10 Way to Undermine the Three Tier System of Wine Distribution

Posted by Tom Wark on Mar 20, 2014

undermine

 

THERE IS A WAY.

In response to my recent post on Repealing the State Mandated Three Tier System, I’ve received a number of pessimistic comments and emails that essentially go like this:

“But Tom, what can really be done. The wholesalers and the three-tier system are entrenched and too powerful.”

The State-Mandated Three Tier System and its wholesaler supporters are indeed entrenched and quite powerful. But, there are ways to begin to undermine this system that harms wineries, retailers and consumers. So, as a public service, I thought I’d list the various ways the State Mandated Three Tier System can be undermined by everyone.

1. CONSUMERS: Join the American Wine Consumer Coalition, which works to provide more open markets by advocating for wine consumer rights

2. CONSUMERS: Buy Wine Direct. Buy your wine directly from out-of-state wineries, in-state wineries and out-of-state retailers. Take the money out of the three-tier system as much as you can.

3. WINERIES: Support Free the Grapes, which works across the country to open more states for direct winery to consumer shipping

4. WINERIES: Self Distribute Where You Can. Look for those states that allow self distribution by out-of-state wineries and get to work. Find organizations and companies that help facilitate direct to retail and direct to restaurant sales.

5. WINERIES: Support the Craft Brew and Artisan Distillers with Membership in their Organizations and Associations. They too are looking to break open the three-tier system and they are your allies.

6. RETAILERS: Join the National Association of Wine Retailers, which is a coalition of progressive retailers across the country that works to open more states for retailer-to-consumer direct shipping

7. RETAILERS: Support Self Distributing Producers. If you are in a state that allows self distribution by in-state and/or out-of-state producers of beer, wine and spirits, then do business directly with them and avoid wholesalers where you can. Take the money out of the system

8. WINERIES: Make Wholesalers Pay. Before signing up with a new wholesaler in a state, require that they make a financial contribution to Free The Grapes or the American Wine Consumer Coalition if they want your business so badly.

9. CONSUMERS. Make the Purchase Anyway. If you live in a state that prohibits shipment from out-of-state wineries and retailers, place the order with out-of-state wineries and retailers anyway. They may just find a way to ship you the wine you want and you take money out of the three-tier system.

10. RETAILERS: Ask Your Representative for Help. It’s simple. If you live in a state that won’t allow direct to consumer shipment from out-of-state retailers, call your representative and ask them to support a change in the law to allow your customers to buy the wines you don’t carry. It will make a difference.

Posted In: Shipping Wine, Wine Business, Wine Consumers, Wine Legal Battles

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13 Responses

  1. Carl - March 20, 2014

    Been doing 2 & 9 for decades.

  2. Bill Haydon - March 20, 2014

    This is awesome. I haven’t laughed so hard in a long time. Regarding #2, you do know that buying from out-of-state retailers does NOT take money out of the three tier system but, rather, simply shifts it to another state’s distributors.

    But this–this gem of innovative thinking–is my all-time favorite. It truly is the shining monument to your towering intellect.

    8. WINERIES: Make Wholesalers Pay. Before signing up with a new wholesaler in a state, require that they make a financial contribution to Free The Grapes or the American Wine Consumer Coalition if they want your business so badly.

    I’m going to surprise you now, Tom. For I have seen the light, and I am going agree with you on this wholeheartedly. I sincerely urge every California winery out there to make these demands. I’ll go even one step further and urge wineries to make this demand to their existing distributors under the threat of no longer selling them wine. After all, it’s a sellers’ market. Your wines are in such high demand these days that any distributor would be foolish not to cave in to your demands because all of their competitors would be there to snap you up in a heartbeat. Napa Valley wine has never been more popular or trendy, and I urge you all to make full use of this leverage by following Mr. Wark’s advice.

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  4. Matt Reid - March 21, 2014

    I’d love some help with #4, please. I know I can self-distribute in WA and FL, but I have no idea how to handle fulfillment. I welcome suggestions on finding organizations and companies that help facilitate direct to retail and direct to restaurant sales. Thanks!

  • Bill Haydon - March 21, 2014

    Matt, here are the details for Illinois.

    You first need to get a DTC license from the state. Your self-distribution license will be an addendum to this. Total cost shouldn’t be more than a couple hundred dollars.

    Double check these numbers, but I think you have to produce less than 25,000 gallons annually and not intend on shipping more than 5,000 gallons annually into the state.

    You have to either own a bonded winery or have your company attached to another’s bond. You can NOT be a pure custom crush outfit. This isn’t the result of any distributor speeeracy. Rather, and as you well know, the state of California views pure custom crush producers as being in the wholesaler–not manufacturer–tier, and Illinois is just following their lead. As a pure custom crush producer though, you would have the ability to essentially set yourself up as an Illinois wholesaler ($275/year and you can subcontract warehousing and delivery to several companies).

    Who is going to sell your wine, manage your accounts, pick up late checks, build and maintain relationships (this is after all Chicago, and they famously “don’t want nobody sent by nobody) is up to you. I will warn you that it’s not California there. There are no teeming masses of 1099 contractors that you can hire off the back of truck for commission only/no benefits/no expenses. You might actually have to hire somebody as a W2 employee and give them a fair salary/benefit package while they are working to get your business off the ground.

    All that being said, good luck.

    • Matt Reid - March 21, 2014

      Thanks, Bill. That’s great information. I have an 02 license (producer) and I produce less than 5,000 gallons annually (not even close), so I would qualify. Still have the problem of getting wine to accounts, let alone getting paid for it!

  • Magdalena - March 21, 2014

    Matt – Fwiw, self-distribution is also possible in Kansas.

    • Matt Reid - March 21, 2014

      Thanks, Magdalena. Will add it to my list!

  • Tom Wark - March 21, 2014

    Matt:

    Washington state is also an alternative for self distribution. The state was sued over the fact that it allowed in-state wineries to ship to WA retailers, but did not allow out-of-state wineries to do so. The courts found that based on the Granholm v Heald supreme court decision, this kind of discrimination of interstate commerce was unconstitutional.

    • Matt Reid - March 21, 2014

      Hi Tom, Thanks for your comment! I actually knew about WA. Whole Foods there was interested in my wine, I just needed to get it to them. I figured with WF on tap for the wine, finding a distributor would be no trouble. “Here’s the sale, please take your cut.” Not so. I knew I could self-distribute but could not figure out how. WF wanted the wine as each store needed it, not all at once.

      So what I really need help with is finding the organizations and companies that can help with moving the wine in the receiving state, as you mention in your #4.

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  • Erich Russell - March 24, 2014

    Terminated all my distributors except 3 good ones and go DTC and direct to accounts. Business has never been better and we have never been happier. Why do you think DTC is growing SO fast

  • Los Smith - December 6, 2014

    Can someone point me in the right direction for FL and #4? I see IL has a special application for self-distribution, but not FL. We already have our brand registered, but not sure what else. Do you have to also register as a distributor?