Tag Archives: three-tier system

Why do you read about wine you can’t buy?

wine you can't buyHow frustrating is it to read about a wine you can’t buy? After all, how often do you read a review of a movie you can’t see?

Some of it, of course, is snobbery —  and yes, Winestream Media, I’m talking about you. Some of it can’t be helped, thanks to the foolishness that is the three-tier system. In the last month, I’ve tasted a $10 Gascon white and had friends tell me about a $15 red Bordeaux and a $10 Sicilian red that would be perfect for the blog. But the first is only available in southern California, and the other two are only found in the northeast. Which means the wines don’t have distributors in any other part of the country, and don’t meet the generally available criteria I use for the blog.

But there are other, less obvious reasons why you read about wine you can’t buy:

• To create demand for the wine. I get a lot of emails from publicity people offering me samples of wine from regions unfamiliar to U.S. wine drinkers and that have limited, if any, distribution in this country. They do so in the hope that I’ll write about the wine, even if no one can buy it, so that my review will convince an importer or a distributor that there is demand for it. Yes, it’s a little backwards, but it’s one way to get around the restrictions of the three-tier system.

• Because it’s the next big thing. Wine recommendations are often driven by peer pressure, and if one hotshot sommelier or writer praises something, then everyone else has to do so as well. We’ve seen this for years with gruner veltliner from Austria, which is difficult to buy outside of the East Coast. The most recent next big thing is Greek wine, which can be well done and offer value but is even more difficult to find outside of the East Coast than gruner. In fact, during our recent podcast, that’s what Wisconsin retailer Nick Vorpagel lamented about Greek wine.

• Available wine is boring. I’m paraphrasing here, but I’ve heard and read this countless times: “Why should I write about a wine that anyone can buy in the grocery store?” This isn’t quite the snobbery practiced by reviewers who purposely write about wine no one can buy, but it’s almost as bad. Again, do reviewers not do movies because they’re in 5,000 theaters nationwide?

Winebits 423: Kroger wine, direct shipping, Bordeaux

kroger wine ? The big get richer: The Wall Street Journal is reporting that Kroger wants to contract management of its wine and beer departments to Southern Wine & Spirits, the biggest distributor in the country, so that the grocer doesn’t have to worry about buying or stocking the shelves. If accurate, this represents another significant change in the way we buy wine and the choices we get when we do. For one thing, Kroger is one of the biggest wine retailers in the country, and has paid for political campaigns to allow supermarket wine sales in many states, including Texas. Second, Southern could favor its brands over those of other distributors, giving its products better shelf space. Third, and the story isn’t clear on this, producers would have to pay Southern for the privilege of having it manage the shelves, and how many small producers could afford to pay those fees? I’m going to follow this story, because if it happens, other big retailers will follow, and our wine-buying lives will get that much more difficult.

? Rapid growth: The direct shipping market — wine sold to consumers directly from the winery and the only exception to the three-tier system — grew eight percent last year, to almost $2 billion. Which is a lot, though some perspective is needed: the U.S. wine market totaled about $39 billion in sales in 2014, so direct shipping represents less than five percent of the total. In addition, direct sales are focused on consumers in just five states, and one of them is California, where shipping costs are less of a factor. Also, the cost of the average bottle sold directly is $38, which means most U.S. wine drinkers are priced out of the DTC market. (And a tip o’ the Curmdgeon’s fedora to Steve McIntosh at Winethropology for sending this my way.)

? Cheap by whose standards? The Wine Curmudgeon has long advocated that Bordeaux’s sales problems in the U.S. are a function of price, and this gem from the Village Voice demonstrates that nothing has changed. It touts the value in the current vintages of Bordeaux, yet only one of the eight wines in the story costs less than $25, a $17 bottle from what’s called a satellite appellation — a lesser region of Bordeaux. To add insult to injury, the story says it’s difficult to find satellite appellation wines because they usually don’t have scores and you will have to consult a “Bordeaux connoisseur.” Yeah, like most wine drinkers have a Bordeaux connoisseur in their phone. And aren’t we done with scores yet?

The 2015 Curmudgies

2015 curmudgiesWelcome to the 2015 Curmudgies, the fourth time we’ve given the awards to the people and institutions that did their best over the previous 12 months to make sure wine remained confusing, difficult to understand, and reserved for only the haughtiest among us. This year ?s winners:

? Worst news release: Another banner year for releases that insulted my intelligence, committed any number of grammatical errors, and did nothing to promote the product. The winner is 24-Group PR & Marketing for a release for Three Hunters Vodka, which included this foolishness (and a hat tip to my pal Tim McNally, who sent it my way): “We live in a time when some of the most important choices we make come prepackaged and predetermined by companies who know nothing about us. The decisions we make about the things we put in our bodies are constantly manipulated by clever and misleading advertising, and misconceptions about nutrition and health.” Why would anyone write that about vodka? Also, it is a classic example of the pot calling the kettle black.

? The regional wine award, or the more things change, the more they stay the same: To every restaurant in Dallas, and there are too many to list here, that doesn’t carry Texas wine. This is a disgrace given the improved quality and availability of Texas wine in the second decade of the 21st century, and speaks to the restaurant wine mentality that makes wine drinkers crazy. If Lucia can find a Texas wine to include on its otherwise all Italian list, so can the rest of you.

? The three-tier system is our friend award: To the 200 Minnesota cities that, thanks to one of the oddest state liquor laws in the country, operate their own liquor stores. As the Star-Tribune newspaper reports in a solid piece of journalism, “In 2014, 34 Minnesota cities, all outstate, lost a total of $480,000 on their liquor outlets ? money they had to backfill from their own coffers. Another 60 outstate cities saw sales drop from the previous year.” Given how much trouble so many cities, big and small, have doing basics like police and fire protection and garbage pickup, that some want to run liquor stores is mind boggling.

? The Wine Spectator will always be the Wine Spectator: For James Laube’s February 2015 blog post, which included this: “If you want to save more and waste less [on wine], consider how much money you spend on wine that you don’t drink, and how many bottles of wine you opened last year that should have been opened sooner.” Wine that we don’t drink, huh? Wine that we let sit in the cellar too long? Wish I had those problems. That one of the Spectator’s top columnists wrote about it speaks to how little the magazine has to do with how almost all of us drink wine.

? Would someone please listen to this person? The positive Curmudgie, given to someone who advances the cause of wine sensibility despite all of the obstacles in their way. The winner this year is Forbes’ Cathy Huyghe, who spent the month of November writing about the wine that most of us drink, and not what Forbes’ one percenters drink. “…[I]t has turned out to be one of the most eye-opening projects I ?ve ever done. … The longer I ?m a wine writer, the further away it ?s possible to get from the wines that most people drink.”

For more Curmudgies
? The 2014 Curmudgies
? The 2013 Curmudgies
? The 2012 Curmudgies

The Comet Lovejoy wine phenomenon

comet lovejoy wine
But how do they get a bottling line up there?

Astronomers were surprised to find that some comets produce alcohol, as well as sugar, as they travel around the solar system. “We found that comet Lovejoy was releasing as much alcohol as in at least 500 bottles of wine every second during its peak activity,” said Nicolas Biver of the Paris Observatory in France.

This is huge news, given that one theory supposes that comets crashing into the the Earth 3.8 billion years brought with them the carbon-based organic molecules, like alcohol and sugar, that may have jump-started life on our planet. Which is all well and good, but comet Lovejoy wine raises equally important questions for those of us who worry about those things:

? Do the comets know about the three-tier system? Lovejoy was producing the equivalent of 150,000 cases an hour, and we all know that the country’s distributors aren’t going to let that happen without them. They’ve paid entirely too much money to state legislators to let a comet ruin things. And I can only imagine the horror if Lovejoy passed anywhere near Pennsylvania, with its state store system.

? Will E&J Gallo, the Big Wine producer that has made hundreds of millions of dollars of acquisitions this year, buy the comet to add to its portfolio? A sweet Lovejoy red, since the comet threw off sugar, would slide in nicely next to Gallo brands like Apothic and Barefoot on grocery store shelves. And how could a back label that said “Comet Lovejoy wine — out of this world” miss?

? Can the Winestream Media adapt its tasting notes to comet-produced wine? Toasty and oaky, given how cold it is in space, just aren’t going to work. Maybe something like “hints of vacuum linger on the finish”? And how do you a score a comet wine? Does it get 92 points just because it’s from a comet? Or do you take points off for that, since outer space is not Napa Valley?

Photo courtesy of Adam Block Photos, using a Creative Commons license

Winebits 381: Direct shipping, consolidation, Prosecco

direct shipping ? Lots of kinks to work out: Direct shipping, despite its successes over the past decade, is still a tiny part of the wine business, just single percentage points of the $17 billion in sales. One reason for that, of course, is three-tier, which makes it difficult for wineries to ship to consumers in different states. And three-tier has more to it than even those of us who think we know it can imagine; witness the lawyer suing Illinois wineries for not charging sales tax on shipping fees. This is perfectly legal in Illinois, where the law allows private attorneys to recover unpaid taxes on behalf of the state. Much of the coverage has been critical of the attorney, but that misses the point. Illinois law is vague on whether sales tax should be charged on shipping fees, so how how can direct shipping ever become more than a niche business if laws crucial to its success are as vague as the Illinois law? Because, given three-tier, this is certainly not the only vague, poorly written, or unclear law dealing with the subject.

? Retailer buyout: Majestic Wine, one of the biggest retailers in the United Kingdom, has bought another British retailer, Naked Wine. This is bigger news than it seems, since Naked Wine has a trendy U.S. division that sells what can best be described as craft wine on-line at discounted prices to its members. It means that Majestic, facing tremendous competition from grocery stores, is trying to find wine that consumers can’t buy at grocery stores. Given the increasing importance of supermarket wine sales in the U.S., this may be a sign of things to come in this country (within the confines of three-tier) as retailers look for exclusive products to fend off grocery stores. It’s also another indication that retailers want to get bigger to fend of the Costcos, Walmarts, and Aldis of the world.

? Nuts to Champagne: Prosecco has passed Champagne in sales at British grocery stores in news that is so shocking — given the British love affair with Champagne — that it should worry not only the Champagne business, but retailers around the world. If the British are buying Prosecco, the Italian bubbly that is at least half the price of Champagne, what does that means for retailers elsewhere? Has Champagne priced itself out of some markets? Do consumers prefer the softer, sweeter taste of Prosecco? Or are grocery stores playing a role in what’s going on? Even the story, from a British trade magazine, had a panicked tone.

 

Winebits 375: Grocery store wine edition

grocery store wineThis week, how grocery stores are changing the wine business:

? Suing the state: Texas doesn’t allow non-residents to own more than five liquor stores, unless the owners are related to each other. This “just us kinfolk” exception (as a lawyer friend of mine calls it) has allowed Texas-owned chains like Spec’s and Twin Liquors to put together hundreds-store operations. It’s also why Walmart is suing the state to overturn the kinfolk law and why it and Kroger are pushing two bills in the state legislature to eliminate the exception. Neither are likely to go anywhere — courts have traditionally ruled in favor of these kinds of laws, citing three-tier and its constitutional protections, and the legislature almost always avoids offending the big Texas liquor chains. Still, that Walmart and Kroger are willing to spend the money on a seemingly hopeless cause speaks volumes about how they think the world is changing. Starting now may give them a chance later to reform beer, wine, and spirits retail sales in Texas.

? Stopping at the supermarket: Nielsen reports that U.S. grocery stores (including Walmart, Costco, and their ilk) sold $8.6 billion in wine in 2014, which accounted for about 42 percent of the country ?s store-purchased wine. In other words, almost half of the wine sold in 2014 came from a grocer. Imagine what that number would be if Pennsylvania and New York allowed grocery store wine sales. We can write about Robert Parker all we want, but that’s not the news in the wine business. The real news, the development that wine writers should be paying attention to, is that most of our readers have no idea (and don’t care) who Parker is, and they want to know what wine to buy at their Walmart or Kroger. Which is why a grad student named Mark Thornton may be the next Parker.

? One more time: Speaking of Pennsylvania, its state house has approved a bill to end the state’s liquor store monopoly. This is apparently as much a tradition in the Keystone State as Punxsutawney Phil, and makes as much difference in changing the law as groundhogs do in forecasting weather. Still, the debate is fun. Said one lawmaker: ?The other side is talking about the No. 1 drug, alcohol, like it ?s milk and bread. We ?ve got to have more of it, more convenience, for the No. 1 drug in our communities.” The other side, that wants to reform the system, didn’t miss a beat, either: “Even Russia and China have given up on the idea of a state-run monopoly.” So you’re a commie if you oppose reform, and a crack dealer if you support it. Politics is a grand business, no?

The end of the three-tier system?

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