Point & counterpoint on direct shipping

Wines & Vines, Nov, 1996 by Walter M. Haimann, Jerry Mead

First, let me suggest that the name of the group pushing these changes ought to be changed from a "Coalition for Free Trade" to "The Anti-Wholesaler/Retailer League." They suggest that free-for-all interstate shipping to consumers won't compete with the wholesalers or retailers because directly shipped wines are not price-driven, but demand-driven. This is ridiculous. Once direct shipping is legalized nationwide, everyone will get into the game. And they won't be selling their wines at suggested retail when all the profit is headed to the winery. You can bet that once all the profit goes to the producer, prices will drop sharply.

Furthermore, wholesalers and retailers will lose their small and medium-sized brands left and right once wineries develop their direct mail programs. Does the Coalition think this will have no effect on the three-tier system? The Coalition complains that the wholesaler networks are shrinking and consolidating. What do they think will happen to the network of wholesalers when even less brands are actually seeking distributors around the country. In the age of free-for-all direct shipping there will be even fewer wholesalers. And those that survive will focus either solely on big brands or demand no direct shipping by their smaller brands.

And what of the logistical plan for direct shipping the Coalition is offering up? It, too, is riddled with unworkable proposals. According to the Coalition, FedEx, UPS and other shipping companies will be responsible for retrieving signatures from those ordering wine. This, they say, will assure that minors won't buy the product. Anyone who has ever dealt with shipping companies should know that the drivers will not always wait for a signature, regardless of what policy might be. They'll simply drop the package. And to those who claim that no minors will be ordering alcohol (sic) via mail anyway, they ought to remember that opening up direct shipping will mean opening it up to lower priced beer and spirits too.

The Coalition's proposal on how taxes can be paid is even more improbable. They would suggest that direct shippers will happily file tax returns with each state into which they are shipping. But if one thing has been proven by direct shippers, it is that they will disregard the law for profits. Why should states expect wineries to pay the excise tax on wine shipped into the state? Just as they are now, states and their citizens will be screwed (sic) by bootleggers (sic) who care nothing for local laws.

Finally, why does the Coalition not address the issue of parity. How shall we handle the fact that some states will continue to disallow intrastate even if the courts allow direct interstate shipment of wine? While I couldn't ship wine to a consumer in Amarillo, any winery in any other state could. This problem must be addressed.

In the meantime, the Coalition asks me to contribute money to the "cause." I'll pass. The proposal is anti-wholesaler, anti-retailer, ill-founded, and not good for my business. Until someone actually puts some real thought to what they are doing and how it will truly affect this industry I'll hold on to my money.

OPEN LETTER TO WALTER

from Jerry Mead

(Walter Haimann's comments were broadcast on America Online, where, presumably, small children could read them. Enter our old friend, Jerry Mead, with his comments. - Ed.)

Walter...I'll try to respond to your lengthy diatribe item by item, but feel that our friends need to know a couple of things about where you're coming from...Texas, of course, where as you point out the redneck alcohol police are so backward that you can't even ship in your own state, much less anywhere else. You can't know much about free enterprise wine sales, 'cause they just don't exist in your state.

And...you're a former executive with a major distiller with a vested interest in the three-tier monopoly, so you're attempting to defend the system you earned your living (and first retirement) in.

And before we go farther, let me reaffirm that I am not against wholesalers or retailers...I think they're both wonderful...it's just when you try to give either of them monopoly powers that the hairs stand up on the back of my free enterprise soul.

Walter...If the Coalition For Free Trade isn't supported by all wineries (the biggies owned by distillers which own or control their own wholesaler - middle-tier obviously aren't likely supporters), then the vast majority certainly are...you are the exception, NOT the rule.

It is not about being anti-wholesaler or anti-retailer...but about being pro-business, pro-free enterprise, and most importantly (from my perspective) pro-consumer...the only thing it is anti is anti-monopoly.

You say everyone will get into the game (interstate shipping)...I say wonderful, and for those wholesalers and retailers you're worded about, too. Imagine how much more total wine could be sold if everyone could sell everywhere. Think of the jillions of bottles that could be sold at holidays (Mother's Day, Father's Day, Xmas, etc.), if every local merchant could advertise that he could ship wine to room, or dad, or whoever... wherever they might be. And if I buy more that gift from my local retailer (which I'm most likely to do because it's the most convenient), guess who my local retailer bought the wine from...his local wholesaler!!!