The Ugly Truth About Wine Retailers
Among the rarest of things is finding a person in business or politics who is willing to publicly tell the truth, even if it reveals something ugly about them and their industry. Usually, the person doesn’t realize the ugliness of their statement. I think that was the case with Veronica Litton, general manager and partner of the one-location Virginia Philip Wine, Spirits & Academy in Florida.
In commenting on the possibility of Florida opening to wine shipments from out-of-state wine retailers, Ms. Litton offered this unfortunate nugget of ugly truth:
“the Florida market is a very important market for fine wines ranking 2nd, 3rd or 4th every year. … We should not need to compete with other retailers in other parts of the US.”
It’s not tough to figure out where the ugliness lies in this retailer’s statement. If you are a wine-loving consumer in Florida she’s really telling you, “F-you….you’ll buy what we give you to buy. Want something we don’t have? Tough.”
It’s common knowledge that wine wholesalers everywhere are genetically opposed to free trade and real consumer access to products. In this respect, they are both irredeemable and predictable. What many folks don’t realize is that the majority of wine retailer (those who actually deal with the wine buying public) are equal if not more dismissive of consumers. Just like Ms. Phillips. Her main concern is to be protected from having to compete in a free market in order to put more cash in her pocket, all at the expense of the same consumers she claims to serve.
If you want further proof of the anti-consumer disposition of many retailers, consider the American Beverage Licensees, a national association of wine retailers. This organization of wine retailers was among the first to submit a brief to the Supreme Court in the case of Byrd v. Tennessee. In their “Friend of the Court” brief they argued that states ought to have every right to, and should, bar its consumers from receiving wine shipments from out-of-state wine stores. Although in their brief they couch these claims in the language of protecting consumers from “tainted wine”, that’s not their primary reason for making this kind of claim to the court. Their reason for doing so is the same as Ms. Phillip’s: “We should not need to compete with other retailers in other parts of the US.”
If you read the story at Wine-Searcher written by Liza Zimmerman, you’ll learn that Ms. Litton’s plea for protection from competition comes after the Florida alcohol regulators declared that given a past court case, out-of-state retailers are authorized to ship wine into the state. Predictably, the state’s wholesalers and retailers have responded to this declaration by claiming the sky will fall. It would, of course, not fall. All that would happen is that Florida consumers would have far greater access to a far larger selection of wines offered by Florida wholesalers and retailers.
So, in the end, we ought to reserve some measure of satisfaction in seeing Ms. Litton’s anti-consumer motivations revealed. Ugly as they are, they remind wine buyers who is on their side.
Not sure who I’m most upset with, the retailer, or wine-searcher for seeking comment from an operation that appears to have just one producer, and three wines listed on its website.
I am certain I understand WHY the wholesalers want to keep the State(s) to themselves, but it is an enigma for consumers. Why does the Federal government let the wholesalers do that not-so-little trick? (No surprise, actually; the wholesalers pay for the little guys to get elected.)
Not even living in the States, I get the plot(s).
The article of absurd can produce only another article of absurd.
Florida, mister Wark, maintains strict 3-tier distribution system mandating all retailers to buy alcoholic beverages only from in-state wholesale distributors, who accordingly buy them strictly from the primary sources.
Of course, these single location retailers don’t want to compete with “wine retailers” who do not play under the same rules.
Freedom is not anarchy, mister Wark. You just unmasked your real face – “F-you….those retailers and safety of consumers”, your position declares.
You didn’t even bother to check that Ms, Philip wasn’t one who said that.
Helene, it is because opposite to EU monopoly in the States isn’t illegal if obtained “legally”.
It is nearly impossible to prove that two national wholesalers and two national common carriers came to the point of total control on national markets illegally.
It is at least unethical to peck a single location retailer for what it doesn’t want.
Tom found a tiny fly in a bowl of soup and tries to inflate an elephant out of it without noticing that the whole mountain will give birth to a mouse.
I hope that Tom will realize how foolish was the entire idea with Florida.
Tom: Am thinking you are way too tough on wine retailers and maybe even distributors (although it is tough to find any redeeming qualities for most of them). No business wants competition and why should they. If there are three gas stations at an intersection do you really think they want a fourth gas station?
I will tell you about my very positive dealings with a wine retailer in Raleigh NC. For 20 years I would go into every new wine store in town and ask them if they would order wine for me. They would always smile and say “of course we would love to!”. I would give them my list of 15-20 wines. Days or weeks would go by and I would either hear nothing or maybe they would find one or two wines. Finally, I went to a grocery store (unnamed) run by a lady who had previously run her own wine store. For the first time she explained the wine world–my list of 15 or 20 wines might be distributed by 8 different distributors. To find out who distributed each wine would take a huge amount of retailer time and then dealing with the 8 distributors would take even more time. Where’s the profit? She told me to select one distributor. Go to their web site to see what they sold, and then come up with a list of wines you wanted from that one distributor. That eliminates most of the work the retailer had to do. It works like magic.
“It’s common knowledge that wine wholesalers everywhere are genetically opposed to free trade and real consumer access to products.” Tom, I like your writing and generally agree with it all but this wine wholesaler has always been a believer in free trade and I find it difficult to believe I’m the only one.
The ugliest truth here is that the people involved in all this shipping brouhaha either brazenly lie or don’t understand what they are saying and either purposely do ugly things or don’t understand what they are doing. Their murkily long relations to the industry make their moves even look more ugly.
Frequenter on this blog, Maureen, suddenly came up with ugly, but truth that nobody actually enforces these non-existing shipping laws except those who not suppose to enforce anything, common carriers FedEx and UPS.
While all these lawyers-bullshit-blowers remain silently dumb, maybe Maureen finally exposes to the public a kind of evidence of authorization granted to FedEx and UPS to be enforcement bodies?
Speaking as a wine retailing professional in the largest market in the U.S. – Los Angeles/Orange county — I have never feared competition.
Either from brick-and-mortar establishments or online sellers.
A retailer provides more than just a “physical commodity” bottle of wine.
The best retailers provide “added [economic] value” through food-and-wine expertise. Perhaps an on-premises wine sampling bar. “Theme” winetasting events. Winemaker dinners. And even guided trips to “wine country.”
The “undifferentiated commodity” becomes an “augmented product” through “experiential marketing.”
See . . .
From the Harvard Business Review Online
(January 1980 issue):
“Marketing Success Through Differentiation — of Anything”
By Theodore Levitt
Professor of Marketing, Harvard Business School
. . . and:
From the Harvard Business Review Online
(July-August 1998 issue):
“Welcome to the Experience Economy”
By B. Joseph Pine and James H. Gilmore
[The second HBR article was turned into a book titled “The Experience Economy: Work Is Theater & Every Business a Stage” circa 1999.
Second updated edition circa 2011. You can find them on Amazon.]
I feel your pain. However, in the many years I’ve been watching this aspect of the industry, I’ve yet to see a single wholesaler resign from their wholesaler association over its opposition to direct shipping nor have I ever seen a wholesaler publicly denounce the wholesaler associations and the large wholesalers for thier anti-consumer stance, nor have I ever seen a wholesaler testify in committee in favor of a wine shipping bill.
Tom Wark – I hear you. I and many other wholesalers have never belonged to a wholesaler association and have no interest to. Speaking for myself, if my retailers can sell to more states that’s more wine sold for me. On the flip side, the more wine out of state retailers sell to my retailer’s customers, that’s less wine sold for me. But that’s Ok. It’s not all about me. It’s about what’s right, and freedom – in this case free trade – is fundamentally right, and also economically healthier for wineries who end up selling more wine. That in turn makes them economically stronger and better able to avoid cutting corners in quality and having to take losses. I know I’m not telling you anything you don’t already know and believe except for the fact that there are indeed wholesalers (Ok, they tend to be small and not powerful and not politically “connected”) who are believers and supporters of free trade.
What is even more disturbing are the comments here from multiple people seemingly happy to support glorified legalized racketeering, and happy to have freedoms taken away from them as consumers. Unless of course these such posters have an agenda…
On this and other wine blogs, I have cited U.S. wine drinker demographics publicized by Michael Mondavi’s Folio venture circa 2010.
The hard core wine collectors somehow seem to find their “trophies” in the marketplace – in-state or out-of-state.
They comprise the 350,000 or so paid subscribers to Wine Spectator. The 40,000 or so domestic paid subscribers to Wine Advocate. The unknown number of paid subscribers to Vinous and Wine Enthusiast and Wine & Spirits.
That’s about one percent of the Folio’s circa 2010 projected 47 million wine drinkers in the U.S.
They are the proverbial tail that wags the retail dog, getting disproportionate publicity for their consumption.
The vast majority of wine is consumed by wine enthusiasts who buy a single “grab-and-go” bottle for a Friday or Saturday night from their local grocery store or fine wine store.
These enthusiasts aren’t seeking to assemble wine collections. Aren’t on Wine Searcher ordering up out-of-state wines (whose included ground transportation delivery charges price most bottles above those found in local stores).
For them, it is a lifestyle but not a hobby. Certainly not an obsession.
I don’t foresee significant “share gains” or “share losses” for most wine merchants due to reduced barriers to wine transportation between states.
Excerpts from WineBusiness.com
(May 12, 2010, 2012):
“The Market for Fine Wine in the United States”
[Fine Wine 2010 Conference in Ribera del Duero (Spain)]
By Graham Holter
Associate Director – Publishing
Wine Intelligence market research firm (United Kingdom)
. . .
“According to the data presented by [David] Francke [now former managing director of California’s Folio Fine Wine Partners], US wine drinking is compressed into a small segment of the population.
“SIXTEEN PERCENT OF CORE WINE DRINKERS consume wine once a week or more frequently, which ACCOUNTS FOR AROUND 96 PERCENT OF CONSUMPTION. Thirty-five million adults drink virtually all of the wine sold in America, Francke said.
. . .
[U.K. based researcher and consultancy] Wine Intelligence has studied the US wine market in detail and categorised the wine drinking population — which it measures at 47 million . . .”
[Bob’s aside: Corresponds with the “80-20 Rule of Marketing” — 80% of your sales revenue comes from 20% of your customer base. For those more interested in this observed phenomenon, Google these keywords: “Pareto principle” and “Joseph Juran.”]
Agreed Stan. I’m guessing, and ONLY guessing, that those in this blog and those responding to it who seem to resonate against national free trade, could not be truthfully representing themselves as consumers – and I’m not suggesting that they are representing themselves as consumers or anything else.
That’s about one percent of Wine Intelligence’s circa 2010 projected 47 million wine drinkers in the U.S.
As a winemaker, winery owner and someone who got into this business because of the love of wine, the one piece missing in this blog/article is the proliferation of private label in the mix, supported by out of state retailers and wholesalers alike. I’m also the chair, for my wine trade association here in California and regularly talk to winery owners of small to mid-size wineries. Direct consumer sales are what keeps are lights on. Distributors and wholesalers certainly serve a purpose; but whenever I hear a state representative or someone in the industry claim that the 3-tier “protects” consumers, I say phooey!
We need a total revamp of our federal laws relating to alcohol sales that will allow for free trade. Wholesales and distributors won’t go away because mid-size wineries need them to represent their brands and provide the “last mile” delivery.
I started this reply mentioning “private label” – for some (distributors, wholesalers & retailers alike) that’s how they’re making more margin in wine sales. Somms who open their own wine shops and limit consumers to their “selections” are doing nothing more than buying cheap juice, slapping a label on it, and telling their consumers about this “discovery.”
I’m not sure if Mr. Wark has done much to expose this side of the business, but if you haven’t noticed the proliferation of these new “brands” then you’re blind.
Free Trade – Open Access – if you care about wine and the consumers you serve, then it won’t hurt your business.
I personally know someone who works as a rep for a state winery. She had worked there for the past 15 years and was making 6 figures.She had recently gotten married to a stay at home Dad and had a baby. She *just* got laid off; this is a state that recently banned out of state shipments. She is unable to find work unless MAYBE she’s willing to relocate her family to California, which is the opposite coast for her. She will still have a hard time competing there with a large number of people with more experience for that region. She will definitely have to take a pay cut if she does this and is able to find work.
If you introduced legislation that finalized the state of wine, beer, and alcohol shipping in the USA so that it is COMPLETELY OPEN and FREE on a NATIONAL level, there would be an increase in demand for jobs like hers and all other types of jobs in the wine industry, because opening up *REAL* free trade will greatly expand the industry.
It is time for the antiquated three tier system to be abolished. It stifles growth, jobs, consumer freedoms, and has absolutely no benefit whatsoever to anyone except those who control it.
I’ve been in all phases of this business in the last 50 years and feel that a good retailer can compete with anybody. I controlled the wine department in a three store grocery chain and each one did over $1 million in sales of wine a year and that was 25 years ago! You could probably get better prices on every wine in the department.
The point here is that it’s about service! Most retailers are lazy. They’ll put up a score and then sit down. Too many want wines with scores instead of wines that their customer will enjoy. They should stop complaining about competition and become the competition.
Finally could this be much ado about nothing? What percentage of wine is sold online against all retail sales? Not even 10% and you’re getting all worked up over that? Besides, most of these people are price shoppers and we all know what a pain in the ass they are. I’d prefer they bought somewhere else and stopped wasting my time. The rest probably can’t get the wine in their state. So be it.
You wrote: “Finally could this be much ado about nothing? What percentage of wine is sold online against all retail sales? Not even 10% and you’re getting all worked up over that? Besides, most of these people are price shoppers and we all know what a pain in the ass they are. I’d prefer they bought somewhere else and stopped wasting my time. The rest probably can’t get the wine in their state. So be it.”
I agree with you that for retailers it IS about service or should be if success is something the retailer is concerned with. That said, your dismissal of the importance of the bans on retailer to consumer shipping don’t make sense.
When a state bans retailer to consumer shipments that means that consumers in that state have no access to wine sold at auction (auction houses are retailrs), no access to wine sold via Wine-of-the-month clubs (they are retailers), and little access to old, rare and collectible wines (which are almost always sold at retail).
Also, people who buy from out of state retailers are not looking for bargains on middling, lower priced wines. They always pay more due to the shipping charges. They are buying from out of state because they can’t find what they want from instate sources.
Finally when you say “so be it” that they can’t get the wine in-state, I want you to think about this comment: “bans on shipments from out-of-state wineries?…So be it”. If you can offer me a good rationale for not worrying about bans on shipment from out-of-state retailers I can offer you the very same rationale for bans on shipments from out-of-state wineries.
Only a few of these responses are from people actually familiar with the workings of the wine industry and at least one of those believes way too much of what his association tells him. He speaks of the ‘safety’ of consumers. Can anyone point to an example of someone being harmed by wine shipped from an out of state retailer? I was involved in the country’s largest wine recall. We were the ones sending out potentially dangerous products.
I’ve been in every part of the industry for a total of over 40 years. I’m also a wine nut and collector, so of course I have trouble getting many of the wines I want. It is easy to send even fairly large quantities home from Europe or wherever for your personal use. But getting it from another state is tricky.
Of course once wineries were permitted to ship to other states it is only a matter of time before retail stores can as well. All the same legal principals are in play.
The basic misunderstanding that VVP and others display is that retailers and wholesalers around the country are competing on the same products. Most of the wines shipped by retail stores to consumers are unique hard to find items. Small producers in Europe may send a mere 50 cases or far less to the US. They are sometimes sold in only one state – sometimes to only one retail store. This is the mistake involved in Bruce’s post. His lady is wrong. At least half the wines on his list were probably not available in his state at all! And for a good retailer dealing with 8 or more distributors is a weekly occurrence. The fact that he could be persuaded to buy all his wines from only one wholesaler shows that he is not a candidate for interstate shipping. I can easily give a list of 15 wines to my favorite local retail store and after rigorous research be told that only 2 can be had from our state’s wholesalers as a special order from their sources.
To Mr. Wark, I would agree that the wholesalers have tremendous power due to the rapid and sweeping consolidation of the last 10 or so years. I also agree about open markets, however you are a bit of a “one trick pony” in always finding fault with any large business enterprise. I would ask you and all of the supposed small business promoters out there, when was the last time you bought anything from Amazon, promoted your business on Facebook, and checked your iPhone? Not that those companies don’t put countless small businesses out of the market and stifle competition… no of course not…Just wondering…
While being for so long working in wine industry, you would probably know that under federal basic permit conditions producer is totally responsible for what he produces, and importer is totally responsible for what he imports.
Those, so hated by Tom middlemen, under the same conditions, only keep records of from whom they obtained and to whom they distributed those produced or imported liquors. They aren’t responsible for quality and safety of those liquors.
Retailers, who buy either from the middlemen or from primary source, also required to keep records from where they obtained those liquors, but they are not in any way responsible for quality or safety of liquors they sell to consumers.
This is how the industry set up. If you are unable to produce or import quality and safe liquors, you will be out of industry. Is this clear?
Tom propagates not a freedom, but bacchanalia and anarchy in industry, which I am totally against.
So far, being working in liquor industry (not just wine) for nearly the same time, I am not aware of a single applicable law in my and many other States that in any way limits or restricts a retail establishment (retail dealer in liquors in particular) to deliver or ship any alcoholic liquor it licensed to sell to a consumer.
Still, after more than 20 comments no one noticed that Ms. Philip did not say what this article is crying about! People in this country don’t read or don’t know how to read.
Petty and quiet replacement of the original text in the article, and complete ignorance of emailed questions continue to extract points from my respect to your reputation.
No one is arguing that the likes of Amazon and other large retail operations take a heavy toll on other retailers. But what would you suggest? That we lobby to put them out of business some how?
It’s not a matter of finding fault with all large businesses. And I don’t have a problem with wholesalers. I have a problem with business like wholesalers and many retailes who are all in favor of legal measures to prohibit competition and screw comsumers.
I can only imagine your shock when I tell you that your view of my reputation is of no interest to me. Still, I’m sure you’ll manage to carry on.
“One trick pony” exactly describes Tom, thanks Jim. I promised not to insult him, so wasn’t me who said that. 🙂
I also noticed substitution in this bottle and saved both copies of this post just in case. What if girls decide to sue you for libel? Virginia Philip’s photo remains in original thumbnail. No apologies? No correction word? Nothing? So unprofessional.
I also affirm that there are no bans on retailer to consumer shipping. All your efforts ridiculously don’t make sense.
I wish only Constellation Brands will be available to you for the rest of your life. Yuck!
Consumer’s “view of my reputation is of no interest to me” is equal to “F-you…consumers”, Tom.
Many markets do not have good selections of wine. Many times that is not the fault of the retailer or wholesaler in those markets but the winery. Wineries at times want their product in major markets were the exposure can be maximized. Wineries at times require wholesalers to sell a certain percentage of the wine on premise to increase winery exposure via wine list. Though the demand maybe high on off premise accounts. Those high wine list prices sure make for great ego boosters for winemakers and winery owners. Some wineries also demand price controls on their wines, cut prices and the supply dries up
When we discuss this issue of the 3 tier system we have to be honest with ourselves. There is plenty of blame to go around for limited supply and high prices. I speak from experience, as a winery exec, retailer and wholesaler. It is a dirty business, a free open market is a dream.
Is there a better choice? Maybe, but the current 3 tier system is not the total problem. There is plenty of blame to go around at each of the tiers, plus the consumer. Price shoppers do not care about the industry or professionals that wish to improve the industry.
Thanks for commenting.
You are right that there are many instances of producers and importers pushing their wholesales to concentrate on white tablecloth venues. However, even with this there is no possible way for any set of state wholesalers to represent all the various wines now in the U.S. marketplace. This means that in those states that bar consumers from receiving shipments from out-of-state wine retailers those consumers will not have access to the vast majority of wines in the U.S….expecially imported wines.
Moreover, as someone else above noted, many wines are brought into the U.S. in very small amounts and sold primarily in two or three markets. These wines too are off limits then to folks in states where direct shipping from out-of-state retailers is prohibited.
As a DC online retailer, I’ve been the recipient of snark from storefront retailers because DC allows me to import and retail. So the protectionist behavior is no surprise to me. But it’s misguided. As you described a few years ago, Tom, in the Maryland Comptroller’s report on the impact of direct shipping from wineries, customers listed being able to find selections not offered locally and convenience as their primary reasons for ordering from out of state producers. Logically, this extends to out of state retailers as well. No retailer can be all things to all customers, as Mr. Beaudin described above. Brick and mortar retailers will retain customers through good selection and good customer service — plus the convenience of getting the bottles when you want them on the spur of the moment. I go to my local retailers often for wines I don’t sell for just these reasons.
I forgot to mention in my last comment that even if states are required to open up to out of state retailers, many such retailers won’t ship to every state. Getting shipping permits is time-consuming and expensive and retailers will have to prioritize states to ship into, just as wineries do now.
Beyond the costs, individual states can impose requirements that make it difficult. For example, Virginia requires proof that the retailer has the producers’ permission to sell their wines in the state. As the importer, I can provide COLAs that are accepted as proof. But a retailer with a couple of hundred wines isn’t going to go to that trouble.
Sometime down the line we may have the equivalent of college common applications for state permits, with standardization of fees and required information. Until then, most storefront retailers aren’t going to have too much competition to worry about.
David C. Think you’re totally wrong about my wine buying and also the availability of wine I am looking for. I typically buy some 20 cases of wine a year Probably 6 or 7 of those cases come directly from wineries in California and Oregon (e.g., Carlisle, Bedrock , Rivers Marie). Until recently another third would be shipped from wine stores in New Jersey and New York. The final third would come from local wine stores and grocery stores. I was never happy with the interstate wine shipping process. To find the wines I wanted I would have to deal with multiple out of state wine stores (or go to those sites that show about every wine on their list but actually have almost have no inventory) Many of those stores would ignore vintage requests, send wrong bottles, send leaking bottles, or turn out they were out of stock even though the wine showed on their inventory at the time of order. Not to mention the hassle of having to be home and sign for the wine. Then there is the weather issue–in NC, I didn’t want to ship wine in the four or five hot months or four cold months. Even without the legal issues of shipping to NC, I thought interstate shipping wasn’t worth the problems. Going directly through a good grocery store (Kroger owned store in my case) I can avoid most of the hassles, save the shipping costs and weather worries, and find most of the wines I want at a better price. I find that almost every wine I am looking for is at one of the NC distributors, except the smaller wineries where the best bet is to order directly from the winery (even though I find it outrageous that wineries charge the direct customer so much more than they sell to distributors–it would seem to me it would be wise if wineries would share the savings of eliminating the distributor and retailer). Finally–your comment about having to pick one distributor–obviously I meant one distributor for a single order. If I want to order from multiple distributors I just prepare multiple orders. Finally, I will say my new system isn’t perfect. Finding which distributor handles which wine is a slow, inefficient process–if the distributors would get together and develop a central internet site that would list all the wineries available in each state and show which distributor handles each it would make the process much easier. And some of the distributors have pathetic sites (Country Vintner and Empire are decent). But overall I think the future is ordering wine through a large grocery chain like Whole Foods where they can tap into every distributor and let you pick up the wine at the store. All it needs is a decent web site and ordering process.
Bruce, Not sure if it’s available in NC, but if so, good retailers should have access to the trade resource.
Tom, I take it you are referring to the federal COLA’s not the separate VA label approval process?
Tony, yes, Virginia allows me to use the federal COLAs as proof of permission to ship to the state. Since I am not a Virginia importer, I’m not required to register the COLAs with the state.
Bruce — there are a few reasons that wineries won’t charge you what they charge distributors (or split the difference with you). First, they don’t want to undercut the retailers who sell their wines through the three-tier system. Even though you’re going to have to pay for shipping too. Second, the distributors likely go to the winery to get the wine or pay to have it trucked to them in the wineries regular cartons – with shipping to you the winery is paying for the required shipping cartons and may in fact be charging you less than it costs them to ship by UPS or FedEx. Finally, someone has to take care of paying your NC sales tax and that costs staff time even when they collect it from you. And the paperwork that they have to submit every month detailing exactly what you bought, when they shipped it, what company they shipped it with, etc.
Tom Natan: Thanks for the response but I don’t buy your arguments. Many of the small wineries I buy from don’t (or barely) sell their wines to U.S. retailers (check wine searcher.com and you will see that is true for most small U.S. wineries). They sell almost all their wine in their tasting rooms, directly to their allocation customers, to restaurants and to foreign retail. Sales tax–this cost is not included in the price of the wine. It is separated on all invoices and is based on the sales price–if wineries sell at a lower price than retail outlets they will charge less tax than retail. Lastly shipping–my experience is that wineries charge far more than wine stores even when located in the same state (i.e., a case of wine shipped from a winery in California costs 30-50% more for shipping to NC than a wine store in California for the same shipping).
I am thinking there are two reasons wineries charge their allocation customers so much–one they don’t care or know much about selling–they enjoy making wine.
They fall into the trap of doing what every other winery does. Second: they charge more because distributors require wineries to sign contracts that don’t allow what you call” undercutting” and without the distributors wineries would lose the restaurant trade–and that might be a killer in the long run. At some point wineries will wise up to the distributors games related to foreign retail and restaurants. All it will take is a strong association of wineries to band together. We the customers who care about wine and wineries will be the winners.
Bruce, retailers can have wine in inventory that they embargo from Wine-Searcher. It’s a fairly common practice with allocated wines. If a retailer is getting 3 or 6 bottles of a highly allocated wine, it’s not going to be placed in full view for a first come first serve sale. Retailers will want to reward their best customers.
The smaller the wholesaler, the more likely to have boutique wines, but also the greater percentage of overhead consumed by compliance costs, which vary by state.
Bruce, the wineries still have to remit your sales tax payment to NC and submit monthly or quarterly paperwork. And purchase shipping cartons and fill them. And do this for every state they ship to, with different requirements. You’re right that most winemakers aren’t salespeople or marketers, though.
Tom Natan: My point is that wine stores have to do those same things. Not clear why it would cost a winery any more than a wine store to ship and both would have to deal with the states they are shipping to for tax issues. Are you saying wineries have extra obligations not imposed on wine stores? I guess there could be some location issues–wineries might, on average, be further from the transportation grid. Not sure how the amount of shipping compares between an average wine store and average winery so there could be some scale costs–but I’ve never seen anyone make those arguments.
Bruce: It’s not about the cost of shipping, The differences for a winery and retailer are relatively small. It’s the cost of compliance.
If you are getting a special order through a retailer there are many more possible permutations (and associated costs) as to how that order gets filled, compared to ordering directly from a winery. Distributors systems are optimized for efficiency (usually, you’d hope), and when inefficiencies such as special orders are introduced they are made to bear alone the full burden of their compliance, (as opposed to sharing it with other products), and then may get penalized further so as to discourage in future.
On your comment that wineries need or depend more on restaurants than retailers.
That very much depends on market segment. I’ll offer this.
Overall off-premise accounts for 72% of wine volume and 60% of revenue, but remember that extra on-premise revenue is going to the restaurant, not the winery.
I’m intrigued by your earlier comment that US wineries are withholding product from US retailers, in order to supply overseas retailers. Could you expand on that?
Tom Calley: It might only be what you call the “embargo” on info given to Wine Searcher related to small amounts of wine provided to U.S. wine stores for tightly allocated wine. Scores of times I have checked Wine Searcher for a wine from a small U.S. winery and the only wine shown on Wine Searcher was multiple foreign wine stores. Always thought that was strange–I asked myself why allocated wine was going to foreign wine stores and not U.S. wine stores? I guess there could be three answers–one that it does go to U.S. stores but doesn’t show up Wine Searcher for the reasons you mentioned. Another possibility is that U.S. distributors might have no control over wine sold to foreign wine stores and that might allow the wineries to charge foreign wine stores even more (or less) than the full price they charge allocation customers. Another possibility is that U.S. allocation customers are reselling wine to foreign wine stores or middlemen for a profit. Just guessing. But this thread is getting complicated–my original point was that wineries should be allowed to sell wine to allocation customers (and others) for less than the retail list price. A wine blog article on that topic would be worth reading..