Amazon Is Coming For Wine and That’s a Good Thing
The recent disclosure that Amazon.com is seeking to hire an alcohol policy lobbyist has led a number of folks to wonder if, speculate on and predict that, the retail giant is planning a move into alcohol sales and fulfillment. The interest is warranted given the impact that Amazon can have on an industry when it trains its interest on a service or product sector.
The complicated nature of alcohol law and its regulation isn’t lost on the Amazon gang. Reading the job posting you can’t miss that the first two items listed under Preferred Qualifications are: “Experience in the wine, beer, spirits industry a plus, passion for the industry essential” and “Strong network of alcohol regulators and state legislators preferred.”
Given the state-based nature of alcohol legislation and regulation, you won’t find very many people who have a “strong network of…state legislators” outside two three or four states. Most experienced lobbyists work within one state and sometimes a collection of states in a region. On the other hand, relationships with alcohol regulators across the country isn’t that difficult to accomplish. My guess is that if Amazon does focus on finding a person with experience in the alcohol industry to head their new alcohol policy shop, it will be someone associated with the small number of national, alcohol-related associations.
The bigger question is what are Amazon’s goals and intentions that lead them to seek out an experienced alcohol lobbyist? Where are they heading? What alcohol-related retail initiatives do they have in mind? I think I know.
There are really four possible areas where an Amazon alcohol lobbying effort could turn its attention.
A (RELAUNCHED) AMAZON WINE MARKETPLACE
Amazon ventured into this realm long before it acquired Whole Foods and become a holder of numerous wine retailer licenses in numerous states. For years, Amazon offered Wineries and importers the ability to list their products on the Amazon platform where consumers could buy wine, then have the transaction and delivery handled by the producer or importer. Amazon was a third party marketing agent. It neither sold nor delivered the product. It took a fee from the producers. However, upon purchasing Whole Foods and becoming the proud owner of hundreds of retail licenses, it was forced to shut down the “Amazon Wine” marketplace due to tied house laws in most states that prohibited producers to give retailers anything of value—including fees for advertising their products.
Is Amazon hoping to re-Launch an Amazon Wine Marketplace, list producer and importer products and take their listing fee? This is a very unlikely goal of a lobbying effort. To do so, Amazon’s new alcohol lobbyist would have to convince lawmakers in state after state to rid their regulations of “Tied House” laws. And not just any tied house law but perhaps the foundational tied house law: Not allowing producers to give retailers and restaurants a thing of value.
Prior to Prohibition, it was the Tied House (saloons, which were essentially retailers, who received significant financial support from brewers in exchange for only carrying their beers and being forced to undertake questionable and unethical marketing tactics in order to sell more and more beer to satisfy the brewer, lest they remove their financial support) that caused numerous social problems. After Prohibition ended, one of the primary goals of alcohol regulation was to prevent the rise of tied houses. To this day, most states have laws that prohibit producers from giving anything of value to retailers and restaurants.
Amazon might have it on their mind to change or eliminate these “nothing of value” tied house laws in order to re-establish their online Amazon Wine marketplace. However, once they embarked on such a program they would receive a speedy education in the value of slamming one’s head against a brick wall.
LOCAL ALCOHOL DELIVERY
Changing laws to allow local retail delivery with the help of a third party marketer, such as Drizly, will certainly be part of the Amazon lobbying strategy. It’s a not a big lift given that such an effort would attract the support of most independent retailers, of wholesalers who have an interest in appearing to want to help retailers, as well as from most state lawmakers who see local retail delivery as a simple way to benefit local businesses.
However, Amazon hardly needs a new alcohol lobbyist to accomplish this goal. A number of states already allow retailers to work with third-party marketers and online platforms like Drizly and to deliver alcohol to local customers’ doors. In fact, numerous states continue to pass legislation providing for this kind of service.
Amazon and its new alcohol lobbyist will surely work to change laws and create new laws to allow alcohol to be delivered to consumers in the same bags as organic ketchup, vegan frozen dinners and non-GMO potato chips. However, this goal could be accomplished by working with local and national grocery associations. Moreover, while this goal of local alcohol delivery is a priority for Amazon/WholeFoods, its not the primary reason they need a new alcohol policy shop.
PRIVATE LABEL ALCOHOL EXPANSION
Amazon, through Whole Foods, is already in the business of selling private label alcohol, including beers and wine. Amazon doesn’t need a lobbyist to expand this part of its portfolio or online business. It needs a logistics manager and production coordinator. The goal of expanding private label production and online sales Whole Foods private label beer, wine and alcohol will be accomplished, but not through lobbying
This is the prize and this is why Amazon is hiring an alcohol lobbyist. They are anticipating a positive decision out of the Supreme Court’s Tennessee Wine case. Such a decision, likely to come in late May or June, that will, in time, break down the discriminatory bans on interstate shipping. And that’s the business Amazon is in—interstate shipping.
Amazon could crack the online wine sales nut now by simply undertaking a “Wine.com strategy” in which inventory offered to online customers would be that which Whole Foods has procured from wholesalers in the state where the customer’s wine will be shipped. This could have been accomplished immediately after the purchase of Whole Foods, and I expected them to pursue this route. And they might still if the judicial momentum now afforded the Commerce Clause in its battle with the 21st Amendment loses steam. But that isn’t the purpose of Amazon getting into the alcohol lobbying business.
If the Supreme Court in the Tennessee Wine Case rules in even the most limited way that the non-discrimination principles described in its 2005 Granholm v Heald case apply to laws impacting retailers in the same way they apply to producers, then at some point down the road upwards of 20 states that currently have discriminatory wine retailer shipping laws on the books will have to modify those laws. States will either allow out-of-state wine retailers to ship wine to their residents or pass laws that prohibit any and all retailer shipping (including from their own in-state retailers).
A national wine marketplace in which the majority of citizens can receive shipments of alcohol from out-of-state sources is the kind of marketplace in which innovative and progressive retailers will thrive. Amazon is an innovative and progressive retailer. However, at the moment only 14 states and DC allow for one form or another of alcohol shipments from out-of-state retailers.
If Amazon does want to enter the alcohol space using its numerous Whole Foods licenses, it needs a much more open national market to match the scale of business it likes to attack. It needs a regulatory environment in which interstate shipment of wine, beer and spirits is not focused on and limited largely to producers. It needs a regulatory landscape in which it can cater to consumers who want vast choice and can receive shipments of wine, beer and spirits not limited to a single brand shipped by a single producer.
This also happens to be the kind of regulatory landscape for which America’s best independent wine retailers have been fighting. Put another way, the coming effort by Amazon’s new alcohol lobbyist to open more states for wine shipments from out-of-state retailers is good news for the best wine retailers in America, not to mention consumers.
This sounds counter-intuitive as retailers in nearly every industry have a justified fear of Amazon taking aim. The alcohol industry is no different. In a recent Retail Untapped newsletter from 3×3 Insights, an analytics and data firm operating in the alcohol space, the new Amazon alcohol lobbyist position was discussed in fairly fearful terms:
“It’s the clearest indicator in recent history that the e-commerce giant is plotting its entry into the industry….The good news? This won’t happen immediately. Beverage alcohol laws have been around for a while and can take a long time to change. Instead, think of this news as the biggest sign that e-commerce is coming for booze, in some form or another.”
The attitude that the longer Amazon’s entrance into the online alcohol market is held at bay the better is the attitude of the vast majority of alcohol retailers in America. It also happens that the vast majority of alcohol retailers in America want and have nothing to do with online sales. It is really only a relative handful of really talented, progressive, and motivated alcohol retailers that understand the future of alcohol consumers and the alcohol retail market that has actively pursued a national profile via online sales and fulfillment.
These progressive, highly talented retailers will welcome Amazon’s help in dismantling the archaic, protectionist, anti-consumer laws that prohibit shipments from out-of-state alcohol retailers. If Amazon can use its heft to help open more states for retailer shipping via lobbying and litigation and the work of a new Amazon alcohol policy shop, all the better for independent wine retailers. Because the fact is while a more national marketplace for alcohol is likely to negatively impact those alcohol retailers who are skating by with the help of the many unusual state laws that or aim at protecting them from having to compete in a modern economy and allowing them to be lazy retailers, that same national marketplace will significantly help the more progressive, more talented retailers around the country…whether Amazon is their competitor or not.
Amazon’s posting for a Manager of Alcohol Public Policy went live on January 11, five days before the oral arguments in the Supreme Court’s Tennessee v Blair Supreme Court case. Is this proximity a coincidence? Maybe. But I don’t think so.
If Amazon has any alcohol-related aspirations beyond what can be accomplished via local delivery and through Whole Foods private labels, if it has its eyes on the national wine, beer and spirits marketplace, then it needs a regulatory environment that supports interstate shipment. Because remember, Amazon is by and large a logistics and fulfillment company.
Agree with your assessment.
The small to medium production wines that good independent retailers focus on, is not the type of product that lends itself to a national marketplace strategy. Those producers who currently don’t have enough wine to get on the grocery store radar will still need the independent retailer and restaurant to move all the wine they are unable to ship themselves.
I agree with your analysis, both as to what Amazon is up to and the fact that it’s good news. We almost sold AppellationAmerica.com to Amazon ten years ago but they weren’t ready.
The most important thing Amazon can address that local retailers cannot, anymore than local bookstores, is to offer the hundreds of thousands of products made by the 10,000 bonded wineries that have no three-tier system distribution, averaging 2,000 cases. The guys from Amazon called this the “long tail,” referring to the tails of the normal distribution bell curve
Because local retailers, with their limited shelf space, are pretty much forced to concentrate on familiar brands and work-a-day expected styles, small wineries have a 100% monopoly on interesting wines. I will be very happy to list my Norton, Petit Manseng and St. Laurent on Amazon because I’ll make 10 times the gross profit with zero logistics hassle.
The Amazon situation, if it were to come about, goes a long way towards solving the “Where can I buy it” dilemma. It has the potential to make independent wine commentary – blogs etc – a powerful selling tool in the way that has benefit small brands in the fashion and electronics industries.
Amazon is certainly coming for wine. Their private label wine business will be gargantuan.
The narrowest Tennessee v Blair decision undoubtedly will have impact on Amazon with the question: Why Amazon holds liquor licenses while he is not a resident of the State?
So, it wasn’t a coincidence.
Not sure I understand the logic. Doesn’t Amazon benefit from restricted interstate shipping now? Seems more likely their politicking will be around tied house restrictions that enable them to control production, distribution and retail. As Insider said above, their focus – like most retail – is going to be on private label and they’re going to want to get that as efficiently as possible to local WF distribution centers (or stores).
Amazon isn’t going to incur the high cost to manage and ship long tail wines from some central fulfillment center across the country when they can keep the margin from their own brands and have essentially zero “shipping” costs by delivering them with your peanut butter and cheese.
Amazon is not the calvary.
Great analysis. But let me ask one and all, have any of you actually purchased wine from Whole Foods? First of all they don’t have people working there who know anything. As one who has spent half a century associated with retail wine, most people walking in to buy wine do not know what they’re going to buy. So, how is it that all these people are going to flock to online stores when they don’t know what to buy?
Will there be people online to ask questions of these buyers like there are in stores? Will the seller actually try to find out what the buyer is looking for so they can help make the best decision. Uh, that would be a big NO because the online retailer just wants the buyer to point and shoot. I’m talking about the everyday buyer not the geeks looking for classified growths, and the wines touted by the press, That’s not the wine industry. Take them all off the table and it wouldn’t even be a blip on the screen.
As far as retailers going out of business, most of them shouldn’t be there anyway. They know about as much about the wines they sell as their customers. Or, worse yet, they put up a score and expect the buyer to know what that means. The best retailers are still thriving because they actually communicate with their customers. They find their happy zone and fill it. On occasion they can suggest something outside the buyer’s world and little by little not just have a customer, but own them. It just takes work. An art lost on most unfortunately.
I wouldn’t sell wine to anybody who ate peanut butter with cheese.
Ed…good to have you commenting.
I think were Amazon to go online to sell wine, they’d attract a large number or customers who do know what they want, be it a low price or high price brand. Moreover, there are a number of ways an online wine store can help direct buyers to the wines they want. And it wouldn’t take Amazon much to hire two or three really good content creators who know wine. Yes, there is only so much of a “touch” that can be done online, but given the comfort level people have with online purchases of many types, I dont think consumers would not buy wine online.
One thing I do know is that the smaller specialty wine retailers that have focused their sales on line have developed a number fo ways to determine the desires and palates of thier customers and give them what they want as well as point them in the direction of something they may like but have not considered before.