Expanding the Argentine Wine Frontier
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With US consumers trading down in price, wineries and importers have nowhere to go but to the direct to consumer sales channel to keep finding a market.
The following statistics are reported for 2009 and projected for 2010:
Clearly, the data points to the fact that the reaction of the wine market to the US economic downturn has been to bolster sales via the internet, phone, tasting room and events.
It still boggles the mind that a product that is so ubiquitous as wine would be ILLEGAL to ship anywhere. It’s not like we’re talking about explosives or anthrax. It’s wine. Anyone, anywhere, anytime can go down to their local supermarket and buy as much as they want. So why the big deal? Why waste millions of dollars in legislation and man power fighting this?
Distributors.
I can understand that the point of view of a distributor is that direct to consumer shipping, especially from domestic wineries, will steal market share from their businesses. The flaw in this argument, is that most of the wineries that are truly interested in making their small business work through D2C shipping are too small to work with many distributors. They simply don’t have the volume. Even if they could afford to supply many different distributors with a pallet per month, they run the risk of running out of inventory for territories where they sell well and being ignored by or buried in the portfolios of bigger distributors.
Wine will never stop being put on shelves. And just as this will always remain the main model for buying wine, the distributor will have his place. It’s just that the precise description of that place needs to be revisited to account for small producers to sell D2C.
That said, if a distributor can pay attention to lower volume wineries and develop their brands with an understanding of their inventory levels and marketing budget, this should actually reinforce business for both the winery selling D2C and the distributor selling on the shelf.
This is not rocket science, people, its just selling wine bottles. The harder we make it for everyone, the more the consumer suffers and the smaller the overall marketplace.
Tom Wark’s blog “Fermentation” pointed out in today’s post that the 3-tier system that governs the vast majority of the alcohol trade in the US severely limits “innovation” and thus consumption.
I’m not sure if innovation is the right word to describe the possibility of progress in the wine world. But the 3 tier system must change especially if small producers are going to be able to get to market easily, and if quality is going to continue to improve in general, across all sectors.
Innovation I think would amount to something like a “softening” ingredient for tannic wines, a substitute for oak barrels or aging, or using milk carton containers instead of bottles. But wine production is thousands of years old and tradition is rich. In another blog today, Steve Heimhoff was talking about 10 things that “gatekeepers” could do to better educate the public on wine. At the top of his list was to not poo-poo screw tops. It seems to me that a rift exists within the wine world.
On the one hand, we have true innovators: people who invent synthetic corks, screw tops, micro-oxygenation, direct to consumer shipping and the like. And on the other hand, the doubters. Not that the tride and true should not be honored and that new innovations should not be questioned rigorously.
Here I find as is so often the case, that wine mimics life: those who push for change will be ridiculed and resisted by those who have something invested in the current way of doing things or simply have drawn an arbitrary line of what they “value” on this side of what’s new or different. Once some critical mass is reached, however, the tables will turn and the iconoclast will become what’s in.
In the particular case of the 3-tier system, a whole lot of legal entanglement, lobbyists, and money stand in the way of freeing the grapes (visit freethegrapes.org). The entrepreneur in me can hardly blame those who have worked hard to set up successful wholesale businesses that simply move wine from one place to another and claim a percentage. Actually, when I think about it, that’s all that any of us do who do not actually produce wine. We just move it around or talk about it.
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.
It floors me the extent to which rule enforcers do not know the rules that they are supposed to be enforcing. A recent article in the Seattle Times talks about how visitors to wine country wanted to bring back wines with them to enjoy in their home, a very common thing to desire.
I will not bore you with a summary of the article itself, but I will offer the following commentary: the fact that both the agent for the TSA and the superior figure/manager for the TSA were totally unaware of the regulations that they were supposed to be enforcing not only causes real monetary losses for the consumer but the wine industry and the airlines themselves. If people hear horror stories about not being able to bring wine back from a visit to wine coutry 2 things happen:
1. Less people will be likely to go to wine country because they will assume that they cannot bring with them the souvenir and product that they are going to explore. This results in less people traveling which means that they airlines lose money.
2. Less people going to wine country represents an indirect loss of business for the wine industry in addition to the fact that people will assume they can only take 6 bottles with them (in reality there is no limit for wine (or spirited beverages under 24% alcohol content) but there is a weight limit that is determined by the AIRLINE not the TSA. This can be gotten around by simply paying more) and will thus only buy 6, and not 12 or 24. Another loss for the industry.
We must get away from our post-prohibition ways of protecting distributors and preventing free trade. It does nothing but hurt the consumer and the producer. I would also argue that it hurts the distributor as they lose the brand awareness generated through online sales and direct shipping. Free the Grapes!
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.
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