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The controversy continues with HR 5034 which is a bill backed by the National Beer Wholesalers Association, the Wine and Spirits Wholesalers of America, 100 congressmen who have signed on as co-sponsors, and over $11.55 million dollars worth of “free speech” which are simply campaign donations made to these congressmen.

The bill is opposed by all wineries, breweries, distilleries, and consumer groups like Free the Grapes (www.freethegrapes.org).

The bill aims to give more power to the 3 tier system and thus prevent or at least limit direct to consumer shipping of alcohol.

The simple fact is, that these two business models are not mutually exclusive. Yes there will be a give and take: with the internet, consumer direct shipping was not even possible so this model should grow as it also allows for small producers to turn a profit. This is the real key, without tasting room sales and consumer direct shipping, the small producer does not have a viable business model because distributors will not take on their product! So what are the distributors afraid of?

For those who still don’t know, the alcohol laws in the U.S. are archaic, something left over from prohibition, when the idea was to create a system so that no entity could have a monopoly on the liquor trade.

As Tom Wark correctly points out in his recent blog on the wine and spirits wholesalers of America convention in Las Vegas, many of the large wholesalers are still very afraid of the progress of the direct to consumer trade.

There are three concrete and steadfast reasons why wholesalers should not worry about the direct to consumer trade:

1. The consumer will never want to pay more online than they do when buying retail, and since the consumer has to absorb the warehouse to door shipping cost, which is normally 2-5 dollars per bottle, the vast majority of wines sold via direct to consumer can NEVER beat a retailer’s price.

2. There will always be a segment of consumers who prefer to shop in person for drinks. These are people who want to see bottles, labels, talk to wine stewards and sommeliers and get recommendations.

3. Presence. People always go to the supermarket which is where the majority of wine is sold. There is only one way that that wine gets on those shelves and that is through distributors and wholesalers.

Where could their business possibly go? They may have to modify and adapt to the information age, but this is not a bad thing. In fact, the more brand presence a particular brand has whether it’s on the shelf, on wine lists, online, the better for both online retailer and wholesaler and especially the small winery.

An article released today by the Boston Herald states that the battle for the ability to ship wine direct to consumer in the state of Massachusettes will potentially continue for some time.

Why are the conusmers punished? This is no rhetorical question. As Jeremy Benson (Go J.B.!) asserts at the end of the article, the consumers are punished because those who control current distribution channels fear losing their stranglehold on business within the state.

I totally agree with this but what is to be done about the situation? The only way that this can change is for the consumers themselves to become more vocal and more active. Join www.freethegrapes.org and help to get the word out.

I will admit that this is a bit of a sore subject for me, as I am in the business of shipping wine, but I have not yet met a single American who has attended one of my wine tastings who doesn’t cringe when they realize that they live in a state that does not permit direct to consumer shipping of wine.

They stand and look at me flabbergasted, as if I had something to do with the fact that they can’t simply go on the internet and buy the wine they prefer. An article here in the Citizen’s Voice gives great insight into why these direct shipping bans exist (someone thinks that they will not be getting their money), and the ridiculousness of that:

“There is nothing complicated about allowing consumers to buy the wine they prefer over the Internet and having it shipped, while still ensuring compliance with state tax and underage drinking laws. Most other states have figured it out, but the Politburo that runs Pennsylvania’s booze monopoly prefers to treat it as indecipherable rocket science.

According to the Wine Institute, 81 percent of all adult Americans have access to their preferred brands over the Internet. Pennsylvanians are a large chunk of the other 19 percent.

And make no mistake, this truly is a matter of choice. The Wine Institute says that 40,000 to 50,000 domestic labels, and another 40,000 to 50,000 imported labels, are available for sale in the United States each year. Well, the United States excluding Pennsylvania, where the state monopoly has 3,024 listed varieties and about 22,000 others that can be ordered through the state system — about 25 percent of the variety available to other Americans, often at better prices.

Several courts have found that states cannot simply forbid shipments of out-of-state wines, if they allow shipments of wines produced in-state — a little matter known as interstate commerce.

Here’s how a pending bill in Pennsylvania would purport to have the state comply. Consumers could order from a winery, but the shipment would have to go to the state Liquor Control Board, which would then deliver it for a fee. Orders could be made only to wineries that produce 80,000 gallons a year or less, which fits the description of most wineries inside Pennsylvania.

That, of course, is ridiculous. Of 19 “control” states, those where the state government controls varying degrees of the business, 12 allow direct shipments to consumers. None of those states is as “controlled” as Pennsylvania. But New Hampshire, with state-controlled sales, allows direct shipments. It requires shippers to use licensed interstate carriers, for the shipments to be clearly labeled, and for adults to sign the receipts. Consumers get the products they want. The state gets its cut. Cheers.

Rather than forever guarding its own interests, the PLCB should find a way to accommodate consumers who aren’t satisfied with its selection and service. And the Legislature should do far better than trying to convert the PLCB into a delivery service, an enterprise that requires a far greater degree of urgency than the agency is likely to muster.”This article was published Thursday, August 28th, 2008.

It is too bad that ultimately, the consumer is always the one who gets hurt in situations where massive, rich distributors, or other entities that hold onto monopolies are unwilling to change, adapt and overcome new circumstances that will make everyone better off.

To echo again, what the Eerie Times News (a local Pennsylvania paper) says about direct shipping of alcohol as it pertains to Pennsylvanians (and by default all Americans)… Enough already!!

Why can’t people just buy the alcohol they want and not deal with Liquor Control Boards, middlemen, bureaucracy and unwarranted price hikes?

I’m glad that winebusiness.com is regularly putting articles like this among its headlines as this has to be one of the most important issues effecting alcohol trade today.

I don’t understand why state and federal entities that control the alcohol trade see direct to consumer shipping as something that is somehow different from regular retail/wholesale sales. People are still drinking the wine. People can still buy as much as they want whenever they want. It’s just that people now can only get limited types of spirited beverages, either locally made or made by massive producers that can pay to have their product go through “the system” in order to stock shelves.

It is perhaps the working of wholesalers, other middlemen, and larger alcohol companies that is preventing more direct shipping. They seem to be the only ones who THINK they have something to lose.

In response to dear Alder’s post on interstate shipping laws in the US and alcohol advertising laws in France (May the 24th, 2008 on Vinography), my own rant on this subject is long overdue…

My comments shall remain focused on Alder’s initial comments in his post regarding new laws in Illinois that prevent direct to consumer shipping from out of state merchants. The key phrase as was reported by Yahoo! News is that laws like this “protect… alcohol wholesalers from competition.”

My question is how is this not a blatant violation of anti-trust law?

But more than just fussing about how this is a violation of law, is it not even more important to think about how this effects consumers? Education of consumers? How this inflates prices to consumers? How this limits their choices? How this prevents free and fair trade?

Let us look at the facts: preventing shipping of wine through geography is in no way beneficial to consumers. It limits their choices, it increases their costs, and it indirectly puts pressure on producers that would be able to sell in new markets through direct shipping to sell their product elsewhere.

The only, solitary, stand alone beneficiary to preventing interstate shipping are wholesalers/distributors. They get to maintain their stranglehold on supply channels and keep their margins.

So for those of you who live in Washington, Illinois, Texas, Maryland and a slew of other states in the US, please write to your congressmen and senators and get these laws changed. This will only serve you, as the wine consuming public and allow you to enjoy more wine from more regions from around the globe at lower prices.