Tag Archives: three-tier system

Winebits 646: Expensive wine, Grocery Outlet, drinking laws

expensive wine

“Oh no, expensive wine is endangered!”

This week’s wine news: Catching up with what’s going on that isn’t about rose

The future of expensive wine: Esther Mobley, writing in the San Francisco Chronicle, asks whether the coronavirus pandemic “will make luxury Napa Valley wine less relevant?” It’s one thing for me to write that on the blog; that’s the Wine Curmudgeon’s reason for being. But it shows old-fashioned newspaper gumption for Mobley to do it, since the Chronicle is the paper of record for luxury Napa Valley wine. Because as soon as I saw the piece, I knew Mobley’s bosses would be getting a variety of nasty emails, texts, and phone calls. “How dare she write something like that?” would have been the general tone.”We need her support more than ever, and she is tearing us down!” That’s when they usually threaten to pull advertising. And how do I know about stuff like that? Let’s just say it happened once or twice during my journalism career. Hard to believe, yes?

Grocery Outlet thriving: Grocery Outlet’s sales increased 25 percent during the first quarter this year, as shoppers flocked to the discount chain as food prices increased elsewhere. Grocery Outlet is known on the blog for its quality cheap wine, but its other prices can be as much as 70 percent lower than full-service supermarkets. That has helped the chain, with stores mostly on the west coast, attract shoppers who are still looking for value despite the pandemic, say analysts.

U.S. drinking laws: The BBC takes a look at how U.S. drinking laws have changed during the duration. The story isn’t the news organization’s best reporting – it’s too long, unfocused, and depends on weak sourcing (trade lingo!), but that it did the piece at all speaks to the momentous changes that the pandemic has brought to U.S. liquor regulations. Which, of course, you read here first. It also includes the obligatory quote from a U.S. medical official saying that we’re all burn in hell if we don’t stop drinking so much.

Winebits 642: Coronavirus wine roundup

coronavirus wine This week’s wine news: Coronavirus wine sales trends, more Pennsylvania legal foolishness, and virtual wine tasting samples

What comes next? Noted wine business analyst Christian Miller, a long-time friend of the blog, tells Forbes’ Liza Zimmerman that the coronavirus pandemic could finally slow wine sales later this spring, and the slowdown could last through 2021. The good news, he says, is that “Demand for wine is not going to dry up, or even diminish much, once the initial shocks are ridden out.” He also sees significant changes in the three-tier system as it struggles to cope with the pandemic. The former is pretty much what SVB’s Rob McMillan told the blog a couple of weeks ago, and the latter is something I wrote about last week.

More fun in Pennsylvania: Remember Pennsylvania closing its state-owned liquor stores? Remember state residents being asked to leave neighboring New Jersey and Delaware when they came in search of booze? Well, now the state is being sued by two wholesalers, who say the state is violating its own laws by refusing to let the wholesalers sell directly to retailers and restaurants. The details, not surprisingly since it’s Pennsylvania, are quite confusing. But it’s enough to know that the state’s liquor control board says it doesn’t have to obey that particular law because it is still studying it.

Bring on the samples! The Wine Curmudgeon knows that many of you in the cyber-ether have been worried that I would not be able to receive wine samples for virtual tastings during the duration. But have no fear. The federal agency that oversees that sort of thing said last week that not only wine writers, but consumers would be able to receive “small containers of wine” for virtual tasting. There’s lots of fine print, depending on which state you live in, but this is one more example of the pandemic pushing the three-tier system to the side.

Image: “wine” by Chas Redmond is licensed under CC BY 2.0 

Is the coronavirus pandemic the beginning of changes to the three-tier system?

three-tier system

“Those poor saps in 2020. They’re stuck with the laws that were designed to keep speakeasies from opening, even though speakeasies don’t exist in 2020.”

Will the success of e-commerce and restaurant delivery during the pandemic eventually make it easier for us to buy wine, beer, and spirits?

This is the second of two parts looking at how the coronavirus pandemic has changed the way we buy wine. Today, will the pandemic lead to changes so it’s easier to buy wine on-line? The first part – finding value when buying wine on-line – is here.

Wine is being shipped to our homes, and we don’t have to sign for it. That used to be a felony in many states. We’re ordering wine from restaurants and liquor stores over the Internet, which was not only illegal in some states, but almost impossible to do even where it wasn’t.

All of this is because of the coronavirus pandemic, as state liquor cops relax enforcement of many of the laws that make up the three-tier system. Their goal is to help restaurants and retailers stay in business, and so the economic benefit outweighs enforcing the law.

Which raises a question about the future of the three-tier system, the set of state laws that govern how we buy alcohol in the U.S.: Will the success of Internet sales and restaurant delivery during the pandemic lead to changes that will make it easier for us to buy wine, beer, and spirits?

The answer, after a week of reporting, is almost certainly. Once the pandemic ends, say those I’ve talked to, it will be difficult for state regulators to return to the strict, Prohibition-era system that defines U.S. liquor laws. And that means more flexible e-commerce and home delivery regulations.

“My crystal ball is not particularly clear on this,” says Jason Haas of Paso Robles’ Tablas Creek Vineyard, one of the most thoughtful and erudite people in the wine business when it comes to discussing three-tier. “But I think it is clear that we as a society are not against lifting the restrictions. The fear was always that, if we did, the unknown might happen, that it would hurt business and alcohol would flood society. And those arguments would sound really silly after all of this.”

The genie is out of the bottle

For relaxing enforcement has worked. Wine.com’s sales doubled in March, while the Drizly home delivery service reported “greater shift to e-comm” that “is not only just maintaining, but it is growing.” All told, says the Rabobank consultancy, wine e-commerce has experienced “astounding growth” during the pandemic.

E-commerce and home delivery have traditionally been a tiny percentage of U.S. wine sales. Wine.com, the only truly national e-commerce wine retailer, does less than $150 million in sales each year, barely noticeable among the $70 billion U.S. wine market. Even the so-called DTC market, where wineries sell directly to consumers, accounts for just single percentage points of that $70 billion.

And that’s because the three-tier system was set up to make it difficult to do anything other than buy wine in a restaurant or retailer. And that’s because the goal of the three-tier system, which took effect when Prohibition ended in 1933, was to keep Al Capone out of the liquor business. I’ve written extensively about why this happened, on the blog and in the cheap wine book, but the reasons almost don’t matter anymore. It’s enough to know that even though this is the 21st century and Al Capone has been dead for 73 years, we’re still stuck with a liquor regulation system that makes no sense in the Internet age.

But maybe not for much longer.

“The genie is definitely out of the bottle,” says Cameron Hughes, whose self-named winery has been one of the country’s pioneers in DTC sales. “This shows we can operate successfully without ruining the intentions of the three-tier system, so why should have to sign up for it again once the pandemic is over?”

And the wine industry executives I talked to aren’t the only ones who think change is coming. The Wine & Spirits Wholesalers Association, which has lobbied successfully on behalf of three-tier for almost 90 years, is apparently worried, too. It warned U.S. consumers about “black market liquor” shortly after many states eased three-tier delivery restrictions. That the only thing most of us know about black market booze is from old movies is irrelevant to the wholesalers; they’ll do almost anything to save the system that gives them a constitutionally protected monopoly to distribute alcohol.

Coming next

“Relaxing the rules has always been the goal,” says Matt Crafton, the winemaker at Napa Valley’s Chateau Montelena. “So why not make that permanent?”

So what might happen – or not – once the pandemic winds down? Any changes probably won’t happen immediately, but even later rather than sooner will be a welcome change:

• The law that requires every wine sold in the U.S. to have a distributor won’t change, so the wholesalers trade group can rest easy.

• More and easier home delivery from retailers, restaurants, and wineries. It’s possible the rules will be changed in various states so that more wine shops and restaurants can take Internet orders – and how much better would it be to order wine with your takeout food? The catch here is restaurant pricing. Will restaurants realize they’ll have to improve on their three and four to one markups to be competitive?

• The end to signing for wine deliveries, the hassle that the delivery companies hate as much as consumers do. So far, the republic hasn’t ended without signing for wine, and, says Hughes, “in the 21st century, there has to be a better way for Fed Ex and UPS drivers to deliver wine than to check ID.”

The buying wine on-line checklist

buying wine on-lineHow to find value when you buy wine on-line

This is the first of two parts looking at how the coronavirus pandemic has changed the way we buy wine. Today, part I: finding value when buying wine on-line. Friday, part II: Will the pandemic lead to changes so it’s easier to buy wine on-line?

More of us are buying wine on-line than ever before – Nielsen says e-commerce alcohol sales increased an unimaginable 291 percent in the 52 weeks ending in March. And direct sales from wineries were up by 40 percent over the same period.

But how do we know that we’re getting value when we buy wine on-line? Never fear; that’s why the Wine Curmudgeon is here. I’ve spent the past month buying wine on-line to see whether it’s a practical alternative during the duration. The answer, not surprisingly, is that it all depends, and it’s not necessarily about how much the wine costs.

Know, too that not all on-line wine retailing is the same. Buying wine directly from the winery has almost nothing in common with buying wine from a retailer — limited selection and different laws among them. In addition, your neighborhood wine shop is likely to offer better value than a chain retailer, if only because they’ve seen you in the store and don’t want to tick you off. To most chains, you’re nothing more than a digital account floating in the cyber-ether.

Keep these five points in mind when buying wine on-line:

• Vintage. Some retailers list the vintages for the wines; some don’t. If they don’t, there’s no guarantee you’ll get the current vintage. A Total Wine in Dallas sent me the 2016 vintage of a white wine; the current vintage is 2018. The 2016, not surprisingly, let much to be desired.

• Substitutions. Make sure you don’t allow the retailer to substitute its choice if what you want is out of stock. I was offered a California red for my Spanish tempranillo, which are hardly the same thing. Yes, the retailer is supposed to tell you about the substitution when they make it, but this doesn’t mean it always happens.

• Selection. Some retailers, like Spec’s in Dallas, only offer part of their inventory on-line. The Spec’s near me has one of the best wine assortments in the U.S.; on-line, though, it’s mostly supermarket plonk.

• Retailers vs. delivery services. Companies like Drizly and Instacart are delivery services that contract with retailers. This means limited selection and almost always higher prices. It should say on the website if a third-party delivers for the retailer.

• Shipping and delivery. Two things have traditionally slowed on-line wine sales – restrictive laws and the high cost of shipping and delivery. Sometimes, I think the latter is the bigger stumbling block. I bought 17 bottles from wine.com in March, and the shipping charge worked out to almost $3 a bottle. My order from Total Wine cost me $10 for delivery plus a 15 percent tip, again adding about $3 a bottle to the total. Is the convenience worth the extra money? Only you can decide that.

Image courtesy of The Healthy Voyager, using a Creative Commons license

More about wine buying and value:
The cheap wine checklist
How to find a good wine retailer
Follow-up: Just because it’s a cheap wine doesn’t mean it’s worth drinking

Winebits 635: Beard award semifinalists and some wine legal doings

Beard awardThis week’s wine news: Beard award semifinalists feature drink local, while three-tier wins a court victory and wine clubs lose

Beard award semifinalists: Seven wineries, including four regional producers, are among the semifinalists for the 2020 James Beard Award for outstanding beer, wine, or spirits producer. The three are some of the top Drink Local winemakers in the country: Texas’ Kim McPherson of McPherson Cellars; Vermont’s Deirdre Heekin of La Garagista Farm + Winery; New York’s Nancy Irelan and Mike Schnelle of Red Tail Ridge Winery; and Virginia’s Rutger de Vink, of RdV Vineyards. The Beard Awards are the restaurant business’ version of the Oscars, so this is a big deal. In addition, given the way the final voting often turns out, earning semifinalist honors is the equivalent of winning for someone not on the East Coast or in a major media market. The finalists will be announced March 25.

Score another for three-tier: A Mississippi court has ruled that out-of-state retailers can’t sell wine in that state, in a decision that left a couple of legal scholars scratching their heads. The decision itself isn’t surprising, given the way the three-tier system works to prevent an out of state retailer from doing that. What is odd, wrote the Alcohol Law Review, is that “this unanimous decision reverses the trial court’s decision. … This case served as a reminder of first year law school’s Civil Procedure class and examination of when personal jurisdiction kicks in. The opinion does not really address alcohol laws in depth.” But, as the blog’s liquor law expert has said many times, since when does three-tier have anything to do with alcohol law?

Score one for wine drinkers: The blog has written extensively about problems associated with third-party wine clubs – those not run by wineries. Now, a lawsuit has agreed with us.  Two national wine clubs have settled lawsuits alleging they broke California law by not notifying customers that their memberships would be renewed automatically. Direct Wines and Wine Awesomeness did not admit wrongdoing, but agreed to change their policy and pay $350,000 and $15,000, respectively, in penalties and costs. From now on, each will have tell a customer when their membership is being renewed, and can’t hide the policy in fine print or on an Internet link.

Winebits 625: The Happy Holidays edition

gerrit cole

Gerrit, dude, think $10 Bieler Provencal rose.

This week’s wine news: A $900 wine helped the New York Yankees sign Gerrit Cole, the best free agent pitcher on the market. Plus, a couple of decidedly Bah Humbug developments about the wine tariff and distributors.

I’ll take two, please: The New York Yankees may not have signed top free-agent pitcher Gerrit Cole because they threw a record-setting $324 million at him. Rather, a couple of bottles of $900 Italian wine may have been equally as important. The Yankees gave Cole the 2004 and 2005 Massetto — made with merlot, of all things — and he practically melted. If I had known Cole was a wine aficionado, I could have helped my beloved Chicago Cubs sign Cole. Frankly, he would get a better deal with 180 bottles of the $10 Bieler Provencal rose than two bottles of an Italian merlot, no matter how good it is (and my Italian wine expert says it’s good, but not that good).

More tariff threats: The U.S. government is considering boosting October’s 25 percent tariff to 100 percent and including almost all beer, wine, and spirits produced in any European Union country. That would include those exempted in October. You can read the sad details at the link; why anyone would want to destroy the European booze business is beyond me. That’s just spite. I’ve talked to a couple of importers and producers, and they’re urging wine drinkers who think this thing is foolish to leave a comment with the feds. Go to www.regulations.gov, enter docket number “USTR-2019-0003” and click search. Then, click “comment now” and leave your comments/concerns. Comments are open until Jan. 13.

Not enough distributors? The WC has written quite a bit about distributor consolidation, and how it benefits no one but the distributors and their biggest customers. Turns out someone agrees with me. Cyrus Azari, writing for a trade blog, says there may not be enough distributors for all of the wine in the market, and this is a “huge pain point for wineries who get cut off from markets.” In other words, no distributor means the wine can’t appear on store shelves, since the law requires every wine to have a distributor. That sounds like a fair system, yes?

Winebits 624: Scratch and sniff, Gallo-Constellation deal, Amazon wine

scratchand sniff

“Hmmm.. is that gardenias and lilacs?”

This week’s wine news: Scratch and sniff wine corks, plus Gallo and Constellation rework their wine deal and Amazon launches private label wine in Europe

It smells so good: How about scratch and sniff wine corks? Amorim, one of the largest closure producers in the world, has developed wine stoppers that contain a fragrance, as well as a complementary spray that can be sold with the wine. Call it perfume for wine. There’s no indication in the story in the link, which reads like a cut and paste news release, how the fragrance doesn’t get in the way of the wine’s aroma — which would seem to be a serious problem. In addition, the scratch and sniff product is part of a new line of closures that includes one with an LED and one that changes color when the wine is at the correct temperature.

Not so fast: E&J Gallo and Constellation Brands have revised their massive wine sale after a warning from U.S. government regulators. The original $1.7 billion deal has been reduced to $1.1 billion, and Constellation won’t include several brands that would have given Gallo too big a share of the U.S. market in several categories. That includes Cook’s California Champagne, a $7 sparkling wine, since Gallo already owns Andre, a similarly priced California bubbly. Expect Constellation, which is running away from wine as quickly as possible in favor of legal weed, to dump Cook’s on someone else.

Amazon wine: Amazon has launched its own-branded wine in Europe. The story in the link, which focuses on how this might affect California, misses the point – that it’s likely illegal for Amazon to do this in the U.S. It also misses the point about Amazon’s competition in Europe, which aren’t high-end wineries, but supermarkets selling €10 wine. So the on-line retailer is selling €20 wine in Europe, apparently because it doesn’t want to compete with Aldi, Lidl, and the rest.