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Cross-posted from Seeing the World Through the Bottom of a Wine Glass.

What happens when consumers' and producers' interest, and modern technology, conflict with an entrenched interest with lots of lobbying power?  Let's take a trip around the country and find out, shall we?  First stop, Tennessee.

Tennessee has what is commonly known as the "three tier" system of wine sales - producer to wholesaler, wholesaler to retailer, and retailer to consumer.  That has been the system in almost every state (except the ones that took over the industry themselves, e.g. Pennsylvania) since Prohibition.  Funny thing, though, the wine industry is changing.  Lots of little wineries are shipping direct-to-consumer.  Wineries use wine clubs to market their product, offering two to four wines a quarter, and if people like them they order cases.  When wine goes from winery to consumer, though, the wholesaler doesn't get their cut.  And they don't like that.  Not even a little bit.

Such laws are under scrutiny in Tennessee's statehouse and legislatures across the nation. At least 11 states, including Tennessee, have pending legislation that would loosen regulations on interstate wine shipping.

Supporters say it will be difficult to pass the legislation, given the clout of the alcohol industry, which strongly opposes changes to the law.

...

The debate has pitted small vineyards, wine collectors and specialty retailers against large distributors that have dominated wine distribution since Prohibition.

...

Henry Hildebrand, a lobbyist for the Wine and Spirit Wholesalers of Tennessee, said in an e-mailed statement that the group opposes direct shipments of wine because it could put alcohol in the hands of minors and would cut state revenues.

...

The biggest barrier to changing Tennessee's laws, according to critics, is the lobbying clout of alcohol wholesalers. Wholesalers donated some $50 million to state political campaigns between 2000 and 2006; more than $800,000 was spent in Tennessee, said Tom Wark, the executive director of the Specialty Wine Retailers Association.

"If I was a wholesaler, I'd be concerned about maintaining a monopoly, too," Wark said.

The excuse they use is "the children," as in, "the children can order wine on line and get alcohol without an ID check."  Ummm, yeah, right.  Somehow, I don't see sixteen year olds buying Wine.com runs a sting operationMuir-Hanna Valley Estate Pinot Noir at $280 a case, or my namesake Honig "Bartolucci Vineyards" Cabernet Sauvignon at $900 a case, much less signing up and waiting years to get on the mailing list for a BOTTLE of Screaming Eagle for a mere $3,250.00.  My guess is if they that kind of scratch they'd give a homeless guy a $20 to buy them a 12-pack of Bud, and spend the rest on a Camaro.  And nobody believes it, either.  But it gives politicians the cover they need to thank the wholesalers for hookers and cash.  

An interesting addendum to this conversation has to do with a company called Wine.com.  Wine consumers had some hope for Wine.com, a nation-wide company taking wine orders on the internet.  But Wine.com had its own business model - it set up warehouses in states with no-shipping laws.  But then it did something else, something that shows you, again, how far an entrenched entity will go to protect its interests.  You see, first they set up their business plan, then they went after everybody ELSE, including the little guys, and I mean the REALLY little guys (for example, last time I ordered from Muir-Hanna I had to talk loud because the lady answering the phone was giving her three-year-old a bath).  They ran their own sting, then ratting retailers out to local law enforcement.  The wholesalers loved it, following up with a press releaseto the state legislatures.  

It's not just Tennessee, either.  The same fight is going on this month in Maryland, and again the argument is "protect the children."  The advocate for changing the law was eloquent:

The bill comes from direct support of Senator Raskin of the 20th district. His opening remarks were right on, citing Adam Smith’s 1776 book Wealth of Nations that describes the importance of the free market and denounces monopolies and state control. He also sited Madison’s Federalist #10, which guards against factions. His points were well received and it seemed the senate committee enjoyed his references.

The opponents were less so:

A highlight of the opponents argument was the gentleman who was on the Baltimore liquor board and expressed concern that college kids in Towson would be excited to hear about this bill as they could begin acquiring wine underage. He even noted that "he could just see UPS trucks lining up on campuses as kids order their wine underage." COME ON! What college kid drinks high end wine, wants to wait 3-5 days for shipments, and doesn’t already have access to friends or fake IDs providing them beer and other liquors.

The result?  Nothing.  No vote on the law.  Wholesalers kept their monopoly.

How important is this in the grand scheme of things?  Not very. It's wine.  But it is a very simple example of what happens when the livelihood of the powers that be gets challenged. If they can do it with wine, a tiny little luxury piece of the economy, what will they do when people start talking about coal, or health care, or oil?  

Originally posted to Palate Press: The online wine magazine on Sun Mar 30, 2008 at 07:56 PM PDT.

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Comment Preferences

  •  Tip Jar (28+ / 0-)

    in lieu of mojo, please send bottles of Screaming Eagle.  Chateau Petrus is also acceptable, preferably in a '61, though '05 futures are also ok.

    If you refuse to vote for OUR PARTY'S nominee in November, the blood of a thousand back-alley abortions will be on your hands.

    by dhonig on Sun Mar 30, 2008 at 07:58:30 PM PDT

    •  I've been watching this battle (9+ / 0-)

      of interests playing out for a few years now.  And sadly, time and time again, I've seen no real change in the face of the challenges.

      Cheers for raising the issue here.

    •  Tip: get your futures prices in USD 'FIRM' (3+ / 0-)
      Recommended by:
      NapaJulie, Fabian, jlms qkw

      right now.  Don't let 'em quote you in Euros.

      BTW - the same thing is going on in Maine where there are basically four wine wholesalers for the entire state.  Retailers (and consumers) take what they have to offer (at their exorbitant markup) or go suck an egg (or break the law).  When I was a wine retailer in Ann Arbor (30-something years ago), I had five local wine wholesalers to draw from, plus several more "boutique" wholesalers and brokers from around the state.  Competition was friendly but fierce and a whole lotta fun. I could get just about anything a customer wanted and at a fair price.  Everybody (who knew what they were doing) made money (including the state), just nobody got hideously wealthy.

      The wholesalers' arguments are simply desperate bullshit.

      We have my old friends Ray and Eleanor Heald of Detroit to thank for stirring this pot, BTW.

      Some folks prefer a map and finding their own route. Others need someone to tell them where to go.

      by sxwarren on Sun Mar 30, 2008 at 08:16:16 PM PDT

      [ Parent ]

    •  Just order your wines (1+ / 0-)
      Recommended by:
      jlms qkw

      direct from Australia.  As imports they wouldn't come under state commerce clauses.

      Best Wishes, Demena

      by Demena on Sun Mar 30, 2008 at 11:00:19 PM PDT

      [ Parent ]

    •  Ever tried the 85' Groth PR Cab. Sauv.? (1+ / 0-)
      Recommended by:
      jlms qkw

      It was one of the last vintages that Nils Venge did for them, and by far, the finest Cab ever made in the valley up to that time. It would probably still stand up to the "Screaming Eagles". I remember gasping at paying $50 for it in 88'....LOL! Robert Parker was spot on about the wine (giving it 100 points). What I wouldn't give to get my hands on a bottle of it now. It was one of those wines that lingers on your "memory palate" forever... sigh...

      ELECT LIBERAL PROGRESSIVES NOW!

      by Hornito on Sun Mar 30, 2008 at 11:37:49 PM PDT

      [ Parent ]

  •  An adult signs (6+ / 0-)

    Many states, including here in Calif. someone over 21 must sign for the wine when it is delivered. This feature was added to deal with the "kids ordering wine" issue and seems to work fine.

    "let's talk about that"

    by VClib on Sun Mar 30, 2008 at 08:00:07 PM PDT

  •  Free the grapes! (6+ / 0-)

    So I see only tatters of clearness through a pervading obscurity - Annie Dillard -6.88, -5.33

    by illinifan17 on Sun Mar 30, 2008 at 08:01:52 PM PDT

  •  Washingotn State Duked this out a few years ago (3+ / 0-)
    Recommended by:
    sxwarren, neroden, jlms qkw

    And we finally got a somewhat reasonable law that requires an adult signature. You can only order so much, however, though I am not sure what the limit is. This is a PERFECT example of how special interests consistently block the interests of the average citizen. Currently the wine industry is lobbying to have state liguor stores INCREASE the price of wine they sell because it is somehow unfair to consumers - I forget their exact argument. Turns out our state has large taxes but the Liquor stores have low markups on wine and this drives down prices throughout the state. Hence, the state should charge more to help the average citizen out. And you know what? It is likely to pass.

    •  Of course, the actual remedy would be (1+ / 0-)
      Recommended by:
      jlms qkw

      to have the state get out of the fucking business altogether.  That would actually increase commerce in fine wines and liquors (won't have much effect at all on overall drinking) and, thus, increase state alcohol tax revenues.  But that would be just too simple, wouldn't it?

      Some folks prefer a map and finding their own route. Others need someone to tell them where to go.

      by sxwarren on Sun Mar 30, 2008 at 08:21:37 PM PDT

      [ Parent ]

    •  Thank you for the tip. I live in WA. n/t (1+ / 0-)
      Recommended by:
      jlms qkw
  •  We Like Capitalism unless (7+ / 0-)

    There is actual competition then we squash it. The new American way. Capitalism is only good when there are rules to ensure competition. We refer to those rules commonly as regulations and regulation is not a dirty word

  •  You had me at "wine" (N/T) (1+ / 0-)
    Recommended by:
    jlms qkw
  •  that's crazy... (1+ / 0-)
    Recommended by:
    jlms qkw

    i used to work for wine.com, actually, many moons ago.  it was a great place to work, at the time.

    didn't forsee them pulling shit like this, though.

    bumper stickers are another way of saying "hey, let's never hang out." -- dimitri martin

    by TrollKing on Sun Mar 30, 2008 at 09:34:17 PM PDT

  •  I worked in the wine business for almost 30 years (2+ / 0-)
    Recommended by:
    Quicksilver2723, jlms qkw

    Dealing with wholesalers was the least likable part of my job. They were sneaky, underhanded, corrupt, and worse. Money, drugs, and women, flowed like water through the business, which of course makes it a perfect home for politicians.

    I have often thought of writing a book about my many experiences. I dealt with wholesalers from coast to coast (and in Europe), border to border, both working for large fine wine companies, and as a broker with my own portfolio of fine wineries.

    The problem is, if I wrote about what I know, I am sure some of the wholesalers would have me "bumped off", and I think you know exactly what I am talking about, and who some of those wholesalers might be.

    I left the business several years ago due to health issues, but don't regret no longer having to play the "I'll pay you to sell my wine" game. Anything anyone can do to reduce the power of wholesalers, I am for.

    ELECT LIBERAL PROGRESSIVES NOW!

    by Hornito on Sun Mar 30, 2008 at 10:05:34 PM PDT

  •   North Carolina here (2+ / 0-)
    Recommended by:
    Quicksilver2723, jlms qkw

    We cannot order wine from other states, we have to go through a NC retailer. None of those retailers are willing to carry the wines we love (usually from small  wineries in Virginia that we fell in love with during our years living up there). End result: once or twice a year, we saddle up and take a long weekend road trip  up to VA, drive to all our old faves, and come back with a trunk full of vinous swag.

    Stupid bluenose alcohol regulations.

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