Tag Archives: three-tier system

Winebits 590: Shipwreck wine, Gregg Popovich, liquor laws

shipwreck wineThis week’s wine news: Century-old shipwreck wine off the coast of Cornwall, plus NBA coach Gregg Popovich’s and wine and the National Review takes on the three-tier system

Under water for 100 years: The Wine Curmudgeon must confess to a weakness for stories about shipwreck wine. Why is there such enthusiasm to rescue it, given that it’s probably not going to be drinkable? The most recent story comes from Cornwall, where a ship sailing from Bordeaux was torpedoed by a German U-boat in 1918. Now, a group wants to salvage the cargo. There’s no word on what wine it might include, though a spokesman associated with the operation claims it’s a “one-of-a-kind opportunity to be a part of one of the most significant historical discoveries of the century. The rarity of such a cargo is unprecedented. …” On the other hand, it could be nothing more than pinard, the cheap red wine French soldiers were issued during the war.

NBA wine culture: I don’t often get to write about wine and sports, but this item, from Psychology Today, does just that: “In a neo-Temperance public health period, Gregg Popovich stands apart.” The piece cites Popovich’s embrace of wine culture as something good – not something that will kill all of us if we have one glass. Popovich “is the son of parents from Serbia and Croatia. … For him, wine is essential to group gatherings.” And who can argue with one of the greatest coaches in NBA history?

Too much government: Caleb Whitmer, writing in the National Review, asks: “Are crazy state liquor laws constitutional?” Regular visitors here know the answer to that question, but it is good to see one of the country’s leading political journals address the question. Whitmer misses the role the country’s alcohol distributors play in keeping the system buttoned down, blaming three-tier on local retailers and state legislatures. Still, it’s worthwhile reading, and especially his discussion of Mississippi’s quaint Prohibition-era liquor laws.

Illustration courtesy of Points: The blog of the Alcohol & Drugs History Society, using a Creative Commons license

Amazon Wine 3.0: Is the on-line retail giant getting back in the wine business?

Has Amazon figured out how to make wine work after two e-commerce flops?

Amazon has twice given up selling wine over the past decade, perhaps the two most notable flops in the e-commerce giant’s history. But it looks like the company may be getting ready to try again – call it Amazon wine 3.0.

The evidence comes from two places: First, a Washington, D.C.-area job posting for a “manager of alcohol public policy” – someone to “create, execute, and manage key public policy issues related to alcohol procurement and sales.” In other words, someone to navigate the three-tier system for the company, which it wouldn’t need unless it was getting ready to launch a major booze initiative. (A tip o’ the WC’s fedora to blog reader Tony Caffrey, who spotted the ad.)

Second, rumblings in the trade press that Amazon might buy or lease abandoned Kmart and Sears locations (and even Pier 1?) to open more Whole Foods; to set up some sort of warehouse/retail operation; to build more Amazon Go pop-up stores; or for something that no one but Amazon knows yet.

Amazon didn’t respond to an email request for an interview. But I talked to several supermarket analysts, and they agreed something may well be going on.

“Amazon doesn’t really get all that wrapped up in failure,” says Bill Bishop, the co-flounder of the well-respected Bricks Meets Clicks consultancy in Chicago. “It’s very much a learning organization. Wine in particular, and alcohol in general, is very attractive for an organization like Amazon.”

What makes Amazon think this effort will succeed when the first two failed? In 2009, it killed a test project called AmazonWine, in which it would have sold wine just like it sells books, computers, and garden hose, because the company couldn’t make it work given the complications of U.S. liquor laws. In 2017, it closed AmazonWine 2.0, in which it didn’t sell wine but sent buyers to winery websites to make the purchases – again, because of the complications of U.S. liquor laws.

It does sell wine on-line through Whole Foods, but the orders must be made using your local store’s website and you’re limited to the inventory at that store. Plus, you have to deal with a third-party delivery service and a potential delivery fee. Which is hardly the same as Amazon’s seemingly unlimited inventory and free Prime shipping.

The sense from the analysts is that the company figured out how to work within the three-tier system for what it’s going to try next, in much the same way that alcohol delivery apps like Drizly and Internet retailer Wine.com have figured it out. But don’t expect delivery, although that’s possible, as much as a variation on the current Whole Foods setup.

Amazon Wine 3.0

One possibility:

• You order wine from the Amazon website, which sends the order to a company distribution center in your state in one of those empty Sears stores. In this case, your choice could well be every wine available from your state’s distributors, based on the Drizly model.

• The Amazon retail/warehouse in the old Sears would have a standing inventory of the most commonly ordered wines, while special wines could be shipped from the distributor to the warehouse.

• You pick your order up at the old Sears store, in much the same way you can drop off Amazon returns at some Whole Foods stores.

The advantages here are obvious: Amazon has the booze supply chain infrastructure in each state where it operates Whole Foods, plus the leverage of existing Whole Foods liquor licenses. And, since you pay for the wine on the Amazon website, there’s less legal hassle about underage drinking. All you have to do is show an ID at the old Sears store when you pick up the wine.

In addition, says Bishop, advances in robotics may make it possible to run the retail/warehouse in the old Sears with a minimum of employees, trimming costs and allowing Amazon to undercut traditional wine retailers. Think of R2-D2s scurrying around the building, picking and sorting orders. The only humans needed would be to check IDs.

Will this happen tomorrow? Probably not. Will it happen in exactly this way? If I knew that, I’d be living in Burgundy. But I talked to some very smart people, and their consensus was that something like this makes sense, and it especially makes sense given Amazon’s seeming obsession with wine.

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.