Tag Archives: direct shipping

The sham and hypocrisy behind the three-tier system

three-tier

“Quick — get the wine unloaded before anyone spots us.”

The Wine Curmudgeon buys wine from an out-of-state retailer – even though it’s illegal

A case of Domaine Tariquet was delivered via Fed Ex to Wine Curmudgeon international headquarters in Dallas this week. The shipment violated the laws of two states – that of the retailer who sold me the wine, and Texas, which forbids shipments from out-of-state wine retailers. Welcome to the sham and hypocrisy that is the three-tier system.

Why a sham? Because the liquor cops in Texas and in the retailer’s state both know I bought the wine, since Fed Ex and UPS send so-called common carrier reports to the agencies. The Texas Alcoholic Beverage Commission received the electronic paperwork saying the order was shipped to my house; the retailer’s state alcoholic enforcement agency got the same thing when the order was shipped.

I’m not going to name the retailer or its state; let the liquor authorities do their own investigating. Click the links to see the address label and the alcohol warning label that said the package wasn’t olive oil. Also, everyone quoted in this post was given confidentiality, since I committed a crime with my purchase.

So why did my reverse sting operation work? Because each state doesn’t always enforce the interstate retail ban, according to a prominent liquor law attorney.

“It’s not high on the list of priorities,” he told me. “Most of the time, unless someone objects to that kind of sale, they don’t do anything about it. It’s like enforcing the speed limit on a highway. The police may not enforce it for a long time because they have other things to do – until someone complains about speeding, and then they set up a speed trap.”

And, now – hypocrisy

Interstate retail shipping is banned in most of the U.S. in the interest of “public health and safety” – the legal doctrine that has overseen liquor law since the end of Prohibition. Yet, more than a century later, state regulators and legislators still insist that it’s not safe for me to order wine from a retailer in another state. Yet, if it’s so dangerous, why isn’t it enforced more often?

The answer can be found in the July 8 decision by the Ohio attorney general to sue Wine.com and six other interstate retailers for selling wine to Ohio residents in violation of the state’s interstate shipping ban. Yet, according to two people with knowledge of the attorney general’s suit, Wine.com has been selling wine in Ohio in violation of the ban for more than a decade – and the Ohio Division of Liquor Control knew it was doing so and exchanged letters with the company acknowledging the practice.

The July 8 lawsuit, says the prominent liquor attorney, fits a pattern – interstate shipping bans are often enforced only when wholesalers and distributors press the issue. In Ohio, Wine.com and the other retailers weren’t buying from Ohio distributors, as required by law, but from distributors in other states. This lost business, combined with the dramatic drop in restaurant wine sales during the COVID-19 pandemic and increasing legal direct-to-consumer wine shipments in Ohio, probably had the wholesalers “crapping in their pants,” e-mailed an Ohio wine business consultant who has worked with the state’s distributors. No wonder, he wrote, that they pressured Ohio authorities to sue the interstate retailers in an attempt to redirect the lost business and revenue their way.

So where’s the public health and safety?

And, in fact, the news release announcing the lawsuit barely mentioned “public health and safety.” Instead, it emphasized lost tax revenue and lost retail sales, quoting an Ohio retailer and distributor. In addition, the Wine & Spirits Wholesalers Association, the national distributor trade group, issued a news release saying the same things. The attorney general’s spokesman didn’t respond to two requests for an interview for this post.

Keep in mind that this post isn’t about defending an illegal practice. If anyone violated the law, they should be punished, whether Wine.com (which is a long-time supporter of the blog) or me. And this post doesn’t advocate selling liquor without regulations — we certainly need regulation, but regulations that are fair and efficient.

Because selective enforcement isn’t either. If interstate wine shipping is truly dangerous, then the ban needs to be enforced. Because if the ban isn’t enforced, then it follows that interstate shipping isn’t as dangerous as it’s supposed to be. And if that’s the case, why have the ban at all?

Photo: Odd Truck” by oliva732000 is licensed under CC BY-SA 2.0

Winebits 639: Premiumization, Pennsylvania state stores, direct to consumer

cheap wine

“Premiumization never really bothered me.”

This week’s wine news: Will the pandemic finish off premiumization? Plus, turmoil in Pennsylvania’s state wine stores and the favorite DTC grapes

Is premiumization over? A top wine business analyst has told the industry that its drink less, but drink “better” mantra – premiumization – could be ending thanks to the coronavirus pandemic. Spiros Malandrakis, industry manager for alcoholic drinks at Euromonitor International, told the Harpers UK trade magazine that premiumization is at a crossroads: “What we saw in the recession of 2008 was that even if people that could afford more expensive wines or niche varietals, they didn’t buy them because it looked crass. The context has changed. I’m not saying the industry is over. What we know from history is that people will always continue drinking. It’s not the end of the world but it will be a different world to the one we’re used to.” In this, he’s not the first to predict premiumization’s end. But it is one more voice suggesting that the new normal in the new future could be $10 wine.

More fun in Pennsylvania: Pennsylvania’s state liquor store system has come in for much fun on the blog. And why not, given wine vending machines? But the decision to close the state stores during the pandemic has met with serious opposition, not the least of which is the loss of state tax revenue. Even in New York, the center of the U.S pandemic, liquor stores have remained open. Apparently, the state is reconsidering its decision, and may allow limited Internet alcohol sales. April 2 update: The state did reopen its online liquor sales system, but the system will be quite limited.

Favorite DTC grapes: This is a contradiction that seems difficult to explain: Why is chardonnay the best selling wine grape at retail, but cabernet sauvignon is the best seller when consumers buy directly from the winery? That’s the result from a recent SOVOS/Ship Compliant study (via Wine Industry Insight), where cabernet was the best seller with 17 percent of volume, almost twice as much as chardonnay. Typically, chardonnay accounts for about 20 percent of retail sales. Any thoughts would be much appreciated.

Winebits 634: Barefoot, supermarket wine, artificial wine

barefoot wineThis week’s wine news: Barefoot wine sells some 18 million cases a year, which is no doubt why Google likes it so much. Plus, a look at on-line wine sales and more news about artificial wine

Big, big Barefoot: How much wine does Barefoot sell each year? How about 18 million cases? That would make it the fifth biggest producer in the country if it wasn’t owned by E&J Gallo, which is the biggest. In this, the various Barefoot brands could account for as much as 2 ½ percent of all the wine sold in the U.S. each year. Is it any wonder, then, that Google sends so many people who are searching for Barefoot to the blog? Or that three Barefoot items were in the top four of the most read blog posts in 2019? That Barefoot is thriving while the rest of the wine business is heading downhill speaks volumes – if anyone in wine is willing to listen.

If Amazon can’t. … : One of the great puzzles in the wine business is Internet sales. Supermarkets in particular would love to do it, but three-tier makes it much more difficult than selling razors and mattresses, two categories that have been able to embrace e-commerce. Notes consultant Zac Brandenberg: “But neither market presents anywhere near the opportunity that beverage alcohol does. Wine alone is a $70 billion market with less than one percent commerce penetration — signaling an enormous untapped opportunity for retailers and wineries.” But how do supermarkets do that, when Amazon failed three times? Brandenberg suggests using the Internet for local delivery, just like the local Kroger, Wegman’s, and Albertson’s do for food. The cost could be enormous, but he says he expects retailers to do what needs to be done because the profits would be so immense.

Hold the grapes: The company has a new name, but it says it’s ready to give the world wine made without grapes. Hence, an Italian-style sparkling wine made with a combination of ethanol (the alcohol bit), assorted flavors, and caramel color and beta carotene for color. Interestingly, the latter can oxidize, which would mean fake wine can go off just like real wine. We covered the story on the blog almost three years ago when the company was called Ava, but the questions remain. Why does the world need this?

Winebits 616: Direct to consumer, wine as a luxury, and the wine glass chair

Direct to consumerThis week’s wine news: Texas goes after direct to consumer wine shipping, plus has wine become a luxury and the wine glass chair

Not so fast: The Texas Alcoholic Beverage Commission is cracking down on shipments to Texas from out of state wineries. The state agency will apparently review all of the roughly 1,600 license holders permitted to ship wine to Texas customers. And that will include a request for a voluminous amount of paperwork, including licenses, label approvals, and customer invoices, reports the ShipCompliant consultancy. Why does what Texas does matter to the rest of the country? Because the TABC often sets the example for alcohol cops in the rest of the U.S., and if they’re gong to this much trouble, other states may see the need to do the same thing. And if Texas is cracking down, the next question is why?

Hard to believe: One of the wine critics who helped create the high-end wine world is asking: “Have you noticed how expensive wine is getting?” Yes, actually. But that Jancis Robinson, perhaps the most important European wine critic, is saying so complements the Wine Curmudgeon’s usual rants. That’s because her analysis is spot on – slowing demand yet rising prices. “Not so long ago, it seemed that prices were relatively modest initially, until reputations and/or high scores were won. But now, from where I sit, more and more wine producers dive in at the deep end, asking really quite ambitious prices from the get go.”

Just for sitting: A Spanish interior and product designer has created a chair based on a wine glass – “The Merlot.” In one respect it doesn’t look all that different from what those of us of a certain age know as a Felix Unger chair. But the designer, Marta Del Valle, acknowledges they “aren’t ideal for tedious and work-oriented actions such as studying, working or consuming long meals. But for all you fun-loving design enthusiasts, and not to mention wine lovers out there, such a piece would only liven up any space it is placed in.”

Photo from Yanko Design, using a Creative Commons license

Winebits 592: Wine thefts, direct to consumer shipping, truth in wine advertising

wine thefsThis week’s wine news: An airline investigates wine thefts, plus the growth of direct to consumer wine shipping and a plea for more truthful wine advertising

Missing airline wine: Employees of Cathay Pacific airlines are being investigated for stealing sparkling wine, as well as ice cream and cutlery. The story is vague about what was actually stolen, and this may be more about a labor dispute than theft, but the point is well taken. As we’ve seen on the blog many times, if you’re going to commit a crime with wine, steal the good stuff. What’s the point of swiping the wretched plonk that those of us in economy have to drink?

Direct to consumers: Tom Mullen, writing on Forbes.com, gives a level-headed account of the history of direct-to-consumer wine sales in the U.S. – how it became possible for most of us to buy wine directly from a winery, bypassing retailers and distributors. The piece is a bit long, but any mainstream article that calls U.S. wine laws “sometimes archaic” and spends time discussing the history of Missouri wine is well worth reading.

More truth, less artisan: “I see far too many industrial brands calling themselves ‘artisanal,’ ‘family-owned’ or claiming their wines are ‘hand-crafted’ when they are anything but.” No, that’s not the WC ranting, but Dwight Furrow in Edible Arts. His argument is passionate but logical: The “issue isn’t whether there is an exact cut off point for what counts as artisanal. What is obvious is that wineries with annual case production levels over 50,000—enough to supply large retail stores—are unlikely to use artisanal methods. To claim they do is just false advertising.” His point matters more than ever as younger people, who are more sophisticated about advertising than their parents and grandparents, may be turning away from wine because they see those claims as hooey.

Winebits 557: Captain Obvious, Kerrville, direct shipping

Captain Obvious

Even Drinky knows the value of customer service.

This week’s wine news: Captain Obvious strikes again – a study says customer service matters in selling wine. Plus, the end of a Texas wine era and a victory for direct shipping

Believe it or not: A new study has discovered that customer service is more important than anything else in selling wine from winery tasting rooms. Or, as Paul Mabray, who probably knows more about winery tasting room sales than anyone put it, “File under nothing could be more obvious.” In other words, we have one more wine-related study that does nothing to help the wine business adapt to the 21st century. My grandfather, who sold blue jeans to farmers in central Ohio, knew about customer service 80 years ago. Then again, he didn’t have to publish or perish.

The end of an era: The WC didn’t talk about Texas wine over the weekend; the Kerrville Fall Folk Festival and its annual Texas wine panel is no more. I will miss the event, and not just because I got to promote Drink Local. Kerrville was an adventure in and of itself. There is irony, too, since local wine has become a Winestream Media darling, and one of the events that helped it achieve that status is gone. Yes, a Texas wine panel was added to the Memorial Day festival, but it’s not the same thing.

Hooray for Mississippi: A judge threw out an attempt by Mississippi’s liquor cops to stop residents from receiving wine from out-of-state retailers and wine clubs. It’s a ruling that could be significant in the continuing fight over three-tier reform. The Associated Press reports that a Rankin County judge dismissed the state’s lawsuit, though his written ruling offered few details. It’s another blow to state attempts, says the story, in restricting direct to consumer wine sales.

Winebits 535: Direct shipping, three-tier strikes back, and baseball and wine

direct shippingThis week’s wine news: Dave McIntyre of the Washington Post takes on efforts to halt direct shipping, plus saving the kids from getting drunk and a baseball wine item

Direct shipping clampdown: Dave McIntyre of the Washington Post takes on efforts to stop consumers from ordering wine out of state retailers, describing it as “The three-tier system that favors big producers and big wholesalers is fighting back. …Over time, the way we shop has changed, and wine lovers demand more freedom to buy wines that don’t reach local shelves through the traditional system.” The piece is worth reading – well thought, concise, and sensisible, and even discuss possible solutions.

Striking back: The Texas Package Stores Association, which just had a federal judge call one of its favorite state laws arbitrary and irrational, is taking another tack to keep Walmart out of the state. From a post on its Facebook page: “Since the United Kingdom has deregulated its three-tier system, alcohol-related crime, bar intoxication, and alcohol-related deaths have increased.” Which, of course, has noting to do with the court decision invalidating the law that gave the association’s members a virtual monopoly on spirit sales in Texas. But when in doubt, always bring up public drunkenness and teenagers.

It’s baseball season: So that means it’s time for a baseball and wine post. Chicago Cubs outfielder Ian Happ is my new favorite player – he’s learning about French wine. Plus, he has discussed wine styles with Cubs manager Joe Maddon, who much prefers the kind of wine we don’t like to talk about on the blog. That’s the good news. The bad news? Happ is off to a .125 start, with 10 strikeouts in his first 16 at-bats. Not even first growth Bordeaux can fix that.