Wine Wholesalers and Lawmakers Are Playing Chicken With Amazon

I watched a committee hearing last week that heard testimony concerning the proposal in New Jersey to lift the production cap that currently prohibits large, out-of-state wineries from shipping wine to New Jersey consumers. It isn’t likely to pass this year, but it eventually will.

In the course of the hearing, various folks giving testimony assured members of the committee that, “no!”, this bill would not allow out-of-state retailers to ship wine into New Jersey. That soothed the concerns of many of the committee members as well as the New Jersey wholesalers and retailers listening in like I was.

Despite their claims that bans on wine shipments from out-of-state retailers are meant only to “protect the health and safety” of consumers, everyone knows the bans are meant to protect a state’s own retailers from competition. This tactic won’t, in the end, protect retailers from competition. In fact, this tactic will go a long way toward determining their demise.

Consider…

I remember when the concern about Amazon’s growth was that it was putting small, independent booksellers out of business. That concern seems almost quaint today. Well, it doesn’t seem quaint to the former bookstore owners who occasionally stroll by the site of their former book store and go in to get a pumpkin latte. Nonetheless, it’s true that the juggernaut that is Amazon has long ago moved past books and gone on to destroy any number of other industries that once produced many independent sellers.

But wine selling has largely escaped the unsatiable appetite that is Amazon. So, why do I get the feeling that the middleman booze wholesalers who feed inventory to America’s independent wine retailers understand that the primary impact of their opposition to interstate retailer shipping is to put retailers at a distinct disadvantage when Amazon does set its sights on wine?

Besides the multi-chain wine retailers and grocery stores, who benefit from the demise of independent wine retailers? Well, imagine a wholesale tier that sells the same amount of wine, but sells that same amount of wine to half the number of retailer accounts. It means fewer trucks, fewer employees, less expense on fuel and much higher profits.

Here’s what you need to know. Amazon isn’t waiting for the law on interstate wine retailer shipping to change to get into the business of wine shipping. Amazon doesn’t support the liberalization of those laws. They could service the entire country right now through their Whole Foods retail wine licenses. Using a single website (AmazonWine.com), Amazon could serve up consumers in nearly any state the wines their local Whole Foods has access to via local wholesalers, then simply ship those wine INTRAstate, escaping the current bans on INTERstate shipping. This way they serve practically the entirety of American wine drinkers with one website and 40+ state-based wine retail licenses.

Independent wine retailers don’t have stores and retail licenses in every state. The bans on interstate wine retailer shipping would relegate most of these retailers to shipping to customers in their own state and only a few others. Meanwhile, the AmazonWine site can serve the entire country. Does anyone believe that with the power of Amazon marketing and logistics they would not dismantle and destroy vast numbers of now profitable independent wine retailers? Does anyone believe wine wholesalers would lament this outcome one bit when it would only increase their profits?

If lawmakers really want to protect their independent wine stores from competition, they need to start thinking about how they can help open up all the U.S. states for those retailers to sell and ship into. Without that ability, the wine retailers lawmakers hope to protect by restricting competition will pave the way for the elimination of those same retailers by limiting their ability to compete.

But the health and safety of their constituents will be protected. So, I guess there is that.

But the American booze wholesaler really needs to think things through. Consider that Amazon is in the process of creating a huge freight delivery capability that rivals FedEx and UPS. Consider that it is only a matter of time before courts tell those states that currently allow their own producers they may sell directly to retailers while out-of-state producers may not that this form of discrimination is unconstitutional. What happens when producers decide they want to sell directly to Amazon. It’s not like Amazon prefers to buy their inventory from wholesalers. And what happens when Amazon announces that it will be purchasing most its wine inventory directly from producers? What are the wholesalers going to do? Try to convince lawmakers in each state that producers of wine should have their self-distribution rights revoked? That’s not going to go over very well when the folks with dirt under their nails and wine stains on their jeans gather at the state capitol to oppose the move.

Wholesalers and lawmakers think they have been playing the long game by banning interstate shipments of wine from retailers. It’s not a long game. It’s a game of chicken and they are playing it with Amazon. Ask The Little Bookstore On the Corner how that game went.


No Responses

  1. Jim Bernau - October 11, 2020

    I hope wholesalers are reading and listening. We all need to see into the future to advance a dynamic wine market with thriving small and independent producers, wholesalers and retailers of all sizes.

  2. Jim Ruxin - October 11, 2020

    Thanks for keeping tabs on the awful three tier dinosaurs. Or are they ostriches with their head in the sand?

    It is a horrible thing to witness the death of system that has fed so many business that were extraneous from the beginning. To create such a restrictive system is counter productive to creating a sustainable economy where every level of activity has a good reason for being and adds value instead of merely overhead.

    It is just amazing how we have yet to come out of our early 20th century business habits to actually serve the customers that drive the economy in the first place, not the regulations that entrenched interests had developed 90 years ago.

    Real capitalism serves market needs, not the needs of those who prey on it.

  3. Jim Ruxin - October 11, 2020

    Part 2. Thanks for keeping tabs on the awful three tier dinosaurs. Or are they ostriches with their head in the sand?

    It is a horrible thing to witness the death of system that has fed so many business that were extraneous from the beginning. To create such a restrictive system is counter productive to creating a sustainable economy where every level of activity has a good reason for being and adds value instead of merely overhead.

    It is just amazing how we have yet to come out of our early 20th century business habits to actually serve the customers that drive the economy in the first place, not the regulations that entrenched interests had developed 90 years ago.

    Real capitalism serves market needs, not the needs of those who prey on it.

  4. Matthew fuchs - October 12, 2020

    well, Tom, you sitting in a crowded hearing room, listening to unfolding litigation that may, but ‘probably won’t’ ever come to be, is one thing, but, I will fervently argue, if I were in there too, smirking grandly at what tantamounts to unabated nonsense, I’d likely see the bigger picture there, wouldn’t i….?
    See right thru to the absolute truth with both hindsight, and, for the record, crystal clarity, …that inexorably being, well, a broken status quo is better than nothing at all…you see what i’m getting at here…?

  5. Tom Wark - October 12, 2020

    Matthew,

    For the record, no, I have no idea what you are getting at.

    Tom…

  6. Jim Ruxin - October 12, 2020

    Matthew—

    Your comments are so oblique you continue to confuse readers more with each comment.

  7. Matthew fuchs - October 12, 2020

    so be it, I guess….looks like I’m stuck doing business with some strongheaded, pretty opinionated types, here. Almost like price setting, over here…wouldn’t have been the first time. I’ll bow out,…for now…

  8. VVP - October 12, 2020

    We agree that everything here tantamounts to unabated nonsense.

  9. Tom Wark - October 12, 2020

    VVP,
    Notice all those who comment here say who they are? Why are you too embarrassed to disclose who you are?

  10. Jim Ruxin - October 12, 2020

    Matthew–

    Pease don’t accuse us of being strong headed and opiniated when we were just trying to figure out what you were trying to say. Not even reasonable flexible people can read your mind.

    Claiming victimhood because of the malfeasance or scheming of others is a common ploy popular with many in this season,

    So in true 21st century media lingo, try this: Don’t blame me for doing what you are in fact doing all the time. But perhaps that is too much plain talk and no longer appropriate when people only hear what they want to hear.

  11. Matthew fuchs - October 12, 2020

    Hhhm…Hmm, well let’s consider that last there, jim,…for so eloquent was that, i’m compelled, yes, compelled to respond. So try this, If i hear you poorly, it may because you’re not just off your game, but off base in general. This doesn’t mean you’re talking to a wall, not literally, mind you…but you need to talk louder,…how about that…?

  12. Jim Ruxin - October 12, 2020

    Mathew–

    You contribute nothing but venom to this site. The rest of us try to be helpful for the most part.

    I for one, won’t be reacting to your juvenile approach to discussion. The world is not against you, but you can certainly drive people away,

  13. Matthew fuchs - October 13, 2020

    GM, tom, regarding yesterday’s ‘communicating’, well, it’s not that I’m embarrassed about who I am, per se, quite to the contrary, I kind of like myself, overhere. Very in my element, over here, oh, yes, and besides, you already know who I am…matthew fuchs, from Smithtown, NY.

  14. Matthew fuchs - October 13, 2020

    on the subject of amazon,…well, what’s Amazon got that a good, reliable three tier system invariably lacks? I ask, because, well, in a nut shell, i’m sort of stumped over here, almost literally sitting here, beside myself, wondering about amazon, and, moreover,…where the wholesalers might be going wrong, and, if i hear you right, tom…headed for problems down the line…

  15. VVP - October 13, 2020

    Shipment of alcoholic beverage from one State to another is the act of Interstate commerce. Interstate commerce is regulated by the federal government as authorized under Article I of the U.S. Constitution. The federal government can also regulate commerce within a state when it may impact interstate movement of goods and services and may strike down state actions which are barriers to such movement. That’s it.

    The rest is the rat race and unabated nonsense. Yes, we are too embarrassed to disclose who we are to anyone who officially participates in unabated nonsense.

    veux, veux-pas.

  16. Tom wark - October 13, 2020

    Dear VVP Coward:

    Was the Supreme Court wrong when it said a state May choose to ban DTC wine shipments from in and out of state shippers?

  17. VVP - October 13, 2020

    No, Tom, DTC is the exception from regulatory system and all the Supreme Court said that State may chose not to make exceptions. Unreasonable insults don’t make you more intelligent.

  18. Matthew fuchs - October 14, 2020

    Golly jee, Tom,…i may just be starting to see the lite, here! But, not without leaving me with one burning question, that of course being,…the federal law enforcement foundation…whose in charge, over that way? I know it’s not me, a little bird told me it might not be you either, let alone Jim over there. So, who, Tom…i need a name,…can you provide me with a last name, at least, just so that I know who for sure calls the shots over that way…?
    The treasurer emirates over at the FLE foundation,…who, on gods green earth might that be…?
    A last name will do just fine, for me.

  19. Matthew fuchs - October 14, 2020

    Hey, you know what, Tom,…I’m thinking that if you literally see yourself as between a rock and a pretty hard place, right about now…well, you may want to trust your gut over there, and, never more so than by the end of the day, the end of trading, the closing bell,…you know…?

  20. Matthew fuchs - October 14, 2020

    tom,…you still there…?
    Tom? I think you’re breaking up on me! Tom…?
    Oh, jeez,…this is pretty bad, here!

  21. Matthew fuchs - October 14, 2020

    Hammer time, tom,…where..are..you…?

  22. Matthew fuchs - October 14, 2020

    dear VVP,…can I come to work for you…?
    I like you, and not tom, you see what i’m relating to…?

  23. Matthew fuchs - October 14, 2020

    tom… …?

  24. Matthew Fuchs - October 15, 2020

    ah, yes! Great to be, well, not merely alive over here,…but sorta in my absolute element!
    So, here goes,…long live the always triumphant, always true to form, and, above all,…always PREVAILING three tier system, and, it’s always prevailing internal entities! We did good, yesterday! But,…i still don’t see tom any where. Where’s tom…?

  25. Janvi - October 15, 2020

    This is one the best article i have ever seen in my life you are inspiration for youth keep continue these type of articles thank you.

  26. Jeremiah S. - October 15, 2020

    Janvi is the most fake comment I have ever seen in my life! Keep continue one-trick pony.

  27. Matthew fuchs - October 15, 2020

    oh, yes, Janvi, I happened to be on the same page with you, for sure you can bet! Tom’s artical, right? It’s just as priceless as it is,…hmm, oh, what’s.. the.. terminology I’m after, here?
    Ok, here goes, jurisprudently circumspective. Some fresh insight on a century old conundrum, that’s what tom is dishing out here.

  28. Matthew Fuchs - October 15, 2020

    Jeremiah, that tom there, every bit as impartial as he is perfectly transparent, almost see thru, right?

  29. Matthew Fuchs - October 15, 2020

    ok, well past noon in the west, past the closing bell back east, and what’s this,…still no sign of tom!
    Hey, tom…where…art…thou…?

  30. Matthew Fuchs - October 15, 2020

    Dear, VVP,…i suspect tom, oh, how should I put it…well, I think tom has turned up among the missing….no sign of his likes, anywhere, am i right?

  31. Matthew Fuchs - October 15, 2020

    No Tom, and that Janvi,…where’s that Janvi…?

  32. Jim Ruxin - October 15, 2020

    Tom Wark—

    I am sorry that Mr. Fuchs has chosen to take his culture war into your arena. It is a legal issue he is not fit to consider because of a lack of expertise and temperament.

    I doubt if most readers would miss him if he did not participate in the discussion. I know censorship is not your style but this dangerous and inflammatory diversion diminishes the value of your blog.

  33. Matthew Fuchs - October 15, 2020

    There are arenas, tom, and then there are arenas, am i right?
    It’s who fights where, when, not so much why, ah, but, I suppose at the end of the day,…’who’ it is that won, and that’s all that matters, as I understand things.

  34. Matthew Fuchs - October 15, 2020

    Hey, VVP, not for nothing, but this tom guy sounds like he could benefit from a beating to the head and shoulders, right about now, you know…?

  35. Jim Ruxin - October 16, 2020

    Matthew–

    We have had enoiugh of your baiting and meanness. I for one will ignore, which you will not mind, but if we all did you would probably go back and cry in a corner with your blanket and cry about socialism taking away your right toi be disrewepctful

  36. Matthew Fuchs - October 16, 2020

    no offense intended, it was all in humor from the beginning, ‘straight outta the hold’, so to speak. I do apologize.

  37. Jeremiah S. - October 16, 2020

    He played in humor with fatuity, but fatuity didn’t think so.

    The blog only lives in discussion and opinions can be diametrically opposite. Without open discussion it is the dead blog.

  38. Matthew Fuchs - October 16, 2020

    whe you actually see the box go into the hole, Jim, is when the blog, in my opinion, is done.
    All in fun, Jim, all in fun!

  39. Jim Ruxin - October 16, 2020

    Alan—

    If you are having fun with this you are a sadist.

    You started out claiming you were a victim and now you say it was just a game. You are as hypocritical as Trump and just as mean spirited. Through all your denials all reasonable people of any persuasion see your insecure efforts to dominate others.

    There is no more room in our culture for masquerades and intellectual dishonesty like yours. It’s that kind of arrogance that allowed 208,000 to die. We Are holding the mirror to your behavior so others will see it even if you are incapable doing so.

  40. Matthew Fuchs - October 16, 2020

    As hypocritical a Truimp, oh, jeez, there you go, Alan, gettiing all political on me!
    Try this, as effing hot as Nancy Pelisi in a blood red, two thousand dollar power suit, shaking her fist before a packed emergency session of congress on the eve of i don’t know what. Hey I like her too, right on time, her, am i right?

  41. Matthew Fuchs - October 16, 2020

    editors note: misspelled Pelosi in previous post. Apologies

  42. John Hinman - October 17, 2020

    Tom,

    Back in the real world (where do you find these yahoos who comment anyway?), this column imparted important information, and sage commentary. The Amazon marketing model coupled with the multi-state retailer wine.com model (which is basically a two-tier system securing inventory in large quantities through cumulative quantity discount deals – a natural for Whole Foods) will literally be the death of the small local retailer (if Total Wine hasn’t already killed them off).

  43. Tom Wark - October 17, 2020

    John,

    And really, the only chance that small, independent retailer would have is if they can ship interstate. Given state politics, it’s practically an argument for passing reciprocity laws.

    Tom…

  44. John Hinman - October 17, 2020

    Absolutely agree. Without an open national market the small independent retailer is doomed to extinction.

  45. Matthew Fuchs - October 17, 2020

    Nobody is seeking the extinction of anyone, and, like i’m long maintaining now, my postings were meant to sound funny from the very beginning.

  46. Jim Ruxin - October 17, 2020

    Sorry Matthew–

    In this age of Trump, Tom Cotton and Mitch MicConnell, a claim like that has no credibility.

    They have ruined it for you.

  47. Matthew Fuchs - October 17, 2020

    well, if mitch, tom, and the other one too have succeeded in making things hard for me, i’d better get next to nancy right quick…rather looking forward to that!!

  48. Matthew Fuchs - October 20, 2020

    OK, Tom, just one question, and then I’m taking few days off,…go try and get like really close to Nancy. So, here goes, that rendering of a chicken at the top of your article, there….YOU actually penciled that thing, didn’t you? Penciled and then colored it in, you fiendish rascal, you! And, if i do recall, in one of your previous articles addressed to me, by you,…well, there was a depiction of a robed judge actually presiding someplace. That judge will always stay with me, tom!
    That was as rich as it gets!
    Hats off!

  49. Matthew Fuchs - October 20, 2020

    That chicken in the article’s upper left…who colored that?
    Had to be Tom, right?


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