Michigan Wine Update
Tuesday, September 06, 2005
courtesy of http://www.fermentations.typepad.com/
More Screwage In Michigan
Something interesting has happened in Michigan.
The wholesalers there, who had been pushing most ardently for complete restrictions on any direct shipping of wine to consumers changed their tune. Since the Supreme Court decision in May they had been arguing for the complete ban on shipping, and doing so in a clumsy but loud manner. They were able to get a legislator (Chris Ward) to offer legislation that would have banned the shipment of wine to consumers.
That backfired when consumer and press outrage revealed the hypocrisy behind their claim that they wanted the ban to protect children. Right!
Well, now the wholesalers have changed gears and decided they need to get legislation passed that gets to the heart of what wholesalers around the country really fear: the possibility that wineries will have the right to ship direct to restaurateurs and retailers.
The new legislation in Michigan, which recently passed one house of the legislature and will go to the other, completely bans any shipment and sales of wine from a Michigan winery to a Michigan retailer or restaurant. This seems rather vindictive as it would hurt Michigan wineries even more than a ban on direct sales to consumers. But what the wholesalers are afraid of is the idea that if it's ok for a Michigan winery to ship and sell direct to retailers and restaurants, then perhaps it's ok for out of state wineries to do the same.
Let me break down this fear for you. The wholesalers imagine the likes of Beringer, Gallo, Mondavi, etc. (the big boys) setting up their own distribution system and bypassing the wholesalers. It's a legitimate business fear. It's unlikely the small CA wineries would do this, but it is imaginable that the big wineries could. It's also imaginable that large retailers like Costco, Sams Club, etc. would love to buy direct from wineries and arrange for shipment from CA.
This new legislation would allow wineries in or out of Michigan to sell up to 500 cases a year direct to consumers. This is a partial victory for consumers and Michigan wineries, as well as out of state wineries. And it resulted from the stupid way by which the wholesalers chose to focus on the non-existent problem of minors obtaining wine via the Internet in their attempt to sell their ban on direct shipping.
This new ban they are pushing however is an even greater burden on Michigan wineries. Wholesalers in that state, which would be in complete control of the distribution of Michigan wines rather than the wineries being in control of their distribution, are very unlikely to put any effort behind a Michigan brand. They'll focus on Gallo, Beringer, Mondavi, Yellowtail and a variety of other larger brands. The Michigan brands will be left in the cold and Michigan wineries will be able to do very little about it.
A Michigan winery could hire its own sales force, have it travel around to restaurateurs and retailers, sell their wine, then pass the sale off to the wholesalers. But this is unlikely due to the expense of maintaining a sales force. What this new ban does is it forces Michigan wineries to sell their $20 bottle of wine to a wholesaler for $10 a bottle (FOB Pricing) rather than sell the wine to a retailer at $14 a bottle (wholesale pricing). That's a pretty big financial hit.
While it is nice to see that the word got out about the wholesalers "Minors" canard and stopped them from getting a direct shipping ban passed, it is disheartening that they have been able to convince the legislature to pass a special interest law that sets further in stone the monopoly on wine sales. This should be a lesson, or at least a reminder, of the power of campaign contributions. Votes flow toward the contributions. Ever wonder how it is that more and more small, family-owned business seem to be replaced on a regular basis by big chains and corporate concerns? Follow the money.
Posted by mardenhill 9/06/2005 06:24:00 PM
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