Buying Wine on The Internet in Every State

Buying Wine on The Internet in Every State - Printable Version

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- WineAndCigar - 03-23-1999

Note: This message was first posted in the Novice 100 Section. But after identifying this Political venue .... I believe it should be posted here.
Q: Why is it that I cannot find one distributor/retailer who can trigger monthly wine shipments to (my clients in) all 51, or most, of the States? I realize that there is a major revolution out there by our State Legislators to control catalog and Internet wine (& beer) sales ... but there must be a solution out here. I want to minimize my monthly order administrative efforts and deal with one rep. Is there such a company on the Internet, or via a catalog co?

- Jerry D Mead - 03-24-1999

I answered your question in the Novices folder.

JDM

- WineAndCigar - 03-24-1999

JDM, thanks for the reply (in Novice). It sounds like I really don't have an alternative to have wine shipped in the various states by any 'one' company. The risk (expense) of being caught in a sting could really hurt an Internet Co. It's too bad that no one has set up an Internet enterprise, that has business relationships with various state wine retailers (preferably with muti-state presence), that could take orders directly off the Internet then place the same order with a "local" retailer who would deliver the product (in State) directly to the end customer. The concept sounds easy, but the legal aspect scary.
Best regards,
WCT

- n144mann - 03-24-1999

Correct me if I am wrong WC, but didn't the wholesalers propose something like that??? OF course, they get a small fee for their efforts. You order the wine on the internet,(say something you can get only from the winery) it goes to your wholesaler who delivers to your retailer who then lets you know it has arrived for pick up. Lots of layers....lots of wasted time and $$$. The wholesalers stll have their monopoly and we are still at someone elses mercy.
Nancy

- n144mann - 03-24-1999

Correct me if I am wrong WC, but didn't the wholesalers propose something like that??? OF course, they get a small fee for their efforts. You order the wine on the internet,(say something you can get only from the net in your area) it goes to your wholesaler who delivers to your retailer who then lets you know it has arrived for pick up. Lots of layers....lots of wasted time and $$$. The wholesalers stll have their monopoly and we are still at someone elses mercy.
Nancy

- n144mann - 03-24-1999

Yikes, how did that happen???? Need the magic wand WC to remove the second copy of the message. [img]http://www.wines.com/ubb/smile.gif[/img]

- Jerry D Mead - 03-24-1999

As simple as it sounds...and as simple as the wholesaler scam sounds...neither one will work for many wines.

Some states have laws that if a wholesaler reps your wine one time he has "franchise" right on that brand and no one else can sell it ever. No small winery will risk being married to a wholesaler he doesn't even know who it's going to be.

Or say, it's a small winery which allocates X number of cases to its wholesaler in South Dakota, but has kept some inventory to be sold from its own tasting room. If he sells that wine from his tasting room inventory to a customer in SD, the wholesaler is going to want to know why he didn't get the wine to make his usual mark-up...so the winery is going to say he doesn't have any.

And most states have licensing fee...I guy making Elderberry Wine in Kansas is not going to generate enough sales in any one state to justify buying the license...some of which cost as much as$500 per LABEL. (Now you know why some states have such narrow selections.)

And very often collectables are no longer at the wineries but a specialty retailers...the proposals your talking about do not provide a method to buy from them...or from independent wine clubs.

You can buy every other kind of product via the internet and mails...including prescription drugs and tobacco...why not fermented grape juice? Why should thegovernment permit this one monopoly to exist?

JDM

- amshih - 03-24-1999

D144mann,the proposed "wholesaler" Internet site you probably heard about is at www.naxon.com. They have their press release up there.

WC is absolutely right -- while the Naxon model sounds good in theory, dealing with the various restrictions put up by the states will make it a logistical nightmare. Plus, I'm not so sure that the wholesalers are willing to put their entire portfolio into an open database -- as I understand it, those portfolios are highly guarded by each wholesaler.

Funny thing -- have you noticed that the wineries who are supporting the wholesaler database tend to be larger producers, not smaller wineries?

- WineAndCigar - 03-24-1999

Interesting last point. Maybe the control of the US wine industry has more to do with the top two tiers (Importer and distributor players?) who heavily lobby our government officials (re-election campaign funding maybe) for this monopoly to exist ... on our fermented grape juice. Regardless, someone does not have the best interest of the consumer at hand.
Regards,
WCT

- n144mann - 03-24-1999

Hmmmm, can't remember where I heard about it, but I thought it was a bad idea, maybe I didn't make that clear. I am with you guys in that I think the wholesalers need to get out of the internet loop and the shipping restrictions lifted. I requested a list from a company in Cal. a state that we have a shipping agreement with, but they would not even send me the list I requested because they said they have had trouble shipping to MN and they didn't want to waste their money......pissed me off! MN limits two cases per person per year.....I guess that is where the problem arose??

Nancy

[This message has been edited by n144mann (edited 03-24-99).]

- Jason - 03-25-1999

I to believe that wines that are without a distributor should be allowed to ship directly. Many of these guys are too small for the trade to worry about.The sticky part comes when wines that do have representation can be shipped in by someone with little or no expenses.
The distributors (who you all love so much) are the folks out there training most of the retailers and servers.When a retailer has a tasting the person manning the table is usually a distributor and guess who pays for the wine (most of the time)? Not the retailer.
So after we have done the work, incurred the cost (and are a part of the local economy) the wine can be shipped in from anywhere.com? You have to remember that the people of this BB do not represent the masses accurately, we are the committed few.
For the rest of the folks in the market the local dist. serves an important role.
When the websites start training retailers and helping Mr. Restaraunter whe he forgets to place his order the story may change. Day in and day out the local folks get the job done. We teach, service and are out there every day building these brands. Should we not write the orders?

- Jerry D Mead - 03-25-1999

We (or at least I) are not against wholesalers...only against their having a monopoly.

Most wine will always be sold in the local market...usually within 48 hours prior to consumption. Large (and even medium sized) wineries will always need wholesalers to call on the many accounts that they never could.

But there are middlemen for every kind of product, food and non-food, and yet there are no laws saying I cannot pay shipping and handling and have that product sent in from somewhere else if I wish. Why should this one product be sold by a monopoly system?

And there's the other side of the coin...small producers and wine clubs shipping direct to folks serve the same purpose as sampling at a retailer or restaurant tasting. If a consumer gets two bottles of Semillon from a wine club and discovers for the first time he likes it...he'll start buying it from his local retailer...so the direct shipping sales can work for the wholesalers too.

JDM

- n144mann - 03-25-1999

Curm you said it pretty good for me too!!

As for the weekly tasting at my shop....picked up and staffed by the shop unless they have a special one where they have a winery owner in to sign bottles etc. Then not sure who picks up the tab. But that happens only about 1-2 times a year.

The only thing the distributors do here that I really don't like is putting wines on restautant reserve. That forces us, who would like those wines, to go to the net or to the winery directly. And then we are still limited by the shipping regulations. Retailers are not allowed to purchase these wines at all at any amounts. My choices are go and pay the high markup in a restaurant, or order it shipped in.

[This message has been edited by n144mann (edited 03-25-99).]

- IVYCHEF - 03-25-1999

I have nothing against wholesalers for the most part. I appreciate what they do for me, especially in a crunch. For my personal use, I buy a lot online because I can't get it here. So, be it. But to put something on a wine list or offer to my customer they can't find locally, is almost irresponsible (even though it would be a great way to bolster future sales by them coming back for more of this wine). It would also be a hassle to always "come up" with it if I could not just pick up the phone and order it.

But I've said this before: Things like allocating a wine or wines to certain restaurants and wine stores is crap. Wanting a special wine for a special function that no one carries but no one will make an attempt to get for me even if they have months to do so, puzzles me. My food wholesalers do it all the time. Finding the same wine cheaper at retail in the same and other markets than I have to pay wholesale drives me to consume large amounts of straight vodka. Finding wines on retailers shelves that are "not yet available in this market". DAMN, how did they get them???

Guess that's why I get so "pro internet" and "anti-distributor" at times. And for the most part, I train my own staff [img]http://www.wines.com/ubb/smile.gif[/img]

There is no disrespect in the above...its just things that I always question, but never seem to get a straight response.

Kevin

- Jason - 03-25-1999

Kevin - you have some interesting views especially coming from the on premise side of the fence. Let me try to answer some of your points if I may.
If I am to understand you correctly, you want a wine to have mass distribution, but when a retailer buys a huge amount and gets a good price (or runs it as a loss leader)it frustrates you.
As they say in Disney Land "Welcome to our World".
If few people have it they will protect it and charge accordingly. When a product goes primetime, someone, somewhere will try to undercut all competitors.
Wines are allocated because demand exceeds supply. Often times wineries are very much involved with this selection process. If a winery can sell all of its product tenfold, they invariably want it sold "On Premise" because it has more prestige.
The other fact is that restaurants drive the wine market. People generaly try it at your place and then go seek at retail. The on premise guys are the ones who build the brand and stick their neck out and buy the "unknown" in the first place. When the wine gets rated large and demand skyrockets, the wineries do not want to tell the guy who has had it on his list for two years, that "Sorry, you have the pleasure of buying 2 bottles this year". So the restaurants get first crack at all of it.You also have to consider that this usually just locks out the chains, not the high end retailer who specializes in this. Chains will rarely take on an unknown because they want to see a track record of sales.When it gets rated large they are then left out in the cold.
Allocated items are a mixed blessing. Yes they are easy to sell, but you can easily make two enemies for every one friend.
I keep seeing the wine/food parallel being made, but unfortunately our government highly regulates wine the same way it did directly after prohibtion.Your food purveyors don't have to register the products with the state. Also many foods can be made at will. Wine only comes once a year.
In my experience if you asked a major food distrib (SYSCO) to carry a special item, the first reply is "Certainly. How many pallets would you like?" If someone is going to bring it in, register it and inventory it, there has to be enough product to make money off of it. This is where the net comes in.
By the way, a winery manager who sells 6K case in 26 states last week told me that many states make them re-register if their is ANY change to the label, even as small as the alcohol percentage.This gets costly.
As I am writing this it is occuring to me that all these laws were written before there was any wine industry to speak of and national distribution did not exist. Also we are lumped in with alcohol as one big sin.
Sounds like its time for an update.

- WineAndCigar - 03-25-1999

Certainly some interesting thoughts out here. Did not realize how my original topic could go off in various directions. But, as Jason indicates, the laws seem to be a bit outdated for the wine industry. Anyway, I tried to contact NAXON.COM with the contact name they gave on the web page. The phone number goes to the office of Tony Podesta. Ya, this is the Washington lobbiest who changes the opinions of our legislators. It seems that NAXON is trying to convince Capital Hill that their approach to "wine on the net" will be the "new-and-regulated-way" of the future. They even set up a a Virtual Distribution Company to eventually handle net orders in all 50 States. They have 37 States registered to date. LOOKS LIKE MY ORIGINAL QUESTION MAY SOON BE ANSWERED.

That issue aside,I now get the good business sense that wine sales over the net will eventually become a true monopoly. Hmmm ... where have I heard this concept before ... JDM? I tried to send a note to Virtualvin.com (net wine sales Co.) to get their take on this, and they replied ... "the issue is too complex to discuss over the network - please send your phone # and we can talk about it." (I plan on talking with them after my trip back from Brazil next week). This leads me to think: are the current wine net resellers nervous? Don't know, but NAXON is working on something interesting ... to control Wine over the net.

What gets me pissed off (as a business man, now) is that a MONOPOLY may soon exist out there on the net for wine sales. Although I don't have a busines directly in the wine industry today, this issue kind of makes me want to start a NAXON.COM #2. Certainly our government officials would support open competition. One problem though ... I have heard through my contacts that NAXON has registered anything and everything (phrase, title, object, etc.) do with the branding of XXXWineXXX.COM. They have done a great job to LOCK out the comp. Oh well, life goes on in the wine industry ...
Regards,
WCT

[This message has been edited by WineAndCigar (edited 03-25-99).]

- IVYCHEF - 03-26-1999

Jason -

I've been pushing Forest Glen and Hogue for years. If anyone should be getting multiple case price breaks.... but apparently I'm not. (What did you write about sticking your neck out for new products, product loyalty, etc.?) I have a hard time believing the loss leader theory (especially since I've worked in a grocery store). The daily, not the sale, bottle price is $1.50 less than I pay for it. Plus another 10% if you buy a case. Are you telling me that the store is losing up to a $1.65 a bottle on every FG product they sell or that the distributor is cutting them about a 20% off deal so they can at least break even? One seems hard to believe and the other a bit unfair. Of course, the customer sees the bottle of FG for $6.50 in the store and wonders why I charge $17.00.

I understand the allocation thing...supply and demand. But all of "wonderful wine X" being allocated to "super restaurant corporation Y" is a crock. Guess my "Ben Franklins" aren't as good as the next guys. Its like me saying to a customer: I'm sorry ma'am, the veal special that is listed is allocated to our "special customers", which you are not".

By the way, and in my humble opinion, your food problem is Sysco. (I'm surprised I'm not bald after dealing with them and Kraft over the years and I no longer do.) None of my suppliers (even big corporate Gordon) carry Sevruga caviar, but my Gordon rep came strolling in the other day with these four little jars in a brown paper bag and made the comment "need more, let me know". I also have a "standing special order" with another large foodservice company. Those wing bone in chicken supremes show up every week. I also have a special beef product stocked for me. Sometimes the little guys' prices are higher, but their service is much better.

Kevin

- Jerry D Mead - 03-26-1999

Jason...Let's deal with some of your wholesaler defense arguments...

I don't think anyone minds a mass marketer getting a discount and passing it on...but explain why the small retailer or restaurateur must by law pay the higher price at wholesale when he can buy it cheaper from the discount retailer. Where is the state's vested interest in such a proposition? It is pure protectionism for the wholesaler. If the retail/restaurant can buy ANY other product at a lower price from a fellow retailer there's no law against it. I know lots of restaurant people who buy lots of stuff at COSTCO for just that reason.

A regulated product? Yes, but so are pharmaceuticals and fancy cigars, and both are sold through the mails/Internet. And the minor issue is bogus...not one documented case of a kid buying via the Internet...just lots of adult-assisted stings. And the state tax loss is also bogus for two reasons...states don't collect taxes on other mail order sales so why should they for wine?...AND, the wineries have agreed to pay the taxes if the states will provide a method for them to do so...which none so far have taken advantage of.

Some of what you say about allocations is true, but that doesn't explain to a small retailer or restaurant why he can't get any Dom Perignon at all...while it's floor stacked at a retail price lower than his wholesale...IF he were permitted to buy some.

And WCT...Trust me..the guy who is telling you NAXON won't work but it's too complex to explain online...knows what he's talking about and is not speaking out of fear. NAXON will work to deliver stuff that's already available. It is not a 50 states solution, though the wholesalers would like you to believe that. And even if it did...you would simply have a 4-tier monopoly instead of the existing 3-tier monopoly.

Curmy

- Jason - 03-26-1999

There are laws against retailer going to Costco and buying, but I'm sure it varies from state to state.The reasons are two fold.
1. The state would have no way to track taxes and 2. Who would regulate usage of the liquor license? For that matter, who would even buy a liquor license?
The thing we have not mentioned is quantity. The guy who buys 5,000 cases surely will get a better price than the normal guy. Such is true in any business.
The Dom point is interesting. I have not seen it allocated. They make so much I did not think there was a need.