Dr. Vino Boils Wine Controversy in NY

Posted by Richard Beaudin on Feb 20, 2010 in Wine Shipping & Distribution | 0 comments

There are many great wine blogs on the net. One of my favorites is Dr. Vino. Tyler Coleman not only holds a Ph.D., he is also the author of several books, and very importantly, his blog often delves in some rather contraversial subjects. Case in point, his recent blog entitled “Wine Shops in states with supermarket sales – three views”, in which he has initiated a rather, some times stormy “conversation” between various intersted parties regarding allowing sales of wine in grocery stores in the State of New York.

This is a fairly heated issue at the moment. Here’s a view on the subject from the retailers perspective from the Queens Chronicle – Liquor Store Owners Face Grocery Clash.

This actually is a second attempt to allow wine sales in grocery stores after a first attempt failed about a year ago.

What’s at issue?

There are actually five competing perspectives on the matter:
1. The State of New York wants to increase revenues
2. Grocery stores want to sell wine to  increase sales
3. New York State wineries would like to see more shelves dedicated to selling their wines
4. Consumers would like to be able to shop in one place for their food and wine
5. Current liquor stores want to keep the status quo, and/or are concerned over what this might do to their business.

All the markings of a great debate! As of 2/12 at 12:28 there were about 71 responses. Now this does not reflect 71 individuals. Rather, it represents a much smaller number of people who are either dead set for or dead set against the enactment of this law. (The count is up to 77 as of 2/20)

As I peruse the responses, it is clear that there are passionate arguments for and against enactment. The current store owners do have reasonable concerns particularly where current law includes many restrictions on their business. Namely, dozens of laws enacted before and after Prohibition that likely make little sense in 2010. On the other side are those that are passionate about changing things for the better (their perception) and are arguing strongly in favor of moving away from the laws set as a result of the lifting of Prohibition in 1933 to more reflect the realities of 2010.

Debate is good. No one is completely right or wrong, even if some of the arguments are either protectionist, in error, or simply self serving.

Tempus fugit. Some laws are timeless, but many need review and change over time. For instance, there is a law in Massachusetts that does not allow financial support to parochial schools. Now, I do believe in a separation of church and state. However, the reason for this law goes back to the 1900s when a group (Know Nothing Party) were determined to do whatever needed to stymie those emigrating from Ireland. There is debate now that the law is getting in the way of providing children a better education.

So laws do need to be reviewed, and lively debate is needed to ensure the best results are achieved. Business also must evolve. It wasn’t that long ago that General Motors fought for years against regulations that required safety glass in cars, only to find the Japanese and others investing in engineering instead of lawyers. Times change and require laws and businesses to adapt.

I simply can’t help believe that if each of the concerned parties took a position that said “let’s make things better for the citizens of New York”, a compromise could be identified that:
- Helped increase revenues for the State of NY
- Allowed consumers to do one stop shopping
- Allowed grocery stores to sell wine
- Increased the shelf space dedicated to wines produced in the State of NY (3rd largest wine producing state)
- Changed or did away with laws that restrict current liquor store owners from evolving their business to exist profitably in spite of wines sales in grocery stores (where in 35 other states grocery stores and liquor seem to be able to co-exist)

The only thing I can hope for  is that after pondering the stupidity and inability of our current legislative bodies in Washington to work together for the betterment of the American people, that the interested parties in the State of New York will reflect on what is before them, see this as an opportunity – not a win or lose situation – and act responsibly for the sake of all concerned.

OK .. with that said, don’t forget to bookmark Dr. Vino. Kimchi anyone?

Myth of the Family Winery:Is there another Agenda?

Posted by Richard Beaudin on Dec 16, 2009 in Featured Article, Wine Issues | 3 comments

Yesterday I read a very interesting report (December 2009) from the Marine Institute (Alcohol Industry Watchdog) entitled: “The Myth of the Family Winery: Global Corporations behind California Wine”. Even as a passionate wine enthusiast I would have to agree or at least acknowledge that many of the  statements in the report are accurate.

• As an example, a very high percentage of production of wine from California is controlled by a small number of global organizations (won’t list them here… you can easily identify them in the report).
• I must also acknowledge that these same organizations do in fact fund lobbyists across the nation (and I assume abroad as well) to try and keep the status quo from changing. This of course is also done by powerful organizations across all types of business as a way to support continued growth and profitability – not perhaps humane, fair or reasonable, but still legal.
• Again I have to agree that these large corporations are not only wine focused, but are usually also well invested in beer and spirits.

So where do I differ with the report?

As with any facts, the key is in understanding the background and the numbers to the degree that one has an accurate picture by which to evaluate. In this case, the facts are presented from one point of view; that is, from that of an “Alcohol Industry Watchdog”.

So my humble perspective:

• Yes… alcohol in general is controlled by a few very large corporations. This is true today and it was true at the turn of the century in America, one reason why wine was included within Prohibition. In both instances the main focus is and was on profitability. However, wine is produced also by hundreds of dedicated grape growers and winemakers who have a passion for their craft and who are firm believer’s as am I that wine is and should be a part of your everyday life – not as a beverage with which to binge, but as an integral part of a healthy diet.  Yes… there are huge conglomerates in the wine industry, but there are dozens and dozens of family run wineries that are under constant financial pressure due to the economy and the difficulty of getting their product to the consumer under the current 3-tiered system.  These are very hard working individuals and families who are not wealthy, take great pride in their work, and also provide employment, pay taxes, and produce a quality product.
• Yes … these very large corporations do fund lobbyists .. but not fully as the report suggests. While these large corporations own the majority of production, they are also distributors of the product.  High volume production in any industry requires tiered distribution to support the large volumes that must flow from producer to consumer. Small producers are often shut out of distribution since there isn’t sufficient volume to interest the large volume distributors. So yes there is large scale funding and lobbyists, but not to support direct shipments or alter 3-tiered distribution. One of the issues before Prohibition was the fact that the producters (yes.. again very large scale corporations) controlled the flow of alcohol, often putting pressure at the retail level to the point of exclusivity as a way to stymie the competition. The system put in place after Prohibition (3-tiered system) was engineered to avoid this from happening again. However, over the last 70 years since the repeal in 1933 the situation has changed whereby distribution is now the controller not the producer. I will leave it up to the reader to determine which is better.

In reality, the United States has been debating the role of wine since the mid 19th Century when Nicolas Longworth worked to make wine a part of daily life (keep in mind drinking water at the time was very hazardous to your health with the alternative mostly distilled liquour) and Samual Carey, a strong advocate of temperance, insisted wine was no different than any other alcohol.

As with many aspects of life, the “truth” for the majority of people likely lies in between.

QUICK UPDATE:  According to Linda Reiff, executive director of Napa Valley Vintners, “The strength of the family business is evident in Napa Valley — 95 percent of our appellation’s wineries are family owned. And, yes, 70 percent produce less than 10,000 cases annually and 60 percent less than 5,000 cases annually.”

For more on Napa Valley, its wineries, and the last 10 years, read “Wine Tales of the Decade”.wine

Amazon: No Online Offering Likely

Posted by Richard Beaudin on Oct 27, 2009 in Wine Shipping & Distribution | 0 comments

There was quite a bit of excitement (or concern) when Amazon indicated intentions of adding wine sales to its already large offering last year. Seen as a step in the right direction for small and medium wineries, it seemed to be an opportunity to identify and serve a new set of customers that otherwise could not easily be reached, not to mention finally allowing wine enthusiasts access to wines that otherwise they could find or purchase.

Why? Because the three tiered distribution system in the United States doesn’t work very well for smaller wineries whose output and/or reputation cannot compete very well against large, high demand brands. If a winery finds itself on the outside of the system, there are few options to selling their product except locally, which may not be feasible or profitable.

In an article today by Wine & Spirits Daily entitled “Why Amazon Quit: Is it Wholesalers?  it  got me thinking about why it is so very difficult to change the wine shipment laws in this country. Is it the wholesalers? Well … yes.. there is a monopoly established in which they benefit greatly. But it isn’t just the wholesalers.

As suggested in the article, there really are now many entrenched interests in keeping the status quo:

• state regulators
• control state executives
• public health advocates
• industry policy wonks
• anti alcohol organizations
• …to name a few

The reasoning: ”vested interests in  preserving a system they contend has worked well for 75 years”

To some this statement is true. But to many others the system works well only to a point: It does not support freedom of choice for law abiding wine enthusiasts, it harms an industry with thousands of smaller brands that could otherwise employ more people, and it often hinders interstate commerce.

Progress continues to be made, but the battle for freeing the grapes will not be short term.

Wine Buying Patterns: Temporary or Permanent?

Posted by Richard Beaudin on Oct 1, 2009 in Wine Shipping & Distribution | 0 comments

It is doubtful anyone would deny that the wine industry has been adversely impacted by the global recession. Supply and demand in any industry affects pricing and availability of many goods and services.

In previous recessions the “status quo”  returned, and then moved upwards. So is the current economic situation simply a normal cyclical pattern that once we have a recovery everything will return to normal and then start inching upwards again? Or has this recession, the worst the world has seen since the 1930′s, changed wine buying habits?

Certainly those that still have very large disposable incomes and are partial to wines that are in short supply at astranomical prices, will continue to purchase those wines. But unlike past recessions, there are questions about whether the same degree of “wealth” and disposable income will return to the middle class, those that have become wine drinkers and have been purchasing more expensive, non-cult wines.

Are wine drinkers “stepping down from what they used to spend per bottle, to a lower outlay”? This was a statement from one of the more recent articles from Reuters entitled “Wine drinkers lift glass to law of supply and demand”. There have been numerous articles on the subject including those from wine country itself such as the North Bay Business Journal’s  Wine: As consumers seek value, wineries adjust. All of these are suggesting this is not your normal cyclical pattern.

It is with this background that I setup a survey with a few simple questions. Now I can’t consider the survey a definite indication of what will happen since the response numbers were not significant enough to come to that kind of conclusion. However, I can at least share with you the response that I did get as follows:

Background Questions:

I first asked the participants to indicate their gender, age and location.  77% of the respondents were male and 23% female. Of these, 38.5% fell into the age group of 21 – 39 and 61.5% in the age group 40 – 59.

In terms of location, 38.5% indicated they resided in the Eastern US, 23.1% resided in the Western US, 15.4% resided in the Southern, US and finally, 30.8% resided in Europe/Middle East/South Africa.

Wine Purchase Questions:

The first question asked was “In the last 12 months has the number of 750ML bottles you purchase increased or decreased?” The response was that 67% have increased the number of bottles purchased and 33% have decreased the number purchased.

I then asked a question regarding purchasing pattern before the recession – “Before the recession in what price range did you buy everyday wines and special occaison wines?” The response was 38.5% purchased everyday wine priced $5 – $15 for a 750ml bottle, 53.8% purchased everyday wine priced $16 – $25, and 7.7% purchased bottles between $26 – $50 for an everyday wine. No one indicated purchasing wines for everyday consumption over $50.

For special occaisons, 7.7% indicated they purchased these between $16 – $25 per 750ml, 38.5% at between $26 – $50, and 7.7% over $50.  (Please Note: This was a single question with  multiple responses so that percentages will not add to 100%)

I followed the previous question with “Since the recession I now buy wines ….”. The response was that 69.2% are buying everyday wines in the $5 – $15 price range and 38.8% are now buying in the $16 – $25 range. None of the respondents indicated purchasing wines for everyday consumption beyond $25.

In regards to special occaison wines, the response was 30.8% are buying in the $15 – $25 range and 23.1% purchasing in the $26 – $50 range. None responded purchasing above $50 for special occaison wines. (Again, numbers will not add up to 100% due to multiple answers)

In order to keep the survey brief I asked only two additional questions:

The first was in regards to future purchasing plans following the recession. 30.8% said they would likely return to their purchasing winesas they did before the recession and 69.2% said they would continue purchasing the way they have during the recession.

The final question simply asked whether the respondents had any additional comments. Four of the respondents had additional comments as follows:

• “I think prices have increased as well with high cost of logistics from producer to open markets.”
• “My wine buying strategy is mainly influenced by vintages. As an Italophile this year the release of ’04 Brunello and ’04/’05 Barolo and Barbaresco kept me buying at roughly the same level/slightly increase. With the great ’06/’07 vintages comming up next two years, I’ll expect to be buying at a slightly higher level.”
• “People are now looking at lesser known regions and less well known varietals. This is all good as it will expand on wine knowledge in general.”
• “I have been more mindful of every dollar I spend – there are many good wines in the lower price point”

The data suggests that wine buying patterns have changed. This is consistent with many other industry articles as well as data collected from wineries, distributors and retailers. The question remains whether these buying patterns are temporary or permanent. At the very least these data would suggest that buying patterns will not quickly return as they have in the past, and for some buyers, may have changed permanently.

Guns safer than wine?

Posted by Richard Beaudin on Sep 21, 2009 in Wine Shipping & Distribution | 2 comments

It never seems to amaze me that when we are still feeling the effects of the worst recession since the Depression of 1933 and someone in government comes up with a good idea (something we need more of !) that will promote local industry and increase local revenues, that the naysayers come jumping out of the closet only to use the same tired excuse for not  changing Prohibition Era laws that are either unnecessary, add cost,  or simply hinder business today.

Case in point, a change suggested to Massachusetts law by Sen. Jamie Eldridge D-Action that would allow Massachusetts wineries to sell and offer a tasting of their wines at farmers’ markets in the state.

What’s the problem?

According to a report from WBZ News:

“The bill is strongly opposed by liquor store owners, who also led the resistance to a 2006 ballot question that would have expanded the sale of wine in supermarkets in Massachusetts. Voters defeated that measure by a 56-44 margin.

Frank Anzalotti, executive director of the Massachusetts Association of Package Stores, said Eldridge’s bill is “fraught with peril” because there would be no guarantees that workers at farmers’ markets are properly trained to weed out minors.”

Now one would think this “concern” can be easily rectified and/or soothed:

1. Assuming the wineries are using the same employees that pour at the winery itself, there is no issue as these people are trained – and just as competent to pour as those in a liquor store (in some cases they are family members that have a lot more to lose than a hired employee at a retail store).
2. Assuming the wineries decide to hire new employees  and/or contract for a particular event, the bill could stipulate that anyone selling or pouring must be trained.

I can’t think of any small winery in Massachusetts that would put their license in jeopardy in order to move some bottles at a farmers’ market. I also doubt there would be a huge drop off in sales at liquor stores around the state as many do not carry or only minimally carry locally produced wine.

Let’s be honest: allowing the tasting and sales of locally produced wines at farmers’ markets of an by itseld will not drastically increase sales. I would think that most people would buy one or two bottles, not walk away with several cases. However, what it will do is allow more people in Massachusetts to become familiar with and hopefully interested in locally produced wines.

What is the benefit?

• Massachusetts wineries would have the opportunity to get their wines seen and tasted by those who may be totally unfamiliar with their wines.This could mean immediate incremental sales at the farmers’ market or equally as important, new repeat customers of the winery direct through a wine club or similar, or perhaps by purchasing these wines where available at a local retail liqour store, resulting in increased sales for the store(s) and the wineries.
• As stated, local retail outlets could now find a local interest in purchasing Massachusetts wines. They would have the ability to stock more of these wines and increase their sales.
• The State of Massachusetts would benefit by helping to grow a nascent industry that based on growth would now be paying more taxes and perhaps hiring additional personnel (who will pay more taxes).

Bottom line: if we can allow guns to be bartered and/or sold at events without requiring the normal waiting period or background check, I think having a small taste of wine, and then subsequent sales to adults is not only quite reasonable, it makes good business sense.

Distribution (sales or bartering) of automatic weapons to unknown individuals makes me “fraught with peril”, and is likely less deadly than a sip of wine.