BREAKING NEWS: Direct Shipment of Wine soon legal in all 50 States!

Posted by Richard Beaudin on Dec 16, 2011 in Wine Shipping & Distribution | 0 comments

US Postal Truck

By a wide margin and significant support across both parties, the 29th Amendment has passed by an overwhelming majority.  After over 70 years of inconsistent, special interest regulations, direct shipment of wine in all 50 States of the Union will be the law of the land as of January 1, 2013.

This stunning turn of events was initiated as a means of ensuring the US Postal Service was profitable and self sustaining without the need to layoff significant personnel or curtail major services. This allows the US Postal Service to deliver direct shipments of wine and beer now on a level field of competition with other private carriers.

This new legislation came on the heals of the historic passage of the 28th Amendment just three months ago (See information box below) by overwhelming majority vote of the American people.

Details – Direct Shipment of Wine

The 29th Amendment repealed the 21st Amendment, which gave each State the right to individually regulate alcohol distribution. The States still have flexibility, but now businesses and consumers have a consistent and fair system. There is no longer pressure from special interest groups to adhere and strengthen the exclusive 3-tiered distrbution of alcohol. This new direct shipment of wine benefits wineries, the States, and most importantly, the American consumer. Common sense and the will of the people have finally prevailed.

Here are some of the reasons behind the historic legislation based on independent studies:

• The direct shipment of wine by wineries and retailers would have little adverse impact on the current 3-tiered model since medium to large wineries logistically still require this distribution model.
• Significant job creation would take place as small to medium wineries add personnel to support increased sales of their wines through direct shipment. In addition to robust job creation, costs would be greatly reduced as regulations would be consistent across all 50 States.
• No  increase in alcohol abuse is anticipated since any direct shipment would require an adult signature and ID – no alcohol would be left without proper ID and signature. Hefty fines or loss of license would result for infractures by individuals and/or distribution firms.
• States will also benefit significantly from the new legislation as they will no longer need oversight of inconsistent regulations. Further, States have the right to set their own license fees and collect any State taxes due. License fees will be self regulating since higher, unreasonable fees will result in higher loss of tax revenues.
• Consumers are the big winners in this new legislation. Competition will ensure that consumers have access to the best prices and the most selection. This is the way capitalism is supposed to work.

If only the above was true.…..

No … although four Senators are suggesting that the Postal Service should be allowed to deliver alcohol, 109 Members of Congress are backing legislation that would recind Heald v Graham in favor of special interests, which would in effect reverse the progress made in direct shipment over the last 10 years and negate any benefit should the US Postal Service be allowed to ship alcohol.

No… the Federal Government is still completely deadlocked in partisan bickering. Instead of working for the American people who elected them, they continue to address symptoms rather than solving problems.

No …. direct shipments of wine from wineries or retailers are still constrained in several States AND in those States that allow shipment, the regulations vary state to state. Here a great example of regulation that benefits only a few while raising costs and putting a damper on jobs for the majority. Consistent legislation across all 50 states would benefit the States, wineries, retailers, and most importantly, the American consumer. And, although the monopoly would be gone, the current 3-tiered distribution model would still be necessary and important to medium to large volume wine and beer producers.

I’d like your opinions …….

NOTE:  The results are posted on the Winery Survey Results page.

H.R. 1161 – An Oxymoron?

Posted by Richard Beaudin on Nov 15, 2011 in Wine Shipping & Distribution | 0 comments

In an era when:

• Unemployment is at historical high levels and has remained high for over two years,
• The lynchpin of consumer wealth (housing) for the American middle class is in a prolonged slump with over 22% of home owners under water,
• The top 1% of the population garners 40% of the wealth – the middle class is shrinking while those in poverty substantially increased,
• Debt continues to spiral out of control,
• It is getting harder and harder for Americans to afford or access quality healthcare,
• Infrastructure across the country is crumbling,
• Trading partner currencies are being manipulated,
• The banking industry continues to exercise policies that could easily cause another worldwide recession,
• We continue to engage in two wars, and …
• Fossil fuel based energy continues to hold long term economic growth hostage,

What does 109 of our fine representatives in congress focus on? You guess it!

The Community Alcohol Regulatory Effectiveness Act of 2011 (HR 1161)  – introduced by Representative Jason Chavetz (R) of Utah as a follow on to HR 5034 – a piece of legisation that will not solve, rectify or mitigate any of the above.

According to the Statemans Journal, the special interests supporting this bill (the National Beer Wholesalers Association and the Wine and Spirits Wholesalers of America), depict this as “an attempt to rescue state and local control over alcohol sale from online alcohol sellers, big box retailers, international alcohol suppliers and professional plaintiffs that want federal courts to allow them to sell ever-larger volumes of alcohol at low or below-cost prices – a trend they see as leading to social ills such as more underage drinking.

Why an oxymoron? An oxymoron is defined as “a figure of speech in which incongruous or contradictory terms appear side by side”. In this case, the National Beer Wholesalers Association and the Wine and Spirits Wholesalers of America don’t have a problem in increasing the volume of sales of alcohol or providing pricing promotions where it serves their interests, they simply want to ensure that if volumes and revenues are going to increase it has to flow through them.

The intent of this bill is to unravel the Granholm vs. Heald Supreme Court decision that disallowed state laws that thrash the Interstate Commerce clause of the Constitution in favor of special in-state treatment of wineries. This bill would ensure that when unfair, special interest state laws are enacted, they cannot be challenged, keeping that the current 3-tired monopoly remains in tact.

One thing this bill would do is decimate the small wine producers who do not produce sufficient volume to get the attention of large distributors and instead depend very heavily on tasting room and wine club sales. This would effectively eliminate out of state wine club sales. So at the very least this bill would increase unemployment for small producers.

I am not going to restate all the facts about this bill – this has already been done on countless sites such as Free the Grapes,  Vinography, Stop1161, Fermentation, as well as countless other sites.

• But I will state the obvious:
  This is a special interest bill that serves a small minority that are desperate to keep a monopoly in place
  It has nothing to do with states rights .. they already have them courtesy of the 21st amendment
  It has nothing to do with keeping alcohol out of the reach of minors
  It has nothing to do with ensuring sales taxes are paid

And just to let you know I am not focusing on any particular party, of the 109 co-sponsors approximately 42% are Democrat and 58% Republican.

My question to the 109 co-sponsors would be:

• Did you read the bill or simply sign based on contributions and/or quid pro quo favors?
• Do you understand the special interest provisions and the harm it can cause to small wineries and consumer choice?

If you haven’t read the bill, dah … read it!

Finally, how about focusing on the real problems facing this nation that are in the best interest of all Americans?

Wine Regulation: For or Against

Posted by Richard Beaudin on Oct 20, 2010 in Wine Shipping & Distribution | 4 comments

Regulation.  According to one definition is  ”a principle, rule, or law designed to control or govern conduct”.

As we approach mid term elections the issue of whether we are over or under regulated is a discussion getting a lot of attention. On the one hand regulation provides much needed protection from reckless behavior or downright greed. On the other, regulation can be overbearing, costly to implement and maintain, and simply a way to ensure some special interest group has their way.  And sometimes… its just plain stupid – it achieves just the opposite of what it is supposed to regulate.

Some of the most talked about issues include the housing market debacle and Wall Street. In both cases one could argue that the proper regulations were either not in place or simply ignored.

Great subjects to discuss, but here I prefer to talk about a different industry, one in which the regulations are outdated, overbearing and in some cases, counterproductive. I bet you know where I am heading  … yes, I am speaking about alcohol regulations specifically in the wine industry.

So let me give a couple of examples. First, a regulation that on the surface seems to make sense, but as with many good intentions, misses the mark. There is a regulation that was put in place in Rhode Island to stop the practice of offering cheap prices during happy hours in order to crack down on drunk driving and drunkeness in general. It would seem reasonable … don’t let restaurants and bars promote 1/2 price or all you can drink offers in order to bring in more business, not because it won’t bring in more business, but because it does. Offers that suggest drinking as much as you can as quickly as you can are in fact not likely in the public’s interest.

So where’s the problem? As they say, the devil is in the details: the regulation also prevents a restaurant from providing a special offer when it comes to wine while dining.

Here’s how it works. A restaurant wants to attract business on slow nights so they have a special promotion – buy two entrees and purchase one bottle of wine at half price. In one particular case, the food is good and reasonably priced. The wine list although not extensive includes a small but  nice selection of low,  medium, and medium-high priced wines (Examples -  David Bruce Petite Sirah, Craggy Range Gimblet Merlot/Cabernet Sauvignon, Chateau Ste. Michelle Indian Wells Merlot, Catena Malbec, and Provenance Cabernet Sauvignon to name a few- $32 – $70). This offer has been going on for some time – the patrons get to try a nicer, higher priced bottle of wine for less and the restaurant draws more loyal patrons (oh yes, and the restaurant will re-cork the wine and seal it for take away – so there is no pressure whatsoever in having to finish the bottle.  Actually … here an example of a very smart regulation that promotes business but helps deter one from drinking too much!)

OK … where was I? Ah, so what’s the problem? They can no longer offer the wine at a reduced cost even though you may only get the discount on one bottle and with the purchase of two entrees. Instead, they can “offer” a bottle of wine for free with the two entrees (so of course they will offer their cheapest bottle). So, help me understand how this has helped to reduce drunken driving or alcohol abuse, which I assume is the intent of the happy hour law? In truth it doesn’t.

Before you had to pay something to get any wine, now you can get it free.  It doesn’t seem like a very intelligent way to administer what would seem to be on the surface a reasonable regulation.  Yes… I can now get what amounts to a $6 bottle of wine for free, but I would much rather pay a few dollars to enjoy a mid range wine that’s worth drinking - the vast majority of  $6 wines are not worth the calories! 

OK .. let’s move on to something much more insideous,  special interest regulation…..

(Let me note here that I do not favor any political party, whether Republican, Democrat, Tea Party, Libertarian or any other. I am an independent and would love to discover any political party that seeks to enact legislation for the good of the American public ……not just the conservatives .. and not just the liberals. Common sense would be so refreshing.)

So thinking of voting for a Republican or Tea Party candidate to thwart those pesky Democrats? Well, have a read here courtesy of WineZag entitled “No Comment on Wine Freedom in H.R. 5034 Response from Massachusetts Senator Scott Brown”.  Here we have a candidate that is going to shake up Washington and get rid of the special interest. Would you like to know his position on H.R. 5034?

I have never spoken, written or otherwise conversed with Senator Brown (and I am not singularly pointing him out … there are many co-sponsors of this bill that could use a long vacation..from Washington), but I know that no intelligent individual could read that legislation and not have a sense regarding  its special interest nature. So my question: has he read the bill?

Or, has he been swayed by special interests to vote for something that is NOT in the public’s interest. In either case, the American public has another potential regulation that reaps great rewards for the wholesaler monopoly (and I assume many politicians as well who receive support from the wholesalers), but hinders job creation and makes it very difficult for small, family owned wineries. It leaves them few options.  If they cannot reach their customers directly, they must try  to place their wine in distribution, which for many wineries is much too costly  (assuming they can find a distributor to carry it at all). And PLEASE, not another bit of nonesense about how this will help reduce underage drinking or ensure alcohol taxes are paid; this bill does neither. It simply seeks to ensure no court can challenge laws that  discriminate against interstate commerce.

Now as stated many times I am not suggesting the dismantling of 3 tiered distribution. On the contrary, for high volume wine, beer and spirits producers it is a necessity. Other means of distribution would be impractical.  This system employs thousands of Americans as well.

But just as other industries have adopted new ways of doing business to augment traditional methods, here too regulation of the wine industry must modernize. Current laws established 75 years ago meant to regulate the sale and distribution of wine are not optimal in 2010. How many other products have different regulations in all 50 states? How can legitimate businesses cost effectively deal with 50 variations when it comes to wine sales and distribution? And lastly, why should any legislator support a law that in no way impinges on a states ability to regulate alcohol as long as they do not do so by discrimination in regards to  interstate commerce?

As stated in a recent New York Times article ”It’s easier to deal in guns than in wine”. Let’s free the grapes.

Pennsylvania Wine Kiosks: Stupid is as stupid does

Posted by Richard Beaudin on Jun 26, 2010 in Wine Shipping & Distribution | 0 comments

Excited!! I can’t contain my enthusiasm for the new, ultra modern wine kisoks being tested in Pennsylvania. Move over Jancis Robinson – the Pennslyvania Liquor Control Board is now not only the unreputed wine expert in the state (Pennslyvania’s retailers are already very restricted to what brands they can carry), but they have also transformed the pleasure of learning, understanding and purchasing a bottle of wine into a robotic episode akin to taking money out at your local ATM (although you don’t have to breathe on the machine or teller at the bank).

What a great way to educate the public on wine – how grapes are grown and harvested, how wine is produced, the concept of “terrior”, the history, culture, and dedication of those that produce wine – all by keeping the bottles hidden behind glass doors and providing various snippets to the potential buyer – snippets no doubt written by the distributor that is trying to push one brand over the other.

According to a recent article in the Post Gazette, the kiosks have 4 coolers with … an astounding 53 different wines (let’s see with about 7,000 wineries in the US alone with say an average (being very conservative) 3 wines each, that means the great citizens of PA are being offered about .0025% of what is available in the US, not to mention the thousands of wines produced around the world). How was this selection made? I highly doubt it was selected based on quality and diversity.

In a time when only large producers can hope to secure distribution and only 36 states allow direct shipment, here comes Darth Vader – another attempt to save money while ensuring that access to small producers is kept at bay. Vinography said it well in  “How to AVOID selling wine in Pennslyvania”.  This is an excellent way to hinder sales – just what the wine industry needs after the recent recession.

Now, I am not totally opposed to any automation. In a trip to Madrid I visited a wine shop where you could purchase a card and then use that card to get tastes of various wines of the region. The bottles were displayed along with a full explanation of where produced, which varietals, methods, and tasting notes. There were also employees in the store to provide additional information about the wines and producers.

I understand convenience and certainly agree with keeping alcohol out of the hands of those too young to drink or those that abuse it, but in my opinion this going in the wrong direction. Education and knowledge is key to the enjoyment of wine, and this contraption satisfies neither.

Hmmm….I highly doubt Pennslyvania will be on my priority list of places to visit – at least not unless I bring my own bottle.

Kill Bill H.R. 5034

Posted by Richard Beaudin on Apr 19, 2010 in Wine Shipping & Distribution | 2 comments

This bill was recently introduced in Congress to safeguard the status quo regarding the three-tiered system of alcohol distribution and ensure it remains without challenge even in those cases where the Supreme Court has ruled related state laws are discriminatory.

There are several sites providing a good amount of detail  including Tom Wark’s Fermentation, WineIndustryInsight, Decanter and WineHarlots, to name a few.

As a wine lover I find this attempt by the Wholesale lobby incredibly disturbing at the least . At a time when this country is simply fed up with special interest group legislation, this lobby wants to have their cake eat it too so no one is able to legally challenge them in the future.

To me this is a clear case of self interest and greed; this group wants to make sure that no one can challenge their monopoly. They are getting the support of several State Attorney Generals with the argument that the current justified litigation is too costly – states should not have to put up with it (boy, imagine if the health insurance industry came up with a similar bill and argument: “we should not be bothered with what we consider to be frivolous lawsuits if we unjustly deny coverage to sick people.. it costs too much and takes too much time”!)

Why do I suggest this is absurd?

First, no one is trying to do away with the three-tiered distribution system. From a logistical viewpoint, there are many large wineries that need the current system just to get their product to market. So even after 70 years there is still a place for the system itself.

Secondly, the current challenges in the courts are not based on anyone challenging the state’s right to regulate alcohol, they are challenging the state’s rights to implement laws that clearly discriminate between in and out of state wineries and retailers. Yes… they are reeling against anyone that might challenge them from implementing self interest laws that are clearly in conflict with laws regulating interstate commerce.

So what are the salient arguments?

My interpretation:

“The three-tiered distribution system has served us well since the repeal of Prohibition in 1933. If this system is circumvented it will lead to underage drinking, more alcoholism, loss of taxes and loss of jobs. Further, the cost of defending current laws is becoming expensive and the States should not be burdened with such lawsuits.”

Let’s take these one at a time:
1. The three-tiered system has served the industry well in terms of an orderly transition for a decimated industry at the end of Prohibition. With that said, so has regulations regarding telephone service, television, radio, and many other technologies and processes. However, most all of these have gone through their own transitions based on changing needs and demand. Imagine what things would be like if everyone still only had only land lines to work with, or needed to use cash for all transations. The bottom line is that needs change and most industries and businesses change with it. Actually, the three-tiered system has changed. It now includes a much smaller number (albeit much larger size) of distributors, many who control vast amounts of the industry – from the vineyards, to the wineries to distribution. So there is now a lot on the line for these mega distribution companies (hence… lot of money being spent at the State level to keep these laws in tact).
2. I would like someone to point out to me how the current system has fully curbed underage drinking or alcoholism. This lauded system still has many cracks in it. I would also like someone to prove that direct shipment would drastically increase either of these. If that were the case, every state in which direct shipment is available would have drastically higher rates of underage drinking and alcoholism, which is not the case. (I am not saying there are no alcohol issues as that would be naive. What I am saying is that allowing direct shipment does not translate into either of these assuming well identified safeguards are implemented.)
3. Direct shipment states collect taxes and fees from wineries that wish to ship into their state. Tax collection is not an issue.
4. The next one is loss of jobs. I look at this issue much the same as under age drinking. There is no basis for there being a loss of jobs. The three-tiered distribution system will still have plenty to sell. The issue here is simply allowing those that want access to wines that are not currently offered to be accessible. These are not the high volume wines currently in mass distribution, but rather, small volume winereies that often can’t get representation in the current system. This saves jobs not the way around.
5.Lastly, let’s look at the absurd argument that States should not be bothered with lawsuits to refute laws that clearly discriminate between in state and out of state wineries. Again, this is akin to saying after the most recent catastrophe in West Virginia that mining companies should not be held accountable for safety because the cost of litigation is too expensive. If its wrong its wrong.

My advice to States:  Don’t draft discriminatory laws and you won’t have to deal with related lawsuits!
In my opinion, this is clearly a bill that should not see the light of day. It serves one purpose only – to safe guard a monopoly initially implemented 70 years ago. Time we updated our laws to reflect the demands, capabilities and promise of the 21st Century.

If you feel the same way I do, I encourage everyone to write to their representatives to reject this well crafted, special interest bill that is an affront to all wine lovers. Here’s a link to help you make your voice heard (courtesy of Free the Grapes)

As Tom suggests: Kill bill – HR 5034.