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.

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.

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

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.

Let me make it clear:

I am not a resident of New York … so maybe not my business?

I am not a lawyer or judge, or hold a law degree…. so maybe I don’t know what I am talking about?

What am I?

I am a wine lover and enthusiast, and a believer that if something doesn’t make sense .. it isn’t true! (thanks Judge Judy for that one

So I find it fitting on this occaison and celebration - the 4th of July 2009 - to comment on a recent ruling by a three-panel judge in the Second Circuit Court of Appeals, which illogically upheld a similar judgement from 2007 regarding restricting direct shipment of wine to consumers in New York from out of state retailers when the state of New York allows shipment from in state wine retailers.

If I recall in Granholm vs. Heald in 2005 the court ruled that a state cannot discriminate between in state and out of state wineries – that if the state allows in state wineries to ship directly to consumers, it must also allow out of state wineries to do the same. The issue was pitting the right of states to control the sale and distribution of alcohol (set after Prohibition) against the the Commerce Clause in the Constitution (hence how fitting on the 4th of July!).

Help me out here everyone:  How can it be constitutional for a winery to be able to ship and not a retailer? Isn’t this the exact same principle coming into play, the only difference is the shipment would come from a retailer and not the winery itself?

Steve Heimoff in his blog “Wine suppliers are not the new Mafia provides some good insight into the decision.

Alright .. of course I know the issue: MONEY and MONOPOLY… that’s it in  nutshell.

Forget about underage drinking and tax losses. Both of these can easily be accommodated as they already have in states that allow out of state shipments.

Unfortunately, whenever money and control are at stake there is going to be a struggle.

Hey .. let’s look on the bright side .. the law firms involved will make a mint (no reference to the Federal Reserve intended !

All right … this ever happened to you?

Let’s say its your child’s birthday and you want to purchase a special toy for him/her. You go to your local Toys R Us and they tell you that they don’t carry it in your state, but you can purchase it at a store in another state.

You go home, get on the net and look up the store. You find the toy you are looking for and put it in your shopping cart. You enter your information and hit the “buy” button. Instead of providing you a comfirmation page you get the following message:

“We are sorry but our records show that this toy represents the 13th you have purchased from us over the past year and your state only allows you to purchase one dozen yearly. Please buy from us again after (the date)”.

That’s nonsense, rediculous you say … well not so fast. This is one of the many rules in place or being put in place in many states  where you can purchase as much wine from an in state winery as you would like, but you are limited when purchasing from an out of state winery.

Sound a bit unfair? Or, perhaps do you smell private interest or influence?

Unfortunately since the repeal of Prohibition in 1933, states were given the right to setup their own rules and regulations when it comes to alcohol. Frankly, many of the restrictions made sense at that time based on the illegal activity prevalent during Prohibition and the state of distribution, licensing and administration.

I am sure you have heard the old adage “if it ain’t broke, don’t fix it”. Well here we have a situation where for the wine consumer it is often broken both in terms of cost and choice, but for those involved in distribution monopolies and/or those that have businesses that thrive on the staus quo, it is working  just fine!

One recent example is a new wine shipping law   in Tennessee (Senate Bill 166) that would allow out-of-state wineries to ship up to 3 cases per year if they obtain a $300 non-refundable application fee and then a $150 annual permit fee. Tennesee is not alone in setting fees and limitations on shipments of wine or the size of the winery.

If availability (volume) is the issue, why then isn’t there a limit on in-state purchases from wineries or retailers?

Is the limitation in place to safeguard state revenue? Nope.. Taxes can’t be an issue either since the out-of-state wineries must be licensed.

Alright .. is it access? No not really since the state can mandate that all shipments must be signed for by someone over 21. OK … so perhaps the issue is that the delivery companies don’t have trained drivers? Not likely, most drivers have families to feed and are just as likely as any clerk in a retail outlet to safeguard their jobs.

My point: states are little by little opening up to the 21st century (internet) when it comes to wine sales, but we have an awful long way to go before consumers finally have freedom of choice when it comes to wine purchases, and the “it ain’t broke” crowd are working overtime to ensure it happens as slowly as possible.

There I go .. talkin’ up the grapes again!