My list of topics to blog about in 2008 includes aspects related to the price consumers pay for wine. Some of these aspects originate in the vineyard itself (such as crop thinning… more on this some other time). Other aspects are not so “romantic”… like the Three Tier System. A post by Tom Wark on his Fermentation blog finally inspired me to talk about the Three Tier System. The system primarily regulates the availability of alcohol to the consumer. In my opinion it also impacts the price consumers pay.
Alcohol sales in the United States are highly controlled by state governments. Every state has their own set of regulations for the sale of alcohol. The “Three” in the system represents the producer (such as a winery), the distributor (such as a wholesaler) and the retailer (such as your local liqueur store or restaurant). How does the system work? Take wine as an example. Basically the winery must sell the wine to a distributor who then sells it to a retailer who then sells it to the consumer. In other words, a winery is NOT allowed to sell their wine directly to a consumer, especially across state borders. There are exceptions but that’s how the system works from a high level view.
There are several implications as a result of this system. One of them is price. A case of wine that may cost you $150 at a liqueur store, has been marked up more than once since it had to pass through so many hands. It is quite possible that the winery would have sold you the same exact case of wine directly for less than $100 including shipping. The same exact product ends up in your glass but you have to pay a lot more for it. Another implication is availability. Incredibly, in this country of free-trade, open markets and competition, you may simply not be able to purchase the wine you want if no distributor in your state carries the wine.
Now, let me be clear… I am thankful for having wholesalers/distributors. Without them we would be missing out on thousands of wine choices at our retail shops. I have no problem with paying for the services of a wholesaler who works to find producers, imports, stores and transports their products from another state or country and ultimately makes them available at my local retail store. I am not asking for the total deregulation of the alcohol business in America either. But as a consumer I have a problem with not being able to call up a small winery in upstate New York, order and pay for the wine over the phone and have it shipped directly to me. Consumers are the ones who loose the most in this system. The trade barriers caused by the Three Tier System need to be stopped. At a minimum the system needs to be modified to allow for free trade.
But… there is BIG money in all of this. According to a report issued by the Specialty Wine Retailers Association released on January 8th(pdf link), the American wholesalers and their associations have contributed $50 million dollars to state politicians between 2000 and 2006. As Tom Work states in his post <<consider that nearly every state has laws on the books that either protect wholesalers directly from competition or limit the access that consumers have to wine in a way that aids wholesalers bottom line.>>
Take the state of Massachusetts as an example. Here are some key points I extracted from the report:
- Massachusetts passed severe restrictions on which wineries may ship; restrictions on winery shipping if already represented by a wholesaler.
- In the 2006 campaign cycle, wholesaler campaign contributions amounted to $4,269,895.
- In 2006, alcohol wholesalers’ political contributions outnumber those of all labor unions and outspent all lawyer and lobby¬ists interests.
That’s right, over $4 million dollars contributed by our state’s alcohol wholesalers to Massachusetts politicians in 2006 alone. Coincidence? You decide.
In 2006, we were called upon to vote on a matter that involved the sale of wine in our state. Remember 2006 State Ballot Question 1? Maybe some time in the future we’ll be asked to vote on the Three Tier System. Be informed before you make your decision.
And talking about decisions… My friend Nuno sent me a link to a site called Glassbooth Election 2008. On the site you can fill out a quiz indicating which political issues matter to you the most and where you stand. At the end you will know which candidate best matches your political views. I hope the site can be expanded for the next state level elections… thought there are much more important issues to be worried about, I would love to know where my congress representatives and local politicians stand in regards to the Three Tier System.
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