In a recent Wine Spectator, we read yet another article about how “the battle over (consumer) shipping could rage for years to come.” Yeah, and the sky is blue, the ocean is salty, and the problems in the Middle East aren’t likely to get resolved soon either. Duh. Must be a slow news week.
For as long as we have been involved with the industry there has been substantial resistance to addressing some sort of national policy with regards to wine shipments direct to consumers. Every state has its own unique set of rules regarding alcoholic beverages and doggedly clings to those tenets in the face of the growing awareness of life across state lines, brought to you by the internet.
The arguments in favor of maintaining the status quo never seem to change either. The ‘talking heads’ consistently put forth that the problem with having ‘open borders’ has to do with tax collection and minors. Our take is that those are the easy targets for politicians who are simply protecting a source of donations in the wholesalers who directly benefit from maintaining the status quo of a well-managed legal monopoly.
Alcoholic beverage companies operating within a ‘closed system’, without any real competition from outside of their borders, are in a position to make silly amounts of money simply because they have that virtual monopoly. If you think about it, they are not unlike the bootleggers that most of the curious alcohol laws were created to thwart in the post-Prohibition era. The wholesalers and retailers within a given boundary ‘don’t want anybody muscling in on their territory’.
If this all sounds like the dialogue for some 1930s gangster drama, it kind of is. But instead of ‘tommy guns’ to deal with intruders, it’s a state’s parochial legislation which will cost sometimes prohibitive sums of money for outsiders to fight. This we know from both observation and experience. No other business has to deal with this sort of minefield, though the internet age is creating similar issues regarding sales tax. In all of this, however, no one seems to be particularly concerned with consumers .
The point is that the issue will never be resolved because those entrenched in the various markets will continue to fund the political machine to protect their interests. You can debate the 21st Ammendment vs. the Commerce Clause all you want (the diametrically opposed legal precedents that give rise to a debate in the first place). Those within the particular states have absolutely no interest in doing anything else but fighting to block competition, nor in all fairness should they. They don’t give a damn about the consumers’ right to do anything except buy their stuff. In many cases they don’t even do a very good job in offering the pricing, products and service that would remove the consumers need to look elsewhere .
We’re certainly not going to solidify the definitive argument today. We don’t expect there is one. The debate has been raging for as long as we have been doing this and shows no sign of tapering off. The position of one state or another may change, the intensity of the political saber-rattling increases or ebbs, but the situation itself will always exist as you have one side of the equation with absolutely no reason to accept or work for any kind of change.
Our question here is a simple one. The discussions of consumers’ right to buy alcoholic beverages across state lines have been voluminous, often very heated, and we expect will be ongoing. But, really, how much are we talking about here as a percentage of all alcoholic beverage sales? All of the bar and restaurant business is local, and those bars and restaurants make up a huge portion of the wholesalers business. There isn’t a huge incentive to buy spirits and beer across state lines, and the cost of transport plus the hassle would deter most buyers from doing it anyway.
That leaves wine. How many wine buyers, as a percent of all wine buyers, care enough to reach out to other markets to acquire certain labels or genres. We’re guessing that percentage of buyers looking to other markets to be infinitesimal as a percentage of the total buying population..
And why do these few consumers do it? To save a couple of bucks? Not on every day stuff. The numbers, with the cost of transport figured in, don’t typically make sense. In fact, from an acquisition perspective, only higher end purchases pencil out from a cost perspective. So, really, you’ve got a few high-end buyers who can’t find what they want in their own environment that are venturing out to look elsewhere. We’d suggest, if they could get the stuff locally at a fair price, a good many of them wouldn’t bother with the hassle and risk of shipping and this conversation wouldn’t be happening at all?
The only answer is that they can’t get what they want locally at a reasonable price. More likely they can’t get it at all! So what are they supposed to do? This kind of thing doesn’t happen in any other industry. If I want to ship a couch from Maine to California, I can. It may be crazy given the cost of shipping something as heavy as that couch, but the law doesn’t prevent it. Yet the wine guy is supposed to just suck it up and buy local because of some arcane local law that was enacted 80 years ago?
The governments rail on about lost taxes. Really? How much are we talking about? We’d guess they’re getting all but the tiniest portion of the tax due because most of the market doesn’t care enough or have any motivation to step out. The taxes the states don’t get are because their market has failed to satisfy the needs of those few customers that do want another option.
To put it simplistically, these wholesalers and governments seem to be overly concerned with the one or two buyers out of every, say, 10,000 that feel that need to go to other markets to get what they want. Hundreds of millions in tax revenues (or more) that are coming in give way to concerns about a few thousand bucks that aren’t? The Spectator article mentions a couple of cases where a state attorney general has filed suit against out-of-state wine interests. Don’t state attorney generals have much more important things to do?
Granted the whole shipping thing is probably perceived as a bigger problem today than it was twenty years ago. But that is likely because there is more information available to the consumer regarding new wines and places to find wines that may be outside the state boundary. We don’t expect that the internet is going anywhere, so there will always be access to tantalizing information regarding wines and wine prices for the consumer to take in. But, sadly, the alcoholic beverage wholesaler, sitting in a truckload of money grousing about the few pennies he didn’t get and paying someone to ‘fix it’, isn’t going anywhere either. Neither are the ‘squeaky wheels’ that will start the next cycle of this ongoing hysteria. Does this make the whole discussion pointless? Sadly, it does.