Tag Archives: three-tier system

Winebits 283: Wine writing, appellations, Pennsylvania

? Get our your debit card: The Italian Wine Guy discovers that all it takes is $1,000 to subscribe to a dozen of the best on-line writing websites, including Jancis Robinson and Robert Parker. This is a pittance, all things considered, and speaks to the sad state of the business of wine writing. A subscription to the very ordinary Dallas newspaper costs one-third of that; regardless of anything else, the paper ?s management understands the business side of publishing in a way that hardly anyone in wine writing does. I get asked all the time why I don ?t charge or have premium content, and the answer is simple (regardless of my philosophy that it should be free) : No one would pay for it. There is no economic reason for them to do so.

? Wine regions are so 20th century: The Wine Curmudgeon has long argued that the post-modern consumer doesn ?t care much about appellation ? where the grapes come from that are in the wine. This has caused much consternation among some people, who have called me various names. Nevertheless, this is becoming increasingly relevant, as Mike Veseth points out on the Wine Economists blog. His argument, given modern supply chains and multi-nationals, is that wine will one day be made like fruit juice, with grapes from different regions blended in the same way Minute Maid blends apple juice from as many as six countries. Veseth calls this juice box wine, and has found an example: A Barefoot red blend from E&J Gallo called Impression, made with grapes from Spain, Australia, Argentina, and California.

? Take that, P. Diddy: The battle over ending Pennsylvania ?s state-owned liquor stores has never been without controversy, despite the hopes of my pal Dave Falchek. Still, who knew that rapper turned business mogul Sean Combs would get involved? The Commonwealth Foundation, which has long supported dismantling the state stores, used Combs ? luxury vodka to once again call for an end to the state system. Combs probably had no idea the three-tier system, of which state stores are a key part, could be so cutthroat. After all, he was only in the music business.

Winebits 281: Wine glasses, direct shipping, Italian wine

? Brushes for sale: There are three intriguing things about this post at Forbes about cleaning wine glasses. First, that Forbes would mess with it, given that it doesn ?t seem like something their high-dollar readers would worry about. Don ?t they have someone to clean their glasses for them? Second, that the best solution costs $4, using a baby bottle brush. This reinforces the Wine Curmudgeon ?s theory that most wine accessories aren ?t worth the money they cost and would be better spent on wine. Third, that the baby bottle brush company could have cared less about this new us, which points to the insignificance of the wine glass market in the greater scheme of things. Tip ?o the Curmudgeon ?s fedora to the great W.R. Tish, who sent this my way.

? Impressive numbers? The Wine Spectator analyzes the latest sales gains for winery to consumer shipping in the U.S. in such a breathless fashion that even I was impressed. And, given the legal restrictions, the almost $1.5 billion in sales is impressive (and that regional wine does more direct shipping than Washington and Oregon was pretty amazing). The catch, though, is that the $1.5 billion was just 4.4 percent of the total wine market. Until we see serious reform in three-tier, which hardly anyone is optimistic about happening anytime ever, direct shipping looks to remain a tiny, if lucrative, part of the wine business.

? Italian sales woes: Not in the rest of the world, where a leading Italian producer saw exports salvage its 2012 sales figures. Frescobaldi reported a 3 percent increase last year, despite a 5.1 percent decline in domestic sales. Once again, for everyone writing about wine, prices are a function of supply and demand. If demand decreases, as it has in western Europe over the past two years thanks to the euro crisis, then there must be a matching decrease in supply to raise prices.

Is New York liquor ruling a setback for Amazon?

Amazon Wine, the Internet retailer's end-run around the three-tier system, may be in trouble. The New York State Liquor Authority, reports Wine Industry Insight, has fined a New York retailer for $50,000 for ?third-party liquor sales. ?

Said the authority in its ruling: ?Arguably, since these third party companies are not licensed to sell alcohol, they are violating the three tier system. Additionally, by participating in this arrangement, retailers could be construed as availing their license and sharing their profits with these companies, all of which weaken the system and do not conform to the rules and regulations that govern sales of alcohol. ?

The ruling was not directed at Amazon, and the case is not exactly the same ? the retailer was fined for selling wine on the Internet in conjunction with a distributor. Amazon doesn ?t ?sell wine, ? but allows consumers to use its marketplace to buy wine from retailers and wineries, All Amazon says it does is facilitate the sale, for which it takes a cut from the retailers and wineries.

Still, that sounds a lot like a third-party retailer, and Amazon doesn't help matters by calling itself a wine store on the site. And, as I reported last fall when the program was announced, there was no guarantee it wouldn ?t run afoul of ?newly aggressive state regulators, who might be inclined to sue Amazon just because. ?

Amazon Wine launched in 2012 even though it wasn ?t available in New York, the most important wine market in the country. This ruling seems to indicate it may be a long while before the marketplace gets there. In addition, though the decision has no meaning outside of New York, liquor cops across the country will undoubtedly be parsing it for ways to use in in their jurisdictions.

Amazon goes into the wine business

Maybe Amazon knows something the rest of us don’t. Maybe the world’s largest on-line retailer’s much awaited wine store offers something that isn’t obvious at first glance.

Because, frankly, the debut of Amazon Wine, announced yesterday, is underwhelming. Or, as one winery official told me. “In looking through some of their selections, there are ‘no’ bargains. In addition, Wine.com seems light years ahead of them.”

The wine business has been slobbering over Amazon’s wine store since Lew Perdue at Wine Industry Insight broke the story in September. Initial reports of a limited debut featuring select wines from mostly West Coast producers and sold by the wineries — with Amazon serving as a marketplace and not the actual retailer — didn’t seem quite right. It wasn’t the Amazon way of doing business.

Turns out that was exactly what Amazon announced yesterday, and is what makes its on-line wine site so disappointing. You know that seamless shopping experience it offers for everything from books to music to hiking shoes to pots and pans? This isn’t it:

• A very limited selection, around 1,000 wines ? or about what you ?ll find at a good-sized regional wine retailer. By comparison, Wine.com offers thousands of wines. Amazon has fleshed this out by including third-party, independent retailers like New York’s Morrell Wine and Wine Chateau in New Jersey, which have established on-line presences.

• No free shipping, which will almost certainly be a huge problem given Amazon ?s reputation for and reliance on free shipping through programs like Amazon Prime. The store will charge $9.99 for up to six bottles, which adds 15 percent to the cost of a $10 wine. By comparison, Lot 18, the discount site, charges $9.99 for up to six bottles and free shipping for larger orders.

 • A very odd product mix that includes $100 bottles as well as Coppola’s $10 wines and Ariel’s non-alcoholic products, both of which are widely available in traditional retailers. Why would anyone buy them on the site and pay the shipping charge?

• Very limited shipping, to just 12 states and the District of Columbia The program doesn’t include Texas, with three of the largest wine markets in the country, and New York or New Jersey. Wine.com does 42 states and DC.

In this, shipping — as expected — is the program’s glaring weakness. Amazon’s decision to do an end run around the three-tier system by serving as a marketplace and not the actual retailer means consumers who buy wine on the site face what one marketing executive told me was “a bit of a confusing experience.”

Are they buying from the winery, which may not ship to one of the 12 states and DC that Amazon advertises? Are they buying from one of the third-party retailers, with its own shipping and pricing policies? Do they want to use the $9.99 shipping, which takes three to five business days (so much for buying a bottle of wine for dinner), or pay three times as much for next day shipping?

How confusing is it? There are a handful of New York and Virginia wines for sale, but residents of New York and Virginia won’t be able to buy them.

Having said all this, Amazon is the expert in on-line retailing, and if anyone can make it work, Amazon can. But this haphazard and clanky program doesn’t give one cause for optimism.

Is Amazon getting back into the wine business?

Amazon wine direct shipping

Amazon, the world’s largest on-line retailer, wants to insert itself into the wine direct shipping picture without actually shipping any wine.

The on-line retailer isn ?t commenting. But Wine Industry Insight and the Wall Street Journal reported last week that Amazon will allow some California wineries to participate in its third-party resellers program, in which Amazon lists the items for sale but doesn ?t actually sell them itself.

Needless to say, the wineries were agog at the opportunity to be part of Amazon, which is the fifth most visited website in the U.S. and does almost $13 billion a year. Lew Perdue at Wine Industry Insight wrote that he was contacted by ?numerous ? producers who wanted to know who to call at Amazon so they could sign up.

The legal experts I talked to were less enthusiastic. They asked not to be quoted by name, since they didn ?t know exactly how Amazon wanted to put the program together — though it is apparently based on a 2011 decision by California Alcoholic Beverage Control to allow this sort of thing.

But all agreed that the program could still encounter any number of problems, given the complexity of the three-tier system, which governs alcohol sales in the U.S.; the legal quagmire that is direct shipping law, with 50 laws for 50 states; and newly aggressive state regulators, who might be inclined to sue Amazon just because.

Said one high-profile liquor law attorney: ?It has a lot of moving parts and there are lots of semi-vague statutory commands buried in there, and so lots of problems to work through with even the best intentioned regulators. For those who just don ?t want it to work, there are lots of opportunities to provoke expensive and time consuming litigation. ?

Which, of course, was the reason Amazon got out of the wine business in 2009, after a mostly failed test program that showed just how complicated direct shipping was. Why the company decided to do it again, given those difficulties, could be even more interesting than actually doing it.

Drawing courtesy Appellation America, using a Creative Commons license


Alabama’s wineries and the end of the three-tier system


No, this isn’t what Alabama’s three-tier system would look like if its wineries got self-distribution, despite all the fear-mongering.

The Wine Curmudgeon long ago made his peace with three-tier, the system of state laws that governs alcohol distribution in the United States. It’s outdated and a relic of Prohibition, and makes as much sense in the post-modern world as connecting to the Internet with typewriter and carbon paper. But it’s the law, as the Supreme Court always reminds us, and we must learn to live with it.

And I have tried to do so. But in Alabama, the state’s wineries — all 13 of them — are being pounded by a couple of multi-million dollar beer distributors. Alabama’s wineries want an exemption from the state’s three-tier system so they can sell their wine directly to restaurants and retailers, called self-distribution. Currently, if they don’t have a distributor, and none of them do (or likely ever will), it’s illegal for them to sell to restaurants and retailers.

The beer distributors have blocked legislation that would allow self-distribution, which is common elsewhere (including Texas, where we are hardly known for our progressive liquor laws). Citing the sancity of three-tier, beer lobbyist and former state senator and lieutenant governor Steve Windom told the Tuscaloosa News: Thousands of jobs would be jeopardized by a change in three-tier, and “®he concern is we don ?t pass legislation that impacts the three-tier system.”

Which is about as silly as trying to connect to the Internet with typewriter and carbon paper. Those 13 wineries make less than 13,000 cases of wine a year, and much of their wine is made with muscadines, which isn’t even technically a grape. In terms of commerical potential, Gallo or Kendall Jackson they ain’t. More, after the jump.

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