Little Wineries Need a Safety Net
Wine connoisseurs and boutique wineries have discovered the Internet. Online sales of specialty wines are growing at a double-digit clip and, if industry estimates pan out, will reach $3 billion in five years. That’s good news for the hundreds of small California wineries whose product usually does not make it to store shelves. For them the Internet is the great leveler.
But Internet retailing of wine also upsets the decades-old system of wine distribution by cutting out the middlemen--the wholesalers who make a handsome profit on their markups, and they are pushing for legislation that would send federal enforcers after direct distributors of wine. That’s one law neither wine producers nor consumers need.
The way most of the 800-odd small California wineries get their product to consumers is through tasting rooms, mailing lists, word of mouth and, increasingly, e-mail linked to Web sites. Unlike the big table wine producers with nationwide distribution, they don’t have the economic muscle to attract a distributor’s attention or get retail shelf space. Travelers who visit small wineries either carry away their purchases or have the wine shipped home. The Internet greatly simplifies reordering.
Shipping across state lines is the problematic part. Many states’ laws, dating back to the repeal of Prohibition in 1933, require that wine must go first to a wholesaler and then to a retailer. Most states prohibit direct sales to consumers. California--which accounts for about $13 billion of the $20-billion U.S. wine market--is one of 12 states that under a reciprocity agreement allow a specified, though generous, amount of alcohol to be shipped directly to the consumer.
Growth of this market is what worries the powerful wholesalers. Last year they pushed through each chamber of Congress legislation asking U.S. attorneys to prosecute violations of state liquor laws. But the two houses failed to reconcile their differences. A new bill in the Senate (S 577) is being sponsored by Sen. Orrin G. Hatch (R-Utah), whose former chief of staff and campaign fund-raiser, Kevin McGuiness, is the key lobbyist for the liquor wholesalers, who argue that online sales allow minors access to alcohol.
Teenage drinking is, indeed, a public concern, but Net sales of wine do not contribute to it. Laws in California and other states require conspicuous labels on boxes containing alcohol. Shippers must deliver only to adults, who must sign for the packages. Hatch’s bill would do nothing to reduce teen drinking. As Sen. Patrick J. Leahy (D-Vt.) put it, wholesalers “want to use this legislation as a protectionist ploy to keep their present distribution system.” That’s why the bill should never become law.
