Wine Trader Magazine

The Small Vintner in Paradise: The Interstate Shipping Debacle

As usual, there's a fly in the ointment. Never have more wines been available to more people around the United States. For the past decade or so, wine lovers have had shipped to them just about any wine not locally available (which is to say, most older vintages and the wines of small producers) from out-of-state specialist retailers, internet merchants, and even direct from the producer. Behind the scenes, however, large, conglomerated wholesalers were busy cashing in their chits.

Citing the horrors of underage access to mail order wines and lost excise tax revenues, state legislatures began paying back for the long time largesse of big distributorships. Bills were concocted to crack down on shipments from out of state, thereby ensuring the distributors' historical vice grip over distribution. For the past couple of years, Utah, Michigan, Massachusetts, Florida, Maryland, and Washington have launched sting operations against wineries, occasionally using the under age children of state officials as shills to "order" expensive wines at air freight prices.

More recently, Kentucky passed a bill to felonize out-of-state wineries who ship wine directly to a customer in Kentucky. Ship a wine, go to jail and lose your winery license. The blitzkrieg followed in Georgia, which drew up another felony bill in record-breaking time; a few weeks later, Maryland slapped five-figure fines on two California wineries, each of whom had the audacity to ship a case of wine directly into the state. It is not unlikely that a score of other states will soon wield similar felony sledge hammers against the direct shipping gnat. The level of angst reached an all-time high with the passage of Florida HB 725 in June 1997. While Maryland and New Jersey were saving their youth from mail order evil, the legislature and governor of mighty Florida were caving in to the will of the state's powerful distributor lobby. Both the legislature and the Governor ignored the counsel of the local press (who recognized a power play when they saw it), smaller distributors (who seem to fear healthy competition less than the mega-distributors), the Attorney General of Florida (who advised the Governor to veto the bill on anti-competitive grounds), and consumers (who just want the wine they want, damnit, when they want it). The hundreds of letters that flooded into Hizhonor's office from wineries, internet groups, and Florida wine lovers were no match, however, for the cozy relationships between the big distributors and their friends in high places. Money, cronyism, and monopoly talks in Florida, while freedom of choice, open commerce, and fair play walk.

And the situation is only becoming worse. Buoyed by the above noted spate of anti-consumer legislation, some twelve other states are drawing up their own felony bills under the guidance and insistence of their friends, the mega-wholesalers.

Folks outside the wine industry who are happy to pick up their jug of French Colombard in the supermarket may wonder what all the fuss is about. The lack of access to generally expensive wines by generally well heeled individuals from generally privileged wineries may not register bright on the man-in-the-street's radar screen of outrage. But anyone who cares about democratic principles and free market issues will see in this tale of abuse shades of robber baron politics.

The story demands outrage, whether you care about wine or not: strong distributors muscle into new territories and gobble up smaller fry; large producers dominate the attention of ever fewer distributors, thereby crowding out the smaller, and often the mid-sized, producers; consolidation of power leads to greater political clout by fewer players; and state legislatures kowtow to the increasingly large and ever-more-generous distributors. All of which spells a lack of choice for the consumer.

One might be tempted to draw parallels between this lugubrious scenario and K-Mart's romp over the rural small fry of America. Clearly, other industries consolidate. In their rush to dominate markets, large companies create a vacuum, which niche players rush to fill. Niche marketers champion the smaller and more unusual brands; instead of saturating entire markets with mass produced goods, they rely on multi-state distribution to targeted customers, often via mail order, the very practices that state legislatures assiduously squelch when the product is wine. K-Mart dominates by capitalist power; mega-distributors guarantee the spoils of their domination by legislative sanction.

The situation in Florida underscores the lengths to which friendly relationship between mega-distributors and their pals in high places can go. Megas feel most welcome in Florida, as only the recipients of a de facto, government-sponsored monopoly could. Through years of hard work and strategic maneuvering, the Big 3 wholesalers have whittled down the competition: three companies dominate the market (of the 116 pages in the current "Florida Beverage Journal", 90 are taken by the Big 3), leaving a handful of small distributors to pick up the crumbs.

Not content with having knocked off the competition, however (nor with limiting their reach to Florida alone the Big 3 have gobbled up twelve other markets), they are reinforcing their bulwarks with political muscle. The "Distributor Qualification Bill" of 1996 (section 560.411 of the Florida statutes) all but guarantees freedom from potential competition. Want to introduce some small domaines of the Mediterranean to the Sunshine State? Please consider the following: all new distributors must keep no less than $100,000 worth of inventory in their warehouse at all times; said inventory must be sold to no fewer than 25% of all the retail accounts in the county where the distributorship is located; and 50% of sales must be in lots of less than 10 cases. Translation: plan on supplying 7-11s and other fine wine purveyors with Cotes de Provence's best, and pray that sales don't deplete the warehouse too fast. Better yet, appoint one of the Big 3 to sell the stuff. They will be more than happy to lend a hand. Oops, the big suppliers want the full attention of the sales staff? Oh well, tant pis, pal. The wine lovers didn't need all that exotic wine anyway. And don't forget: long term lodging is available for you at "Chez State of Florida" should you attempt to circumvent the law.

Naturally, the wine industry (not to mention the wine lover, who has more freedom to ship semi-automatic weapons than wine across state lines) is shellshocked and beginning to strike out in frustration. Smaller wineries legitimately feel the most vulnerable: unable to gain the attention of distributors and deprived of any legal means of introducing out of state consumers to their wines, hundreds of American wineries have been effectively denied a fair chance to compete in the marketplace.

Stay tuned for the fireworks. In the mean time, wineries might think twice before signing on automatically with the mega that has just gobbled up his former distributor.

Patrick Campbell is a regular contributor to The Wine Trader and in real life is the proprietor of Laurel Glen Winery, a Cabernet wine producer on Sonoma Mountain. In addition to his two estate grown wines, Laurel Glen and Counterpoint, Campbell and staff also produce a couple of moderately priced wines: Terra Rosa and REDS..."A wine for the people." Campbell makes neither white wines or Merlot and has no plan to do so.

In previous lives, Campbell received a degree in English literature from Pomona College and a masters in philosophy of religion from Harvard University. His introduction to wine growing came via a stint at a Zen Buddhist community, where he managed an ancient Palomino vineyard on Sonoma Mountain. For a time, winegrowing responsibilities vied with Campbell's union classical music seats in various North Bay symphonies. The vineyards won.

Campbell is a past president of Family Winemakers of California, a trade organization of 250 wineries and is currently a board member of the American Vintners Association.

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Latest Update: October 31, 1997