The Relationship Between Total Wine and Consumers Explained

Why are consumers so rarely consulted when it comes to public policy issues that so directly impact them? This is a question I used to pose in this forum more often than I have recently. However, a recent event motivates me to return to this question.

Connecticut recently held a hearing on House Bill 7184. This is an “omnibus” liquor bill that would make a number of changes to alcohol laws in the state. Among the laws that this bill would change is that it would finally allow Connecticut consumers to order and receive shipment of wine from out-of-state wine stores, Internet retailers wine-of-the-month clubs and wine auction houses. Currently, Connecticut consumers may only order wine from out-of-state if it is shipped from wineries.

One thing is absolutely clear about the wine shipping provision in this bill. It is 100% consumer friendly. In fact, this is the primary aspect of this bill that can’t be denied. If passed it means that nearly every wine sold anywhere in the U.S. would be accessible to Connecticut consumers.

So consider this bit of testimony that was presented to members of the Connecticut Joint Committee on General Business on February 28 when the bill was heard:

Section 10 would allow alcohol retailers from outside of the state to sell and ship directly to consumers in the state. This provision raises serious concerns about the public’s safety, local jobs and local and state taxes.

Permitting out-of-state retailers to sell alcohol via the internet and ship it directly to Connecticut residents will make it extremely difficult for state law enforcement officials to properly ensure that alcohol stays out of the hands of underage persons. Unlike Connecticut’s bricks and mortar beverage retailers, who are best equipped to prevent sales to minors, online out-of-state retailers would be outside of the reach of local police and the state’s Department of Consumer Protection’s Liquor Control Division (DCP), complicating enforcement efforts by DCP to prevent sales to minors and intoxicated persons and maintain product integrity.

From small, independent, neighborhood stores to larger retail establishments, Connecticut-based alcoholic beverage retailers employ Connecticut residents. As an example, a typical Total Wine & More store requires more than fifty team members to effectively and efficiently serve our customers. Allowing out-of-state retailers to do business in the state would put those jobs, and countless others throughout the state, in jeopardy. The loss of jobs would result in less taxes – income (from employees), excise on alcohol and retail sales – collected in Connecticut.

This was testimony presented by Total Wine & More. Notice that not a single word is dedicated to how the proposed changes in CT’s wine shipping law would impact consumers. Not a single word. Instead, the Total Wine testimony claims the state could not regulate out-of-state retailers. This is, of course, a lie. We know this isn’t true because the bill allows out-of-state retailers to ship wine to consumers under the same conditions as wineries must currently ship and there has been no issue with policing out-of-state wineries. Under the bill, out-of-state retailers actually agree to submit themselves to Connecticut’s legal system.

Total Wine then attempts to argue that allowing out-of-state retailers to ship to consumers would result in job losses. They offer no evidence for this claim and they offer no evidence for a good reason: There is no evidence.

But what I want to suggest here is not simply that Total Wine uses bogus arguments against retailer wine shipping in order to put the government to work protecting Total Wine from competition. This should be perfectly obvious. Instead, I want to suggest there is a correlation between the degree to which a company or organization’s benefits from the three-tier system of wine distribution and the likelihood that the company will oppose consumer-friendly regulations.

Total Wine, like most wholesalers, is completely dependent upon the three-tier system of distribution. The Three Tier laws require that retailers like Total Wine procure the vast majority of their inventory from wholesalers. Now it’s true also that smaller, fine wine retailers also procure most of their inventory from wholesalers. However, the clients of small, fine wine retailers tend to be looking for something more than cheap, private label brands. They tend to be looking for special wines and they are looking for a more intimate, customer friendly experience, rather than a big box experience.

To put it another way, the primary business relationship of large, big-box retailers like Total Wine is focused on wholesalers. The primary business relationship of smaller, fine wine retailers is on the customers and client. This difference determines not only how the organization will react to the legal and regulatory environment surrounding alcohol, but will also determine if that reaction is pro-consumer or anti-consumer. Total Wine’s response to the Connecticut retailer wine shipping legislation ignores the needs and desires of consumers entirely.

What’s important to understand is that the three-tier system of alcohol distribution is not entirely anti-consumer. What we know is that the three-tier system remains completely intact and undisturbed by interstate shipment of wine from either wineries or retailers. The three-tier system defines the logistics and route to market taken by a wine that is destined to be sold by a retailer. It isn’t meant to define how a consumer accesses wine. There is a big difference as the direct to consumer shipping channel makes clear.

However, the three-tier system does define how a wholesaler operates. And it defines how a retailer operates. If a business model has been built around this kind of operation or, as in the case of wholesalers, provides a distinct industry advantage, then that advantage will be protected at all costs. Wholesalers and retailers like Total Wine only see threats to the three-tier system when they see any allowed business operation that in any way appears to disturb the advantages provided by the three-tier system. In other words, laws and regulations are understood by the likes of Total Wine and wholesalers as a zero-sum game with consumers having no place in their minds at the game table.

One of the strange ironies of Total Wine’s testimony in Connecticut is that they also argue that one part of the proposed legislation that lifts some restrictions on the state’s retailers is necessary in order to compete with online retailers:

“Package stores must be allowed to compete in this ever-changing retail environment. Alcohol retailers in Connecticut are severely restricted in the use of coupons, online incentives, and customer loyalty opportunities that retailers in other states and online retailers can employ. Brick and mortar package stores must be given the tools to compete in this ever-changing market place.

While Total Wine argues they need more privileges as a retailer in order to compete with online retailers, they also argue that they should be able to operate in Connecticut free from competition from online retailers. That’s a tough circle to square.

 


5 Responses

  1. Tony Caffrey - March 4, 2019

    Thanks for that. I sat immediately in front of David & Robert at the recent SCOTUS oral argument during which their attorney also made clear in response to an “Amazon of Alcohol” comparison that they were not interested in fighting the online battle.

    They haven’t the slightest interest in the consumer’s welfare. I was a manager at Total Beverage in the mid 1990″s when they bought it. They were getting a 300% markup on some of their imported winery direct product then. Even today they take 50% on branded US wine where they can.

    The old adage: no-one ever went broke by underestimating the stupidity of the American public is alive and well.

  2. Mike - March 5, 2019

    Online sales should require a driver’s license or other official form of identification prior to order placement. Verification of the ID by the delivery person upon delivery of the product would complete the process. That’s all that’s required to check minors aren’t purchasing alcohol illegally.

  3. Walter - March 5, 2019

    The stupidity of the American public is a well known fact.
    The second comment here is a perfect example of it.
    The stupidity of corporate America is another issue, but we can live with it.
    The stupidity of our legislatures is also an issue, but unfortunately we have to live with it.
    The stupidity of this blogger is also acceptable, for as long as readers understand that.

    The House Bill 7184 and Total Wine’s testimony have the direct attempt to regulate Interstate commerce, the power that they both will never have.

  4. Robert R. Smith - March 6, 2019

    Tom – excellent article as usual. I did not know that Total was so greedy that they would be so protectionist. I for one will be boycotting Total wine from now on!

  5. Anthony C. Trainer - March 6, 2019

    Excellent article for “STUPID” category. Why it is not there? Connecticut House Bill 7184 doesn’t require in-state retailers (package stores) to obtain any shipper license and explicitly allows them to ship liquor out-of-state. The case of discrimination against out-of-state package stores is so obvious here.


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