I know, I know, y'all think this one is about drugs, but it is not. The USSC heard arguments that would allow wineries to directly ship their products to out of state consumers. There have been a number of stories about it, but this one is the one I read. http://www.eastvalleytribune.com/index.php?sty=32793 Let Prohibition truly end Tribune Editorial Few things should needle a freedom-loving American more than laws remaining on the books even though the reasons for them no longer exist. Several of these laws refer to the purchase of alcoholic beverages. These unneeded laws differ from those against abuse of alcohol. Indeed, in many cases, alcohol-abuse laws should be toughened. But laws limiting from whom consumers may purchase wine should be stricken as a violation of the Constitution’s Commerce Clause. The U.S. Supreme Court heard arguments this week recommending it do just that. When Prohibition ended in 1933, federal authorities still feared private “moonshining,” so a system of government-licensed distributors was set up. Only from them could retailers buy alcoholic beverages for resale. Consumer direct purchases from out-of-state sources were banned. But the clandestine moonshiners of the past have all but disappeared. And this system continues to benefit the big wine producers and distributors while preventing niche wineries from direct shipping to those in other states. Thus an East Valley resident is currently prevented from ordering cabernet sauvignon from a small California winery whose products aren’t available in local liquor stores. The Supreme Court cases apply to New York and Michigan, but have ramifications for Arizona and 24 other states that still ban direct shipment from out of state but allow it from in-state wineries. We hope that finally Prohibition truly ends and adults can buy wine directly from vintners. As Institute for Justice attorney Steve Simpson notes on the opposite page, those who claim that minors would mail- or online-order alcohol in droves are just fearmongering. States allowing direct shipment report no uptick in underage purchasing. If the high court allows direct wine shipment, beer and hard liquor sales via mail or Internet could still be regulated, though fairly and equitably with no difference between in- or out-of-state providers, as Simpson recommends. Eliot Ness retired a long time ago. So should this system that is a lingering vestige of his era.
Amen! I want my Castlemaine XXXX back, damnit! Also, would this put an end to "dry" counties? These seem out of place, as well.
Unfortunately, the three tier-system is necessary, and actually helps save you money. If you want a certain bottle, complain to your local liquor/wine store, not the courts EDIT. Three tier being supplier - wholesaler - retailer.
Not true. TABC regulates what can and can't be sold in Texas. It took forever for Fat Tire to be sold in Texas for that reason.
You're right, but you're arguing to skip through two parts of the system for that to work. This would take away profit from the wholesaler and retailer, and in the long run be more expensive for the customer. In combination of this, several businesses could potentially fall under, as they rely on the profits from re-selling. All in all, a dangerous situation if the SC allows it.
EDIT: the article is talking about a customer who wants her wine shipped directly from the supplier, skipping the whole saler and retailer. I was just saying how that is not possible and shouldn't be, since in the long run you save more money with the three-tier system
I don't really understand your point. How is cutting out the middle-men going to cost customers more money? These middle-men are adding costs to customer with each step the product takes through the chain. If the customer can buy directly, wouldn't that usually save them money? am i missing something here? do you happen to be a member of the chain that could be cut out?
Because the higher volume you sell, the lower price you can sell at. You have to understand that these distributors sell thousands of cases at a time to wholesalers, who in turn sell hundreds at a time to retailers. If they went from shipping out 1K a day, to say 5 cases to individual people, the price will have to be jacked up so THEY can stay in business. But yes, I do have some ties to it
It doesn't mean that you cut the wholesalers and retailers entirely. It just means you have an option, right? And it doesn't mean that the Supplier HAS to sell directly to the customer, only that it can. So if you want to pay more for a wine that is currently unable to find at a store, you can. Isn't it illegal to join beer clubs that send you different samples etc by mail in Texas? Is that just a Texas thing?
ahh ok, economies of scale but what if the suppliers, in response to this new 'market' of direct selling, change their operations so that their prices could be competitive with the traditional chain of supply? wouldn't this new competition reduce prices for customers ?
1) Yes, that does make sense, although honestly I can't really see the suppliers doing that. A lot of work for so very little profit. 2) Honestly, I have no idea about the legality of those beer clubs. I've heard of them, and wine clubs, but I don't know any details with them. I know there is a wine guild, in which they select one retailer from each market, and that retailer gets exclusives on different wines. Basically, gets them majorly discounted, not a bad profit for them. I'm not really clear on what you're saying. Are you asking the suppliers, a la Bacardi, Jim Beam, to change their operations to fit direct selling? And thus reducing the price of it?
A toast to free-market principles RULES AGAINST WINE SHIPMENTS SHOULD BE OVERTURNED Mercury News Editorial Predicting how the Supreme Court will rule on any given matter is tricky business. But the justices last week made it clear that when it comes to wine they are inclined to strike down anti-competitive, Prohibition-era laws in favor of 21st-century e-commerce reality. It may be too early to uncork a bottle of Bonny Doon Le Cigare Volant to celebrate, lest the court say ``no cigar.'' But if the justices rule as they indicated they are inclined to, it will be a victory for both consumers and the burgeoning industry of independent wine makers -- not to mention free-market principles. The justices were rightly skeptical of antiquated state laws that prohibit wineries from shipping directly to consumers. The laws, which exist in 24 states, have been cast by their supporters as a way to prevent minors from getting wine online. It doesn't take a legal scholar to understand that the laws do little to keep booze from underage drinkers. And it doesn't take an economist to understand who the laws really protect: the powerful, government-sanctioned liquor distributors who, in many states, are the only ones allowed to sell beer, wine and spirits. Small wineries lose because many distributors, more interested in volume that in quality, won't carry their products. Consumers lose because they are forced to pay monopoly profits to distributors. The cases heard by the Supreme Court were not specifically about the Internet. They were about the right to ship wine across state lines, whether it was ordered online or by telephone. But the Internet brought the issue to prominence. By bringing buyers and sellers together, the Internet has become the greatest marketplace the world has known. It has allowed producers and consumers of just about everything to cut out the middleman. Valleyites know this as ``disintermediation.'' Only a few industries have been able to resist this trend. The holdouts have relied on protectionist state laws, such as the bans on interstate wine shipments. If the Supreme Court strikes down those bans, it will be because they represent barriers to trade between states that run afoul of the U.S. Constitution. That will send a powerful message to the holdout industries that their anti-consumer days are numbered. http://www.mercurynews.com/mld/mercurynews/news/opinion/10399570.htm?1c
I disagree. If you can ut out the middle man in a certain business model it saves teh customer money. I don't know what the profit margin is between teh supplier and wholesaler but in Ohio the wholesaler-retailer is 20% on beer and 33% for wine-liquor. That means if the retailer pays $10 for beer they sell it for $12 minimum and if they pay $10 for wine they sell i for $13 minimum (in both cases you can sell for me but it's tough with competition with groceries and drive thrus). But let's assume the same type of margin between the supplier and wholesaler: Beer is sold by the supplier at $8.33 which is sold to the retailer at $10 and to the customer at $12. That is a 44% markup to teh consumer ($3.67/8.33) Wine would be sold $7.69 and to $10 to the retailer and $13 to the consumer. That is a 69% markup from supplier to customer. If you can cut the wholesaler and retailer out do it.
Yeah, but for my father, it doesn't even really have to do with money (though that is certainly a part of it). He is a wine, beer, and mead connoiseur (sp?) and loves to get local brews from all over the country. He particularly enjoys several wines from Texas wineries (there are actually many Texas wineries), which sucks for him since he lives in Detroit. It is insane that the wholesalers have so much power and money that they are able to hamstring online sales with an antiquated set of laws.
I don't think you quite understand the economics that come into play. The REASON the wholesaler gets a certain price is because he buys 1000+ cases of it. The more he buys, the bigger of a discount he gets. You want to cut out the wholesaler AND retailer? First off, that makes absolutely zero sense for a supplier. Their whole operation is to make thousands, millions of cases of wine/liquor that they are constantly shipping out to the wholesaler. The more they ship out, the cheaper they can offer it. Economies of scale as said before. Now, if you take them away -- you have the supplier shipping out maybe ONE case to a customer. Which is pretty ridiculous and costful, as you will be shipping to a different address for each customer. It's just not worth it for the supplier to do this, from a business stand point. Add that to the fact that retailers are the best marketing a liquor/wine can get. How did you hear about bla bla? OH, the manager at bla bla recommended it. That's usually how word gets around about wines/liquor, besides retailer displays and specials. Basically, retailers are essential for the survival of most smaller brands. As was noted before, they could offer a service where they could order out-of-state wines and shipped directly to the customer with him paying all expenses. But that's a lot of work for basically zero profit, and I can't see suppliers ever doing this. In addition, the article mentioned a lot of smaller wineries unable to get their product out by "monopoly distributors." If the owners or marketers came to an inidivudal liquor chain, they could offer that chain an exclusive and basically the chain could get them cleared through a smaller wholesaler. There are several wholesalers, two main ones in texas, and several smaller ones that carry all the wines. I'm not saying the system is fine at all, just pointing out that it isn't entirely impossible for those wineries to get their product out as the article states.
Longtimefan- Maybe I don't understand everything, but do you understand today's market? In today's market companies can have their own logistics department (or better yet work with Fed Ex, UPS or the USPS). You don't need a supplier to do that anymore. Granted if you're someone buying one bottle of wine or 6 pack of brew then you probably would pay more (just due to shipping costs) but for folks who buy a case of decent wine they could get it cheaper than going thru the current system. Based on what you're telling me Dell is a bad business model. it is not. And I am not saying we have to totally do away from the current chain but if folks want to order directly from the supplier let them do it. There is no reason since I live in Ohio that I shouldn't be able to get California wine without have to special package it to hide it's contents (I don't do this but coincidentially I was talkign to a co-worker of mine who does). PS - Any discounts given to the wholesaler are probably profits to the wholeseller. At least in the state of Ohio there are state minimum prices for beer/nicotine and alchohol. There is a floor price and also a markup on what teh retailer pays the wholesaler. So I'm not for a system where discounts goes to a wholesaler (large businesses) rather than to the retailers (both large and small businesses) and/or the consumer.
And the current system makes absolutely no sense for the small winery/distillery/brewery that simply does not produce enough volume for them to even be noticed by the wholesalers. It is those businesses that are behind the push to get this changed because they want to see as much of their product as possible and will be happy to ship their product (even if it is only one case) anywhere in the country. Nobody is talking about taking wholesalers out of the equation altogether, they are just talking about allowing the makers to ship directly. This will not change the economies for the vast majority of wholesalers (who make their living from the Gallo/Shiner/Smirnoff brands), but it WILL dramatically impact the smaller wine/beer/spirit makers who want to be able to ship directly to consumers as well as the consumers who cannot get the products they want. Of course the wholesalers won't do it, but the smaller wineries will be more than happy to ship a case of their product to a consumer who wants it. They are looking for ANY increase in volume and even the piddling little orders from consumers DO make economic sense to a small company. Small Texas wholesalers are one route, but those wholesalers do not deliver to Ohio, Maine, or Oregon. Why should we allow one of the last vestiges of a failed policy (Prohibition) to continue to hinder the ability of our businesses to take advantage of the latest technology to do business the way the rest of the country does?
I agree with Andy. These laws are stupid. Its a classic case (haha no pun intended) of an entrenched industry wanting to legally keep the efficiencies of the internet at bay. If a retailer or wholesaler can't stay in business with people ordering what they want from the originator, then they shouldn't be in business. No reason to artificially protect them any more than horse buggy makers should have been protected from the automobile.
I'll try to answer these as in order: My point was that it would not be cheaper for you, the consumer. It would be cheaper for you to go to your local liquor store and buy that case, rather than order it through the winery. The supplier would move all of its cost to you, and would mark up the price of their wines so they could make profit. In the end, you would get your wine later in the week, have the risk of shipping it, and pay extra. Obviously, that's speaking about wines available to the same state. As I said before, out-of-state shipping isn't that bad of an idea, but don't think you will be saving any money. It will be more expensive (If SC allows it), but then again you will get your special product. That's basically how it will work with all out-of-state wineries. Yes, obviously the wholesaler makes money off those discounts. But so does the retailer, and so do you. Every month different wines/liquor will go on special for retailers, and they can buy them at a lower price than usual -- thus running the specials/weekly ads. I agree, smaller wineries would love to get their product out. Although I don't share the same optimistic view as they might have -- how will people find out about that small winery? If they allow out of state shipping, that would demolish that portion of tha TABC, and liquor stores will start picking up on them eventually. Not to say there will be no out-of-state shipping -- I just feel like the wines you know of and are popular are already mostly in your area. I don't see a big future in the out-of-state shipping, but I'm not at all opposed to it. I'm not familiar with any of their laws and regulations, I was just commenting on the system as it is in Texas.
