Maryland Wine Lovers Fall Prey To Wholesalers
March 13, 2008 – 1:01 pmThese last three days I was at the National Alcohol Beverage Control Association’s Annual Legal Symposium. That organization of control states was kind enough to ask me to sit on a panel and discuss retailer-to-consumer shipping.
In the course of the talk I gave I made the point that retailer-to-consumer shipping was likely to come about through litigation, rather than legislation. The reason for this and the reason for telling them that SWRA or another organization would likely be coming to their state with a threat to sue them is because America’s wholesaler’s appear to have a stranglehold on each and ever legislature across the country that results from $50 million being spent in this decade alone on contributions to state political campaigns.
That kind of political largess, I told the folks in the room, results in a lot of favors and a lot of legislative deference.
If anyone needs to see what I mean by this all one had to do is look at what happened recently in the State of Maryland.
In Maryland the legislature was considering a bill that would have allowed direct to consumer shipping for both retailers and wineries whether in-state and out-of-state. If passed into law, Maryland consumers would have much greater access to wine, the state would have collected considerably more taxes on the sale of alcohol and this would have occurred with no harm done to the three tier system.
The bill was killed in committee…even though considerably numbers of legislators, consumers and industry folk supported it.
Allow me to quote liberally from an article on this fiasco from the Maryland Gazette:
“The proposals met heavy resistance from distributors and their lobbyists, who argued the state’s three-tiered system linking producers, distributors and retailers would suffer if consumers could purchase wine directly from wineries.
Wholesalers argued that wine would be more available to minors through Internet sales, and would be less profitable for the state and less regulated.”
It’s important to be very clear about the character of the claims that were made by those who opposed this legislation: They are lies. Not only would the three tier system in Maryland have been effected in no way whatsoever, but minors would not begin buying wine via the Internet. They never do. But of course, these issues were not the main issues in play. Even the wholesalers admitted as much:
‘‘Of course it would have a direct impact on the distribution business,” said Nicholas G. Manis, deputy director of the Maryland Beer Wholesalers Association. Give Mr. Manis credit for admitting publicly that the real concerns is not for consumers or proper and appropriate regulation, but rather for the financial interests of the wholesalers.
The fact of the matter is that the wholesaler lobbyists didn’t even need to show up to these hearings. They made their appearance in front of the legislature long before when they delivered checks, a great many of them, to the lawmakers who vote on these issues.
So while it seems that in reality nothing has or will happened in Maryland on the issue of Direct Shipping, the killing of this bill does have consequences:
1. Marylanders will pay higher prices for wine.
2. Marylanders will have a diminished selection of wine to choose from.
3. The State of Maryland will not benefit from increased tax revenue.
4. The environmental benefits that flow from direct shipment vs. the Three Tier System will not accrue to the state.
11 Responses to “Maryland Wine Lovers Fall Prey To Wholesalers”
At the very least, we all ought to know who voted against the bill in committee so that we can work against the reelection of such folks the next time around. Wine without Borders would do us all a service by providing the list.
By charles schmitz on Mar 13, 2008
It is clear that Mr. Manis and the Maryland Wholesalers Association are complicit in an overt attempt at preventing the PEOPLE OF MARYLAND from deciding which wines they want to enjoy. DTC (Direct to client) is inevidable and SHAME ON YOU DISTRIBUTORS for your lobbyist $!!! Another sign of greedy corporatism in America.
By Shawn on Mar 14, 2008
The thing the legislators don’t seem to understand is that when you don’t provide a free and orderly market for direct shipment of wine, it just becomes a black market where the state does not enjoy tax revenue. That was one of the lessons of the failed social experiment known as Prohibition and which gave rise to the existing three tier distribution system, when did little more than make illegal mobsters into legalized mobsters which today go by the name Distributors.
By Ian Lawrence on Mar 14, 2008
The thing the legislators don’t seem to understand is that when you don’t provide a free and orderly market for direct shipment of wine, it just becomes a black market where the state does not enjoy tax revenue. That was one of the lessons of the failed social experiment known as Prohibition and which gave rise to the existing three tier distribution system, which did little more than make illegal mobsters into legalized mobsters which today go by the name Distributors.
By Ian Lawrence on Mar 14, 2008
So let me get this straight, the distributor who acts as a sales force for these boutique wineries by placing their wines in retail shops and restaurants so consumers can experience & enjoy their wines are the bad guys? All because wineries want to sell direct to consumers thus directly hurting local retail shops? Just where do the vast majority of wineries think their business would be without distributors? Do boutique wineries really believe they are solely responsible for the wine industry’s recent growth? Without distributors your local wine shop would carry Gallo & Silver Oak with very little in between. Talk about short sighted, I choose to go to my favorite local wine shop(s) and support them for bringing me diversity.
By Glenn Toney on Mar 17, 2008
Glenn, the issue has nothing to do with “bad guys” versus good guys, but has everything to do with allowing consumers the freedom to buy the wines they want.
No one is advocating distributors vanish from the face of the earth. Why can’t they exist and compete in and environment that includes direct shipping? If they provide such great service to these boutique wineries then they should have nothing to worry about, right?
And why do you assume that direct shipping will hurt local retail shops, what basis do you have for making that statement? People go to retail shops for convenience and the ability to interact face-to-face with a knowledgeable salesperson, having the additional option of buying direct will mean you local shop will have to compete at a higher level.
I would argue that a retailer that is worried about direct shipping hurting their business and can’t figure out how to better serve their customer deserves shouldn’t be in business in the first place.
And to your question about where do wineries think they would be without distributors, let me turn it around and ask do you think those wineries would be better off financially if they could sell direct to restaurants and retailers? Isn’t it feasible that some small wineries have the capability to self distribute? And if so, what value does a distributor add to that company that is forced to use its services? Is that an “efficient” system, forcing a company to use the services of another? How can that make any sense in a free market society?
By Jeremy on Mar 17, 2008
Nice rebuttal Jeremy. I believe Glenn Toney is from the Wine Source, an Alabama distributor. Cheers.
By Dean on Mar 17, 2008
Glen, I live in California where wine is sold in every which way you can imagine legally. It is sold and shipped to consumers direct through the internet by small retailers, big retailers, and direct from the winery. You can buy wine and take it home from restaurants, wine bars, small retailers, big retailers, costco, the corner market, and you can even buy it now at Target. There is a very free market for wine in California and let me tell you something, business is booming for everyone including those who work within the three tier system in the state. There are massive distributors like Southern wine and spirits and there are hundreds of small wholesalers all of which manage to survive, thrive, and sell in the same market. This is the way it should be in every state and anyone who thinks differently is just flat out wrong. The three tier system will survive if states open up to internet shipping. Small retailers will survive. Competition is good for the market and if you can’t figure out how to survive in the free market then that is not the problem of the consumer!
By bill on Mar 17, 2008
Jeremy is right on the money I work for a retailer in the DFW area and we focus on artisan producers and cult wines from all over the world. Direct shipping does not affect my business in the least in fact most of the time my prices are better than the winery, thats if you can even get the wine as procuction levels are so small and demand is often high for these wines so allocations are tiny. I’m always eager to help my clients find the wines they seek regardless of wether those wines are even distributed here because were building a relationship and in the future they will remember that I’m here to help them and they will continue to shop with me because of that. Distributors can be a nightmare with the way they allocate and control the distibution of product in a market. Couple that with the fact that some distributors are to large to fairly represent the wines in their portfolios meaning that they are doing a diservice to the wineries that they represent add to that the fact that their sales force often times has poor product knowledge and you have to wonder if there isn’t a better solution. That being said some distributors do a great job and some of the owners and employees of these distributors I like and have great respect for.I have ranted long enough thanks for the opportunity to add my 2 cents.
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By Dondon on Apr 23, 2008
I just tried to by wine online and found my choice for wines was ONE (1) bottle, while many other states had 400+. I would like to have the opportunity to try things that my local wine carrier does not offer - which is MANY. Ian, you’re absolutely right. I have many friends in ajoining states, and don’t think for one minute that I won’t be shipping to them and having it lugged over the border “illegally”. Your loss Maryland.
By Crystal on Jun 13, 2008