercourse of these three named above.

  2. Tom Wark - October 23, 2018

    Jeremiah,

    Liza is doing no such thing. Her job is not to correct the wholesaler’s statement. Her job is to report. Which is what she did.

    She has no control over how wholesalers answer her questions and they were legitimate questions.

  3. Fakrash-el-Aamash - October 23, 2018

    Desperately want to translate the phrase, so forgive me: “One major wholesaler told us recently that 40 percent of the company’s top sellers were not in their portfolio…”

    They call it Graduation. Who they? Little and not so little guys (too many to name). Small an a bit bigger foreign importers and wholesale distributors who belong to, or owned by that one major wholesaler. Yes, they all owned by the one major and belong to him. How did it happen? Tom Wark knows (“Two Companies Control Majority of Wine and Spirits Distribution” by Leah Douglas).

    So, the scheme is – as soon as a brand or label becomes top seller, the one major wholesaler takes it from the minor’s portfolio and puts it on his own. The minor wholesaler has nothing left to do than quietly grow and graduate another brand for the one major or quit the business.

    Last question is – who will eat who, or we’ll have to live with these major two? The answer is – doesn’t matter, monopoly and duopoly is the same thing.

  4. VVP (veux, veux-pas) - October 23, 2018

    The job of a good reporter is to be a provocateur and drive the liar into the farthest corner with no chance to escape. Liza didn’t even move a finger toward that.

    As an amateur not versed in the industry nuances, reading her post, I would take it as the finest truth, fully believing that WSWA does really great job for wholesalers and consumers.

    Sorry Tom, I take Jeremiah side on this. The post is dull and boring as Raul’s speech on the VII Congress of the Communist Party of Cuba with his Development Plan until 2030 …

    As the industry member, I’m the most irritated with the very last three lines of the interview.

    States do have the full enforcement capability to audit their own retailers to ensure that taxes have been paid and that the product has traveled through the appropriate supply chain prior to arriving to the consumers.

    A nice, good old boy, as you call him, at least should know and won’t let the nonsense come out of his old boy’s mouth that nobody gave to states any power to control all retailers in the country, specially those in the other states.

  5. Tom Wark - October 23, 2018

    VVP,

    Often times it is the job of a trade/industry publication to allow important elements of the industry to layout their vision and view. This is exactly what Liza did.

  6. SafeProof.org - October 23, 2018

    This is America, we all know that associations have members with common interests. Focused financial and human resources are required to control or promote legislation. WSWA to their credit is well organized and has an experienced team.

    Question: What organization represents the interests for wine producers? The consumer if informed would never be against regulated shipment, increased brand selection or technology. – SafeProof.org

  7. VVP (veux, veux-pas) - October 23, 2018

    As a consumer I don’t care what layout want to bring to me the element which by laws doesn’t have an access to consumers.

    It is the job of a trade/industry publication to inform that trade/industry where they at. I don’t understand the other purpose of Liza’s publication in pure consumers’ media, other then disinformation and propaganda.

    Yes, WSWA is really well organized in bribing of legislatures any kind, sitting on the fat valets of its cheeky members.

    Unfortunately, other elements of this industry not only unable to retort these experienced barkers, but sometimes do not even have resources to survive.

  8. VVP (veux, veux-pas) - October 23, 2018

    SafeProof.org

    WineAmerica.org is the one. It is located 6 min. walking distance away from WSWA, and it is literally on the opposite side of White House. 🙂

    What is regulated shipment?

    How absence of proper competition increases brand selection or technology?

  9. Go Tom Go - October 27, 2018

    That interview reads like 1984.


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