Tag Archives: three-tier system

Winebits 589: The world revolves around the three-tier system edition

three-tierThis week’s wine news: It’s all about three-tier — a merger called off because it would have raised pricers, the “unique” U.S. distribution system, and tussling in New Jersey

No deal: Breakthru Beverage Group and Republic National Distributing Company, which had announced a $12 billion merger in 2017, have called it off. The reason? The Federal Trade Commission, which oversees these deals, said it would have caused “likely anticompetitive harm.” An FTC official said the agency found that “this transaction likely would have resulted in higher prices and diminished service in the distribution of wine and spirits in several states.” The Wine Curmudgeon, who is not an attorney and doesn’t pretend to know anything about anti-trust law, has just one question. If this deal was anticompetitive, why did the FTC allow the 2016 Southern-Glazer’s merger, worth $16.5 billion, to go through? The new company controls one-quarter of the wholesale spirits and wine market, and is bigger than the next three companies combined.

Just a happy family: Who knew that alcohol distribution was just another family business? That’s the latest from the industry’s trade group, the Wine and Spirits Wholesalers Association, which wants the world to know the “story of wholesalers and the three-tier system while highlighting the value and uniqueness of America’s beverage alcohol system.” The Wine Curmudgeon, who does know how to read a news release, got a giggle out of this one. Unique indeed – so unique that almost no one but liquor law attorneys and wholesalers understand how the damned thing works. And yes, value, especially when the FTC doesn’t object.

Not in Jersey: New Jersey’s legislators are trying to decide if they should loosen the state’s direct shipping law, one of the most restrictive in the country. The article is exceptionally well written by Bloomberg.com reporter Stacie Sherman – easy to understand, direct, and almost devoid of winespeak and legalese. In other words, it’s everything almost all other mainstream media booze stories aren’t. My favorite part? Her description of three-tier: A “patchwork of laws that, as with those governing so many other industries, were ill-suited for the advent of e-commerce.”

Three reasons to be optimistic about the future of the wine business

wine business futureMaybe there are reasons not to be so doomy and gloomy about the future of the wine business

Mike Dunne, one of the most perceptive people I know in the wine business, left a comment recently that not all is doom and gloom with wine. The Wine Curmudgeon has been especially doomy and gloomy about wine’s future, and with good reason. Just when it seems like the news can’t get any worse, it does.  How does Constellation, one of the smartest companies in the business, overvalue assets it’s selling by a billion dollars?

Still, Mike being Mike, his comment made me ponder. Does he see something that I don’t? In one respect, Mike is completely correct – the wine business isn’t going to vanish tomorrow. And who knows? Maybe young people, who currently seem as interested in wine as I do in the Kardashians, will eventually change their minds. I’m always willing to admit I’m wrong — and hope I am, in this case.

So, given those two conditions, maybe there are three reasons for optimism that I have overlooked:

• The re-emergence of lower alcohol wines. We won the battle against 15 percent chardonnay and 16 percent cabernet sauvigon at the end of the recession, and most wines today are made with more or less normal alcohol levels. If wine drinkers can convince producers we don’t want our rose to kick like tequila, then maybe we can convince them that smooth and sweet isn’t a good idea, either.

• Rose’s success. When I started the blog, rose was a dirty word and difficult to find in shops, stores, and restaurants. The wine business told us to drink white zinfandel and lump it. Today, white zinfandel is an afterthought and even the biggest of Big Wine companies are scurrying to produce what they call dry rose. So we won that one, too.

• Reform in the three-tier system, which limits the wine we can buy and where we can buy it, and decides how much we pay for it. I recently exchanged emails with the blog’s unofficial liquor law attorney, and he was excited about a Connecticut three-tier case that upheld that state’s minimum pricing law. Why excited, since three-tier won the case? Because, said the attorney, the appeals court’s decision was so silly and went against so much precedent that it could be overturned by the Supreme Court. Throw in the Tennessee case currently in front of the Supreme Court, and we have a chance to fire two silver bullets into three-tier’s body.

Wine Folly’s Madeline Puckette: The three-tier system is rigged

Madeline Puckette

Madeline Puckette: The three-tier system gouges consumers

Says Puckette: The system gouges consumers with crappy wine and too high prices

Wine Retail Rant (Why Grocery Store Wines Are Rigged),” written by Wine Folly impresario Madeline Puckette is just the sort of thing that people who are more or less members of the wine establishment don’t write. It’s the sort of thing that I write, and we know what the Winestream Media and the wine establishment think of me.

Nevertheless, there it was, in all its incendiary glory. Wrote Puckette – who has initials after her name: The grocery store wine business is “a rigged market. … runs on Prohibition-Era policies that ultimately gouge the wine consumer, hurt independent wineries, and even hurt small retailers.”

Damn. Someone who isn’t a friend of mine actually agrees with me

The story is remarkable, and not just because of who wrote it. First, the Winestream Media doesn’t acknowledge wine is sold in grocery stores. Second, even if it did, it wouldn’t drink it. Third, it doesn’t acknowledge wine pricing, let alone complain that something isn’t a value. And to use the word “gouge”? Be still my beating heart.

Fourth, and most importantly, it almost never criticizes the Big Wine and three-tier system, and Big Wine makes almost all of the wine we buy in grocery stores. The wine establishment and the big producers and distributors that dominate three-tier are like the bird that eats the insects off grazing animals; each makes the other’s life easier, and both benefit. That they benefit at the expense of those of us who want quality wine at a fair price — and that is easy to buy — is not a consideration.

Yet Puckette is saying exactly that: “So basically, each transaction along the Three Tiers has a tax and a mark-up. The end result is that consumers pay $22 for a wine that the winery sold for $7. … Now, imagine that grocery store wine for $11.99? It was probably really crappy.”

Hmmmm. Where have we read this before?

I’m not as sanguine as Puckette is about some of the solutions she offers, which includes direct sales (though she does say nice things about private label wine). We need to tear three-tier down, not find a way around it. Still, Puckette’s rant is a fine start – in this effort, we need all the help we can get.

Winebits 571: Ed Lowe, three-tier foolishness, wine prices

ed loweThis week’s wine news: Ed Lowe, whose Dallas restaurant served Texas wine when hardly anyone knew what it was, has died. Plus, New York state three-tier foolishness and cheaper bulk wine prices

Ed Lowe: How important was Ed Lowe to the U.S. regional wine movement? He served Texas wine for 30 years at his Celebration restaurant in Dallas, and when he started doing that Texas wine was chancy at best. Lowe, 69, died before Thanksgiving during a canoe trip in the state’s Big Bend region. I knew Lowe a little, and we talked several times about local wine, his half-price Thursday night wine promotion, and quality local food. Celebration was farm-to-table long before the term was invented by some East Coast hype guru, and Lowe (who could still be seen busing tables) truly believed in the concept. The world will be a poorer place without him.

Take that, Wegman’s: The East Coast grocery store chain has been fined more than $1 million for illegally managing liquor stores by the New York state booze cops. That’s because grocery stores aren’t allowed to sell alcohol in New York, save in one location. The state liquor authority claimed Wegman’s violated any number of laws and regulations, including “illegally trafficking in wine.” That’s a delightful 21st century crime, yes? The infractions are arcane to anyone who doesn’t follow three-tier, and Wegman’s may actually have violated the law. The larger question, though, is why these laws still exist.

• “Awash with wine:” More bad news for premiumization – wine prices in the bulk market are dropping, “and in some cases, significantly,” reports a British wine trade magazine. The world is flush with wine after bountiful 2018 harvests around the world, and those interviewed in the story say prices could keep falling. Why do bulk prices matter? Because, save for the most expensive wines in the world, bulk prices influence the price of grapes everywhere. Cheaper bulk prices usually mean cheaper grape prices, and that usually means cheaper wine prices.

Illustration courtesy of Tampa Tribune using a Creative Commons license

Winebits 569: Organic wine, three-tier lawsuits, New York wine

organic wineThis week’s wine news: California betting on organic wine, plus three-tier lawsuits and an English critic signs off on New York wine

Make it organic: Organic wine has never been especially popular in the U.S., with a market share in the low single digits. But several producers see its growth as part of premiumization, as consumers pay more for better quality wine. “I think it’s going in the right direction. It’s just not happening as quickly as we like,” says one winemaker. “I think it’s inevitable.” Perhaps. But until consumers see a difference between organic wine and conventional wine – the way they do with tomatoes – inevitable doesn’t necessarily mean anything.

Join the lawsuits: Want to participate in the upcoming Tennessee three-tier case that will be heard by the Supreme Court? Then you can contribute to a Go Fund Me campaign to pay for an amicus brief asking the court to overturn the Tennessee law. The campaign, sponsored by a retailer trade group and WineFreedom.org, which works for three-tier reform, was near its $25,000 goal at the beginning of the week. Meanwhile, the trade group for the country’s distributors and wholesalers filed an amicus brief asking the court to uphold the law because three-tier is vital to the safety of the republic.

Drink Local: Andrew Jefford, writing in Decanter, has been to New York’s Finger Lakes and found it worth drinking: “We are as far from Red Cat” as possible, referring to the legendary cheap, sweet white wine that fueled New York’s wine business for decades. That Jefford, one of Britain’s leading wine writers, likes what he found in the Fingers Lakes speaks volumes about how far Drink Local has come.

Winebits 565: Wine advice, ancient wine, three-tier system

ancient wine

This week’s wine news: More bad wine advice, plus a shipwreck could hold evidence of 2,400-year-old wine and a another challenge to the three-tier system

No, no, no: Points and scores are bad enough, but when a general interest website runs a story aimed at beginning wine drinkers and starts throwing around winespeak, we know we’re in trouble. But that’s what the Skillet site did, advising a white wine drinker to try a red made using carbonic maceration. There is almost no reason for anyone to know what that means, unless you’re a wine geek. And, of course, most people aren’t wine geeks. Is it any wonder I worry about the future of the wine business? Next time, use English – words like soft, fruity, and so forth – and then drop in tannins if you want to get technical.

More than 20 centuries old? A 2,400 year-old wreck has been found in the Black Sea, and researchers think the ship may have been used to carry and trade wine. “Normally we find amphorae (wine vases) and can guess where it’s come from, but with this it’s still in the hold,” said a member of the expedition. The wreck is similar to the ship pictured on the Siren Vase in the British Museum. The vase, dating to around 480 BC, shows Odysseus (of Homer’s Iliad and Odyssey) strapped to the mast as his ship sails past three sea nymphs.

Another challenge: A Florida-based wine importer has filed suit in California, claiming that the state’s version of the three-tier system is unconstitutional. The Dickenson Peatman & Fogarty law blog says that if the suit is successful, any importer or wholesaler in the U.S. – even if they don’t have a California license – may be permitted to sell to California retailers without using an in-state distributor. This would be a revolutionary change, possibly making it easier for consumers to buy wine previously unavailable. However, the firm doesn’t rate the suit’s chances highly, noting that the precedent used in the suit hasn’t been applied to importers before, calling it a “bridge too far” in the suit’s approach.

Winebits 561: Drink Local, three-tier, Dave McIntyre

drink local

Cool… a book about local wine trails

This week’s wine news: Drink Local gets a book, plus three-tier and the Supreme Court and Dave McIntyre celebrates his 10th anniversary at the Washington Post

All over the country: One more sign that drink local has become mainstream – a travel guide from one of the world’s leading travel publishers. Lonely Planet’s “Wine Trails: United States and Canada” includes 40 wine trails: The usual California, Oregon, and Washington suspects, plus Texas, Virginia, Vermont, Nova Scotia, Virginia, Pennsylvania, Colorado, Arizona, North Carolina, and Maryland. Again, if someone had told me I’d be writing about this book when we started Drink Local in 2007, I’d have laughed. And rarely have I been so glad to be wrong. So glad, in fact, that we’ll give a copy of the book away during Birthday Week next month.

Bring on the Supremes: The U.S. Supreme Court has agreed to hear a key three-tier case this term, though it may not be as important as many people are making it out to be. The court will decide the constitutionality of a Tennessee law that requires anyone who wants a retail liquor license to be a state resident. Residency laws are often used to keep out-of-state companies, like Total Wine, from opening in a new state (and was used in 2016 in Indiana to stop an Illinois chain from opening stores). This Tennessee case is a big deal, given how few three-tier laws get to the Supreme Court. But there has also been a lot of cyber-buzz that the court will use it to allow direct shipping from out-of-state retailers, so that someone in Texas, for example, can buy wine from a store in Illinois. Currently, that’s illegal in most of the U.S. I checked with the blog’s liquor law attorney, and he says it’s too early to tell if a residency case could transform into a direct shipping case. If anything develops, I’ll write more.

Congratulations, Dave: My pal Dave McIntyre, who was a co-founder of Drink Local Wine, recently celebrated his 10th anniversary as the Washington Post’s wine critic. This is most welcome news, and not just because Dave and I have been friends for a long time. He possesses a fine palate, cares about quality and value, and wants to share those things with his readers. Would that more people who do this thought the same way.