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Despite widespread support for expanding consumer choice in wine, many consumers are still prohibited by state law from purchasing the wines they want directly from wineries and retailers.
Twenty years ago, only four states allowed for legal, regulated winery-to-consumer wine shipments. Now, 35 states allow such shipments from out of state wineries, although just 12 allow retailers to do the same. The U.S. Supreme Court, Federal Trade Commission, state alcohol regulators, and state legislators have joined consumers to help update archaic laws many of which are merely designed to entrench state-sanctioned monopolies in wine distribution.
Interstate wine shipments using a common carrier, from a winery to an adult consumer 21 years
or
older, are now allowed in 35 states, which cumulatively represent 81% of wine consumption (source: Adams Wine Handbook, 2004). Such shipments are still prohibited in the following 15 states as of January 2008: AL, AR, DE, KY (felony), ME, MD (special interstate by 3-tier only),
MA, MS, MT (consumer permit - no carrier), NJ, OK, PA (special interstate by 3-tier only), SD,
TN (felony for winery to direct ship) and UT (felony for winery to direct ship).
What’s driving this consumer rights issue?
- Each vintage, more wines are produced than can be stocked or sold by wholesalers or retailers. The number of U.S. wineries increased by over 500% to more than 5,000 in the past 30 years – there is at least one winery in every state. But U.S. wineries produce more than 10,000 new wines each vintage, and nearly all wineries are small, family-owned and operated producers. The top 50 largest wineries produce more than 87% of America’s wine. But less than 17% of U.S. wineries are represented by distributors in all 50 states (source: Wine Institute member survey, 2003).
- Consumer demand for these wines is thriving. Consumers expect to be able to purchase the wines they want, in the manner of their choosing: from retailers, at the winery, and remotely by telephone, fax, and online. The U.S. Supreme Court, Federal Trade Commission, and many state legislators support them, and support expanding consumer choice in wine.
- But wholesaler middlemen seek to protect their state-sanctioned monopolies. The number of wholesalers decreased by over 75% during the same 30-year period. Now, two or three wholesalers alone determine what wines are available in their state. The 10 largest wholesalers control 58% of the U.S. market (source: IMPACT newsletter, April 1&15, 2006).
Solution
The Model Direct Shipping Bill satisfies consumer demand for choice in wines and how they are delivered, satisfies regulatory requirements and creates a new source for state sales tax revenues. The solution was cited by the U.S. Supreme Court in its May 2005 ruling, by the Federal Trade Commission on numerous occasions, and is working successfully in the majority of US states (including New York, Texas, Virginia, New Hampshire, and California, among others).
Proponents
Millions of wine enthusiasts, regulators and tax collector officials in states that have passed favorable legislation as well as America's 5,000+ mostly family-owned winery farms located in all 50 states, support limited, regulated direct-to-consumer shipments.
What are consumer supporters doing to support the cause? Citizens and winery plaintiffs have worked together to sue in numerous states and took the case successfully to the U.S. Supreme Court. On May 16, 2005, the High Court ruled that it is unconstitutional for states to allow their wineries to ship to their consumers, and deny that same privilege to out-of-state wineries. (For more information on the legal foundation coordinating these lawsuits visit the Coalition for Free Trade website.)
Opponents
Wine wholesalers (aka distributors) and their national trade association, the Wine & Spirit Wholesalers of America.
Group Fighting Online Liquor Sales Serves Up a Questionable Stat on Kids
“I asked Michael Wood, a vice president at Teenage Research who worked on the (WSWA) survey, whether one could say, as the liquor trade group did, that millions of teenagers had bought alcohol online. ‘You can't,’ he replied, adding, ‘This is their press release.’” |
| Wall Street Journal, August 18, 2006 |
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| "Most of the wines that are unavailable beyond the states in which they are made are expensive, but wine lovers, and there are a lot of them, don't want their choices dictated by a few distributors." |
| New York Times, June 25, 2000 |
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| "The [wholesaler] industry's tactics are a civics lesson in how scare stories, lobbying and political money can be used to limit consumer choice through special-interest protections." |
| USA TODAY, July 7, 1999 |
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FACT: Distributors can't logistically stock and sell the 10,000 new wines produced each year by more than 5,000 American wineries.
- 30% of all products stocked in the average supermarket would need to be wine to display one bottle of each wine.
- A single row of lined-up wine bottles would stretch for nearly one-half mile.
FACT: Less than 5% of wine production is ever likely to be shipped directly to consumers.
- The 50 largest U.S. wineries produce over 87% of all wine produced in the U.S.
- U.S. wineries are located in all 50 states, and are mostly family-owned and operated. They produce, on average, less than 10,000 cases each.
- But this is not an issue exclusive to small wineries. Large wineries also blend special, small production lots which the current system cannot adequately sell. And retailers can ship to, at most, consumers in 12 states.
- Well-aged "library" wines are often only available from the winery or retailer.
- The majority of specialty imports, like Bordeaux "futures," are purchased and sold by a handful of East Coast retailers.
FACT: Wholesalers want exclusive control of the wines consumers can and cannot purchase, and are going to extreme measures to maintain their state-sanctioned monopolies.
- In 1999, state wholesalers in Texas aggressively supported a bill that carried the same penalty for shipping a bottle of wine illegally to a Texas adult consumer as the penalty for assault with a deadly weapon. Fortunately, the bill was not signed into law by then Governor George W. Bush.
- Distributors forced through legislation, making it a felony for winemakers to ship any amount of wine directly to wine lovers in Utah, Maryland, Kentucky, Florida and Georgia (except in compliance with House Bill 1273).
- Florida's key wholesalers have virtually eliminated competition by setting legal requirements which prevent the formation of new, small distributorships:
- Maintain minimum $100,000 in inventory;
- Actively service 25% of all accounts in their county-- that is, staffed to sell to convenience stores-- even though fine wine specialists account for just 5-10% of all accounts
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