Tag Archives: three tier system

Ninth Circuit Court sides with wine wholesalers; consumers lose

The Ninth Circuit court decided yesterday that an Arizona law allowing only wineries that make fewer than 20,000 cases to ship directly to consumers and retailers was not unconstitutional. The result is that wineries who make 20,001 or more cases must go through the infamous three-tier system, adding layers of middlemen and making it more difficult for consumers to get their hands on wines that distributors don’t want to represent.

Why is this so bad? After all, distributors often help wineries sell their product around a state and do the bear’s share of the sales and marketing work for the winery, according to most distributors you talk to.

Or do they? when I worked for a small winery, I cannot tell you how difficult it was to get the attention of the large distributors. We would schedule a market trip to let’s say, Palm Beach, and I would go around with three or four separate sales reps selling the wine at different restaurants and retailers. In Florida, we were working with Southern Wine & Spirits, the behemoth of distributors. While some sales reps were great, I worked with some people who basically had me doing all the work. Oh, and they were getting an extra commission if I sold the wine. The moment I left, the distributor’s sales reps forgot all about our winery. We couldn’t give them the attention (read: incentives) that giant companies like Diageo and Constellation could give them.

Would our tiny winery have been better off selling to consumers and retailers directly? Definitely. We could have courted small specialty shops and focused on shipping directly to them, without having to go through the giant distributor, who didn’t really care about us because we were small.

Even better, consumers who came out to Sonoma to visit us could have signed up for our wine club and had wine shipped directly to their home. But under certain state laws, wineries cannot ship directly to consumers.

And in this economy, distributors simply do not want to take on new brands, big or small. So it makes it tough for someone launching a new wine brand to get representation, no matter how many cases you produce.

The Wine & Spirits Wholesales of America applauded the Ninth Circuit Court’s decision. Of course they were thrilled. Check out this statement put out by the WSWA:

“It is important that courts understand that the three-tier system was specifically designed to address critical state concerns regarding the distribution of alcohol to consumers. The adoption of the 21st Amendment reflected recognition by both Congress and the states that the difficult problem of regulating alcohol, a socially sensitive product that can be misused and thereby can give rise to numerous problems for local communities, justified delegating to the states maximum authority to develop solutions tailored to each state‚Äôs citizenry.”

Oh please. The three-tier system has one main goal: to make sure that distributors stay in control and in business. They don’t care about “regulating alcohol” because they care about your health or that of your kids. In fact, the large distributors are the ones who represent the major liquor brands.

The Ninth Circuit’s decision is truly disappointing. It is still unbelievable to me that we are in 2010 and that a consumer in Pennsylvania or Arizona can’t just go online and buy wine from a merchant in California or New York. The WSWA pours money into the hands of lawmakers to make sure that they continue to receive protection under the law — are the courts tainted, too?

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Posted by on April 16, 2010 in Wine


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