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Category Archives: Wine trends

The end of the three-tier system?

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three-tier systemPaul Mabray, who knows this stuff better than almost anyone, says the end of the three-tier system is coming. It will probably be later rather than sooner, but Mabray is convinced that technology, combined with three-tier’s built-in inefficiency, will make the system obsolete.

The Wine Curmudgeon mentions this because my views on three-tier are well known. The system, which mandates how wine is sold in every state, says consumers can’t buy wine from the producer (with some exceptions), but must buy it from a retailer, who must buy it from a distributor. Buying wine from an Internet retailer, the way we buy clothes from Overstock.com or computers from New Egg, is almost always illegal. In this, three-tier is constitutionally protected, so we’re stuck with it until the end of time or until we reform campaign finance laws, which is about the same thing.

But Mabray, the chief executive officer for VinTank, which helps wineries use the Internet and social media to market their products, sees the situation from a completely different perspective.

Market access should not be constricted by antiquated regulations, but by market choice,” he says. “Yes, there needs to be regulation to enforce a regulated product but forcing it to go through a mandated tier structure is outdated.”

Mabray said this during last month’s Silicon Valley Bank State of the Wine Industry presentation, and I was so intrigued by what he said that we talked about the subject this week. He reiterated it during our chat: Trying to stop the advance of technology with artificial barriers is almost always futile, and three-tier will eventually break itself.

How that will happen involves lots of supply chain geekiness, but Mabray is convinced that Internet technology — the same thing that has allowed Amazon to make money by selling diapers for next day delivery, unheard of a decade ago — will come to wine. Three-tier as we know it will break down because it will be too expensive and too complicated to work the way it does now. Even the distributors, who have the most to lose, will want to change it to make it more consumer-friendly.

Perhaps. One reason our views are so different (besides my crankiness) is that Mabray sees an economic model ruled by efficiency. I see an economic model ruled by state legislatures with vested interests, whose idea of a supply chain is something you tow your car with. I hope he’s right about this, but I won’t be surprised if he isn’t.

More about three-tier and direct shipping:
Could the Internet screw up direct shipping?
Amazon.com, Prohibition, and the three-tier system
The Supreme Court and retail direct shipping

Welch’s grape juice hops on the wine bandwagon

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welchs grape jucie wine

“Gorgeous and totally juicy. Jam and sweet spices burst from the glass in this deeply resonant, expressive bottling.”

Grape juice is good, wine is bad — accepted wisdom for generations. After all, there’s a reason there isn’t a minimum drinking age for grape juice.

Which is makes this TV commercial for Welch’s grape juice so damned odd. It compares grape juice to red wine, noting that the juice has some of wine’s health benefits: “We’re not so different after all.” This is mind-boggling, and not just because it runs counter to the current wave of anti-drinking propaganda. Rather, it positions wine in the mainstream (and it’s a juice company doing it, for good measure): Comparing wine, which no kid is supposed to drink, to something every kid in the U.S. has had.

“Considering that roughly half the adults in this country don’t drink alcohol, it makes a certain sense,” says Michael Wangbickler, CEO & Partner, Balzac Communications & Marketing. “Since it’s become common knowledge that drinking red wine is good for your heart, they’re making a play for those consumers who don’t drink wine but want its health benefits.”

This ties in with Welch’s 2014 goal to promote a health and nutrition, says Wangbickler. That anything to do with wine is part of that message should make all of us who drink it smile. Just like a little kid at breakfast with a glass of grape juice.

Video courtesy of iSpotTV.

Shark Tank wine

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Shark Tank wineDear Shark Tank Masters of the Universe:

The Wine Curmudgeon does not pretend to be a financial genius; witness my inability to make any money off the blog. But your recent foray into the wine business — Zipz single-serving wine and Beatbox flavored wine — is about something I know. For smart guys, you’re doing dumb things with your money.

Know just two things about the wine business, which should put these investments in perspective:

First, that three-quarters of all wine sold in the U.S. is traditional wine that comes in a 750-milliliter bottle, just as it has been for decades. There is no evidence that that Americans are clamoring for single-serving wine or flavored wine sold in a box, no matter how cool each product may be. If you doubt that, wait in line (or have a minion do it for you) at a World Market, where the single-serving bottles are lined up for impulse purchases. Count how many people buy them. Yes, not all that many.

Second, that wine is not sold like other consumer goods, but through the three-tier system. This means that your entrepreneurs can’t sell their product to a retailer like Costco. The law in all 50 states requires them to hire a distributor to sell their product to the retailer. If they can’t find a distributor, and distributors are notoriously picky about what they represent, then it will never be sold in a store. I should also mention, thanks to three-tier, that it would be even more difficult to sell Zipz (which isn’t all that tasty) and Beatbox in Pennsylvania and New York, two of the largest wine markets in the country. The former doesn’t have any independent wine retailers, and the latter doesn’t allow wine sales in grocery stores.

I hope this helps the next time someone pitches a Shark Tank wine deal. And no need to thank me — it’s enough to know that I’m helping incredibly rich people not waste their money.

Sincerely,
The Wine Curmudgeon

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