Wine Without Borders

Doing Wine Sales the Right Way in Wisconsin

October 29, 2007 – 9:46 am

Late last week the Governor of Wisconsin vetoed amendments to the state’s budget bill that would have, if signed and had become law, revoked Wisconsin wineries’ ability to sell directly to wine retailers, bypassing the wholesaler and allowing the winery to make a little bit more on each sale of wine.

This remarkably self serving piece of legislation was crafted and written by Wisconsin Wholesalers. This is not remarkable as nearly every piece of alcohol related legislation in every state in America is written by wine wholesaler lobbyists.

What’s interesting is the Wisconsin wine wholesalers’ response to the veto of this pitiful attempt by wholesalers to change the law purely to protect them from competition:

“We’ve just stuck our head in the sand”

That’s what Mike Wittenwyler, the lawyer for the Wisconsin Wholesalers who wrote the legislation and tried to have it quietly put into the Budget Bill without anyone seeing (that act alone suggests the wholesalers knew they were crafting unethical legislation.

To quote from the Milwaukee Journal Sentinal’s explanation of Wittenwyler’s view on this veto:

“One way to provide equal treatment would be to allow all wineries, including those outside Wisconsin, to sell their products directly to the state’s retailers, Wittenwyler said.

But that could result in a legal challenge to the entire system of using wholesalers, he said. If that system fell apart, Wittenwyler said, the market could be dominated by large winemakers, such as Gallo, selling directly to large retailers, such as Wal-Mart and Costco.”

Wittenwyler should know better. He’s a lawyer that deals with Alcohol law. I think he does know better. I just don’t think he wants to admit what he knows really should happen to fix Wisconsin’s wine distribution regulations.

Due to the 2005 Granholm v. Heald Supreme Court decision and subsequent federal court decisions it is pretty clear that a state may not allow its own wineries to sell directly to retailers in the state (as Wisconsin does) while prohibiting out-of-state wineries from selling to Wisconsin retailers (as Wisconsin does currently prohibit).

There are two ways to fix this discriminatory law: The right way and the wrong way.

The Wrong Way: This would be the wine wholesalers’ approach. It would be the approach that was just vetoed. It amounts to forcing all wineries, including those in Wisconsin, to sell their wine through a wholesaler. As a reminder of what this means, consider that a Wisconsin winery that sells its wine at its tasting room for $20 per bottle must sell that same bottle to a wine wholesaler for $10 if it wants the wine to end up in a retail outlet. Plus, there is no guarantee the wine wholesaler will make any effort to sell the wine.

The Right Way: Allow any winery anywhere in the country to sell directly to Wisconsin retailers and restaurants, bypassing the wholesaler option all together. The key here is making the wholesaler OPTIONAL.

Mike Wittenwyler understands this is an option, but argues it “could result in a legal challenge to the entire system of using wholesalers” and which, he says, as a result “the market could be dominated by large winemakers, such as Gallo, selling directly to large retailers, such as Wal-Mart and Costco.”

This is nothing but an attempt to scare people. By allowing out-of-state wineries to sell directly to Wisconsin retailers means these retailers will have access to every single wine produced in the United States, not merely those distributed by retailers. Furthermore, does Gallo really want to hire the kind of sales force for Wisconsin that would be necessary for them to go around wholesalers and do the work of taking orders and delivering boxes that wine wholesalers are so good at? I don’t think so.