Tag Archives: three-tier system

Feds to country’s biggest wholesaler: May be time to clean up your act

FTC investigating Southern Glazer’s for anti-trust violations

gavel on top of money
FTC inquiry will ask if Southern Glazer’s favored big customers over smaller ones.

The Federal Trade Commission, doing something that it hasn’t done in two decades, says the country’s biggest wine and spirits wholesaler may have broken anti-trust laws.

The FTC is investigating Southern Glazer’s Wine & Spirits, which could control much as much as two-fifths of the U.S. wine distribution market, of illegal practices “related to how wine and liquor are priced and sold around the country,” Politico reported on Friday.

Politco reports that Southern may have violated the 1936 Robinson-Patman Act, which prohibits suppliers from offering better prices to large retailers at the expense of their smaller competitors. The federal government has largely ignored enforcement of the Robinson-Patman Act for more than 20 years, and this action may indicate that the Biden Administration was serous about its 2021 report calling for more competition in a variety of U.S. businesses, including alcohol.

Why does this matter to those of us who buy wine? Because, if the charges are proved, it means Southern has used its dominant position to artificially inflate prices – and we’ve paid more than we should have.

Which, frankly, would not be surprising given consolidation in the second tier, where Southern and RNDC probably control some two-thirds of the business. And I can’t emphasize enough how important this action is, even if nothing comes from it. And nothing might, since it’s just an investigation. Nevertheless, this demonstrates that someone understands that one or two companies dominating a market is not good business and is not necessarily good for the economy – unless you’re the companies doing the dominating.

Says the Politco story: The FTC is seeking detailed sales data on thousands of brands of alcohol and wine sold around the U.S. by both Southern Glazer and its competing distributors. This includes questions about pricing and benefits Southern Glazer offers to retailers, including quantity-based discounts, rebates, promotions, as well as marketing, warehousing, merchandising and other services.

It is also asking about the “competitive dynamics” in the retail market for wine and alcohol and how Southern Glazer allocates wine and alcohol between different retailers, including whether and how it limits distribution to certain customers.

 

Winebits 746: “Clean wine,” convenience store wine, three-tier system

clean wine
The federal government says this is about the only kind of clean wine that is legal.

This week’s wine news: The federal government warns on “clean wine,” plus Gallo soars at convenience stores and a history of the three-tier system

• No such thing: The cyber-ether has been beside itself with news about clean wine, healthy wine, and the like over the past year or so. Now, the federal government agency that regulates alcohol has told marketers to calm down. The Tax and Trade Bureau, part of the Treasury, announced recently that “clean” should not be used to create the “misleading impression” that consumption of the alcohol beverage will have health benefits, or that the health risks otherwise associated with alcohol would be somehow lessened. The statement didn’t say if there would be legal penalties for anyone who did that; consider it a warning. And, added the bureau, “consumers should not interpret the term as meaning that the beverage is organic or has met other production standards” set by the federal government.

• Gallo soars in c-stores: The WC, ever alert to changing wine trends, keeps a sharp eye on convenience store sales, which are about the only bright spot for wine these days. As such, E&J Gallo helped a Midwestern chain increases its wine sales 8 percent over the past year. The key to success? Sweet wine, selling to Millennials, and making sure the wine was cold.

• Keeping it three-tier: Two of the most knowledgeable people in the country dissect the history of the three-term system in this interview, featuring Sovos ShipCompliant’s regulatory general counsel Alex Koral and Tom Wark, executive director of the National Association of Wine Retailers and author of the Fermentation Newsletter (both of whom have been on the blog). The interview gets a bit wonky, but it’s well worth reading for anyone who wonders how we ended up down this rabbit hole. My favorite bit? How a book published in the early 1930s, called “Towards Liquor Control,” still determines how we regulate booze in the U.S. The great Lou Bright once had one of my El Centro classes spellbound talking about the book.

Winebits 735: The three-tier system is always worth a few giggles edition

drinking wine
“Bring it on, Utah!”

This week’s wine news: Three-tier news from around the country, including long-time favorites Pennsylvania and Utah

• No more state stores? Pennsylvania legislators, for what seems like the millionth time, will attempt to privatize the state’s infamous government-owned retail liquor store system. This time, they’ll try to amend the Pennsylvania constitution to get around a potential veto. Regular readers will remember that Pennsylvania’s state store system defies almost all logic, political and economic. Its supporters include Democrats, anti-booze Republicans, and the state’s wholesalers, while those who oppose it are mostly anti-regulation Republicans.

• Yes, even in Utah: Utah residents may soon be able to order beer, wine, and spirits on-line, just like almost everyone else in the 21st century. Why the delay? Because, to quote one trade group official, “In Utah, we have a unique relationship with alcohol which means we often have unique definitions.” How’s that for understatement in a state that used to require a curtain to hide the bar? Proposals in the state legislature may also allow some hard seltzers to be sold in supermarkets and make it legal to purchase 50-ml bottles of booze, which currently are only sold in hotels and on airplanes (with a few exceptions).

• Sunday sales? South Carolina voters may be able to decide to let liquor stores in their county open on Sunday. Oddly enough – or maybe not – the state has a county option for beer and wine sales, but not to let liquor stores open. My favorite part of this? A quote from one of the bill’s supporters: “As an Ambassador, I saw first-hand how outdated South Carolina laws create barriers in business and stand in the way of people investing in our state.” Which shows just how screwed up U.S. liquor laws are – one has to be an ambassador to a foreign country to notice?

Photo: “Nan Drinking Wine at Four Point Winery” by nan palmero

Pandemic or no, e-commerce wine is here to stay

eric schwartzman
“It’s all about ease of use. Consumers want to use as few clicks as possible.”

Eric Schwartzman: “The rule book was written in the 1930s, and it’s all out of date”

There’s e-commerce, and then there’s e-commerce in the wine business, and sometimes it seems like the two are completely different propositions.

Until now, says Eric Schwartzman, a digital marketing consultant and the author of “The Digital Pivot: Secrets of Online Marketing.” His take: The pandemic put the final kibosh on the three-tier system and its century-old restrictions that make it difficult when it’s not illegal to buy wine on-line. And, says Schwartzman, it’s just a matter of time until the walls come tumbling down.

“The rule book was written in the 1930s, and it’s all out of date,” says Schwartzman, who has seen first-hand the difficulties in selling wine over the Internet while consulting for a California winery during the pandemic. “It’s amazing that it hasn’t kept up with technology – and even for alcohol. If you can do that, everything gets easier.”

That’s one of the things that retailers found out during the pandemic, he says. Despite the handicaps they faced, whether legal restrictions or websites that weren’t designed for much more than browsing and showing Google maps, retailers found that e-commerce was more than just a bonus.

“I know I talked to retailers in many categories who saw what happened,” he says, “and who wished they knew more about digital, that they been to digital quicker.”

And wine e-commerce could bring retailers business they didn’t know existed. Says Schwartzman: “It’s all about ease of use. Consumers want to use as few clicks as possible. They don’t want to be hassled by popups or diversions. They don’t want a site that looks like it came from the dinosaurs. They truly do judge a website by its cover.”

As such, there is momentum today – from both retailers and consumers – to reform three-tier that may not have existed before. We’ve noted this before on the blog – and that someone from outside of wine has noticed the same thing speaks volumes.

Winebits 696: Wine tariff, Walmart, wine tourism

wine tariff
Could the end be in sight for the EU wine tariff?

This week’s wine news: More good news on ending the EU wine tariff, plus Walmart will sue Texas to open liquor stores and mixed news for wine tourism

• More good tariff news: The new U.S. trade representative says she’s “hopeful and motivated” in resolving the airplane parts dispute that led to the Trump wine tariffs. Bloomberg reports that U.S. Trade Representative Katherine Tai told a Senate committee last week that she is “very committed” to ending the tariffs by July, which would put an end to the two-decade long dispute over the subsidies. “I am at this point very motivated and hopeful that we will get the traction that we need with our trading partners,” Tai told the Senate panel. Which is the best news we’ve heard about the wine tariffs since the U.S., the EU, and Britain announced the four-month tariff suspension in March.

• Suing in state court? Walmart, whose several federal appeals failed, will change direction and sue Texas in state court to overturn a law that says it can’t open liquor stores in the state. The Alcohol Law Review Blog reports that the retailer “will pursue its litigation strategy in the Texas state court system under Texas state constitutional claims.” This comes after the Supreme Court declined to decide the case and Walmart was rebuffed twice by a federal appeals court. The company wants to overturn a state law that says only privately-held companies can sell spirits in Texas, on the theory that public companies can’t guarantee the public health and safety as well as private companies when it comes to selling gin, bourbon, and the like. Ah, now to be in Texas that three-tier is here.

• Return of wine tourism? Wine Business News reports mixed news for a revival of wine tourism, based on a recent Wine Market Council webinar. Dale Stratton, the group’s president, said the wine industry must continue to monitor consumer sentiment about health and safety. “First and foremost, it’s the consumer in the end who decides what recovery looks like,” he said. In this, expect wine tourism growth to come from people who live in the same regions as the wineries, and wine country destinations in rural areas will likely benefit the most.

Ohio regulators: Why can’t wine writers get samples in your state?

wine writing
“Listen up — we’re going to have to review the wine without tasting it, since Ohio law won’t let us get samples.”

When it comes to the three-tier system, even the First Amendment doesn’t matter

This is how screwed up the wine business, three-tier, and wine shipping is: A PR firm can’t send wine samples to wine writers in Ohio so they can write nice things about the wine so wine drinkers will buy more of it.

Is it any wonder I worry about the future of the wine business?

The samples are part of a virtual tasting set for today. But participants got an email on Monday saying two of the wines can’t be shipped to wine writers in Ohio “due to complications with shipping laws to Ohio.”

Is there any other business in the world where you can’t review a legal product because it’s forbidden to send it somewhere? “I’m sorry, Ms. Critic, but you can’t see the new Marvel Avengers movie in Ohio – there are shipping complications.”

We’ll ignore the First Amendment issue here, which the Ohio “complications” clearly step all over. “Congress shall make no law … abridging the freedom of speech, or of the press. …” The Ohio “complications,” in prohibiting a writer from getting the wine, violate the Constitution. It’s not unlike telling the New York Times its reporter can’t cover Ohio State football because state law forbids non-Ohio reporters from writing about the team.

But, hey, this is three-tier, so who cares?

Rather, this is about the short-sightedness, stupidity, and arrogance of the wine business, as well as the legislators and regulators who are in the pockets of the wine business. Protecting three-tier – and its cash-making monopoly – is apparently more important than letting consumers buy what they want, making wine accessible, and acting like we live in the 21st century.

To say nothing of selling more wine.

I’m purposely not mentioning the wines, the PR firm, or the tasting because I don’t want to get anyone in trouble with the Ohio authorities – they can be especially vindictive.

But I’m here, and I’m happy to discuss this foolishness at length. I want to hear someone from the Ohio legislature, attorney’s general office, or liquor regulators tell me why it’s legal for a wine writer to be denied a sample in the name of three-tier.

Because they can’t.

Photo: OzTypewriter, using a Creative Commons license

The dilemma of wine availability, why you’re so angry about it, and why it just won’t go away

wine availabilityBlame the three-tier system for the dilemma of wine availability, as well as some surprising venom from the blog’s readers

There has been a surprisingly venomous strain in some of the comments across several recent blog posts relating to wine availability and buying wine in supermarkets. One reader went so far as to accuse me – me, of all people – of abandoning independent wine shops. Another said it was impossible to buy quality wine at a store that sells laundry detergent.

Damn – how did the blog’s comments start to resemble Facebook before the election?

So let’s try to restore our cheap wine camaraderie, because this is $10 wine we’re talking about. And isn’t wine supposed to be fun?

• The spark that likely set this off – and, in retrospect, not surprisingly – was wine availability. Several readers noted they wouldn’t be moving to the paid version of the blog because it was difficult finding many of the wines I review. This, of course, is nothing new – wine availability is the scourge of the wine business, and we’ve discussed it here many times. It’s now such a big deal, in fact, that the Europeans have noticed it. Wine is not like computers or ketchup; the three-tier system works against that kind of availability. This is a fact of life, and no amount of wishing and hoping will change that. One needs to look for a workaround.

• Which I offered, as I always do, and my advice included checking supermarkets and Wine.com. Because, of course, the three-tier system. Whoops. Who knew that would set off such a conflagration?

• One person accused me of turning my back on independent wine shops in their pandemic hour of need. Maybe I should send him my credit card receipts from Pogo’s and Jimmy’s, Dallas’ two best independents? More practically, all he needed to do was to check the blog to see almost 14 years of posts, podcasts, and words of wisdom about the best place to buy quality wine – independent wine shops.

• This somehow morphed into the supermarket wine conundrum. Is there a lot of crappy wine sold in supermarkets? You bet. Just like there is in every other wine retailer, because that’s the way the system works. But you can also buy this wine. And this wine. And these wines. Each is in the $10 Hall of Fame, and to ignore them because of where they’re sold is as silly as breaking a wine glass before pouring wine into it.

• Finally, know that what makes me different from almost every other wine writer in the world – and makes me worth paying for – is that I visit almost every retail location that sells wine. That’s because I’m a reporter as well as a wine critic. Anyone can sit at their desk and wax poetic about $100 wine. You can’t criticize something you don’t know, and that I know what’s on the shelf at Kroger and Walmart and Target and even 7-Eleven gives me that right. Would that more in the wine business felt the same way.

Photo: “Sunseed Natural Market – Food Co-op” by Rusty Clark ~ 100K Photos is licensed under CC BY 2.0

More about wine availability:
• Can we ever solve the problem of wine availability?
• Wine availability, and how it drives readers crazy, too
• Eric Asimov and the dilemma of wine availablity