Republicans and Democrats alike take campaign contributions from liquor wholesalers, as you can see from this data compiled by The Center for Responsive Politics, but perhaps the poster child for alcohol distribution companies is the Republican Senator from Texas, John Cornyn, who heads CRP’s list.
Our system of wholesalers and distributors is, of course, an anachronistic relic of the Repeal of Prohibition. As Tom Wark cogently pointed out last week in his blog, the original reasons for creating this “third leg” between producers and buyers might have seemed logical in the 1930s, but today, the system has become a “self-serving…monopoly” that “provide[s] the means for wholesaler coercion of producers and retailers.” The effect of this, as we all know, is that smaller wineries too often find themselves shut out of distribution channels, forcing them to try to sell their products directly to stores, restaurants and individuals. DTC is in fact the Holy Grail for wineries for the simple fact that the three-tiered system so ignobly makes fair distribution impossible. Wineries, especially small family ones, find themselves thwarted at every turn by a wholesaler industry that desperately wants to keep its monopoly intact.
Now, Cornyn is the senior senator from a state, Texas, which is one of a handful of American States, all of them in the so-called Bible Belt, that still has “dry” counties—those in which the sale of alcoholic beverages is illegal. This is a dreary leftover of the “temperance” movement in America, a religious-based crusade that began quite early in our country’s history, picked up steam throughout the nineteenth century, and finally resulted in the calamity of Prohibition, which, for fourteen years (1920-1033) made the sale and distribution of alcoholic beverages, including wine, illegal, except in the rarest of circumstances.
What people should understand about Cornyn, who also is against almost any form of gun control including background checks, is that politicians like him are the reason why liquor wholesalers continue to hold so much power over what the American people can and cannot drink. When Tom Wark says “today’s lawmakers tend to support this wholesaler manipulation and control of the alcohol beverage marketplace,” he must have had John Cornyn in mind.
Politicians often claim that their votes can’t be bought even if somebody contributes a lot of money to their campaigns. (I know, I know, Hillary says the same thing about her Wall Street donations.) But an analysis of where Cornyn gets his money shows an outsized presence of liquor distributors, almost all of them based in Texas. When Dallas-based Andrews Distributing, one of Texas’s biggest beer wholesalers, contributed to Cornyn, what did they get for it? How about Texas City-based Del Papa Distributing, or Corpus Christi-based L&f Distributing, or Amarillo-based Budweiser Distributing? The list goes on and on.
Why would any reasonable person be against direct sales from small family wineries to whomever wants to buy their wines (as long as they’re of legal drinking age)? Tom Wark points out the many reasons why the three-tiered system is antiquated. But it’s more than that: it’s also anti-democratic (with a small “d”) and thus anti-American. It’s ironic that people who argue with such passionate conviction about the virtues of a free market should side with one of the nation’s most monopolistic trusts, the liquor wholesalers. “Let the free market work,” Cornyn endlessly yammers—and yet, when it comes to putting his money (or rather, the distributors’ money) where his mouth is, Cornyn is conspicuously silent, a lacuna that helps to crush the very free market he praises.
The ironies pile up. A fund-raising company called the Aristeia Group held a “wine tasting reception” for Cornyn that asked for a minimum contribution of $1,000 for PACs and $250 for individuals. What is Aristeia Group? Well, in a single year, 2014, they gave more than $281,000 to “Texans for Senator John Cornyn,” but they also gave large amounts of money to the Rand Paul Victory Committee and the Alamo PAC, whose Federal Election Commission statement lists only a single individual “Leadership PAC Sponsor,” John Cornyn. And where does Alamo PAC get all this money to donate to its favorite politician? From the interests and lobbyists who attend the many BBQs, breakfasts and “dove hunts” they sponsor, every one of which lists as its sole beneficiary “John Cornyn.” Your cost of admission: at least $1,000 per event. A sweetheart deal, and we can only guess at the things Cornyn is forced to do for his benefactors.
Well, the tight little circle of PACs, campaign contributions and lobbying isn’t limited to any one political party, like I said, but a peek behind the murky scenes into the Cornyn-Aristeia-Alamo PAC-beer distributors cabal should be enough to make even die-hard free marketeers bewail the extent to which the true “free market” has been demolished, in the alcohol distribution industry and no doubt in others. Returning to a truly free market of wine distribution should be a non-partisan no-brainer, but for some reason, we’re not seeing it, and I wonder if we ever will, as long as some of these politicians are drinking off the teat of distributors.
In 1999 the futurist Stewart Brand, whose Whole Earth Catalog galavanized a generation of environmentalists and alternative lifestylists, published “The Clock of the Long Now,” in which he introduced the notion of “pace” into the analysis of history.
Brand came up with six “layers” of human existence;
each layer proceeds at a different pace, in a sort of celestial-mechanical model whereby Mercury rounds the Sun far faster than Neptune. Only in Brand’s model, the speeds are reversed: The outermost layer, “Fashion,” moves at the quickest pace. This is why hemlines go up and down every season on the runway, and why wine writers are able to proclaim new “styles” with each passing vintage. Fashion changes constantly; the mullet is now hopelessly out of fashion. Not that long ago, everybody wanted to look like Andre Agassi.
Brand’s inmost layer, Nature, moves at the slowest pace. Evolution and geology are its most visible indices. The Sierra Nevada has taken tens of millions of years to rise; the Grand Canyon did not spring into existence overnight due to the whimsy of some flood. Not for nothing do we refer to the timespan of Nature as “glacial.” (We can have a discussion of global warming some other time!)
Inbetween Fashion’s furious rush and Nature’s leisurely progression, from inmost to outermost, are Culture, Governance, Infrastructure and Commerce. Culture requires a long time to change; witness the world battles currently underway that have been going on since the dawn of history. Governance is almost as hard to change as Culture, but when change does occur, it can come swiftly, as with Franklin D. Roosevelt’s New Deal. Infrastructure occupies a sort of midway point between Fashion’s speed and Nature’s lethargy; as we are reminded every time a bridge collapses in America, or our cars bounce over an urban pothole, changing the Infrastructure requires human will, such as that shown by President Eisenhower, a Republican, when he promoted the Interstate Highway System.
Between Infrastructure and Fashion sits Commerce. Brand sees Commerce as occupying a vital place the scheme of things: If it derives its impulses from the outermost layer (Fashion), it risks becoming “unfettered [and] unsupported by watchful governance and culture…it easily becomes crime.” And yet, we don’t want commerce to become too regulated, lest it lose its ability to flexibly react to changing conditions.
We can apply Brand’s “pace” model to the situation we find ourselves in with regard to wine. It is, in fact, a useful tool for analyzing every issue, from the continued popularity of Cabernet Sauvignon and Chardonnay to the contemporary debate over alcohol levels. It’s apparent that the latter—alcohol content—is purely a matter of Fashion. As Brand writes, “The job of fashion…is to be froth: quick, irrelevant, engaging, self-preoccupied, and cruel. Try this! No, no, try this!” What is in today may be out tomorrow, as Heidi Klum always warns contestants on Project Runway.
By contrast humankind’s liking of wine stems more from Culture, “the work of whole peoples” as Brand describes it, and of Nature itself, “inexorable and implacable,” which somehow has programmed us (and other forms of animal life) to delight in the slight intoxication of alcohol, and in wine in particular, that most natural of alcoholic beverages.
What of the dominance of Cabernet Sauvignon and Chardonnay in America? We can see in this a balancing act between the slow-motion pace of Nature and Culture, which act to keep change from happening too quickly, and the “froth” of Fashion, which, if it dominated, would have had us by now become a nation of Fioletovy Ranny drinkers. There always will be wine critics, sommeliers and others who try to push the nation’s tastes towards the exotic and rare; also always will be pushback from people who know what they like and don’t want to change. This tension—between the more conservative elements and the more radical ones—is healthy. The system itself reinforces dialogue: “the pace layers…provide many-leveled corrective, stabilizing negative feedback [loops] throughout the system. It is precisely in the apparent contradictions of pace that civilization finds its surest health.”
We may even use Brand’s pace system to make predictions. Will the three-tiered system survive? In its favor are the slower-moving layers of Nature and Culture, both of which tend to abhor change and to support the status quo. Against the system’s continuance are Fashion and Commerce: both suggest greater flexibility, innovativeness and individual choice for the consumer.
Between Nature and Culture, on the one hand, and Fashion and Commerce, on the other, lie two key layers: Governance and Infrastructure. The former right now is largely immobile, from many points of view; the U.S. Congress is unlikely anytime soon to interfere with the three-tiered system, while the Courts likewise have not shown that they’re particularly eager to take up the issue (despite the 2005 Granholm v. Heald decision by the U.S. Supreme Court, which has resulted in hardly any change, and was in any case a 5-4 vote that could have gone either way).
That leaves Infrastructure as the sole remaining hope for upsetting if not ending the three-tiered system. A nation of consumers that has happily embraced the Internet, with its notions of untaxed online transactions, net neutrality and infinite choice, may decide on its own that it does not want its shopping decisions hampered in any way, by Governance, by Commerce or anything else. As the Infrastructure of online commerce develops in ways that are completely unpredictable, we can be sure of this: The arc bends towards freedom. That is not a good sign for a confusing, paperwork-swamped system that currently restricts what and how people can buy.
China never developed the complex infrastructure for the distribution of alcoholic beverages that the U.S. has in the three-tiered system, and it might never, because e-commerce is becoming the distribution method of choice.
That’s according to an article in the Taiwan-based China Times, which says that e-commerce is preventing the emergence of “leading brokers or end retailers,” as they’ve arisen in this country. This is also having an impact on the price of wine in China: “the popularity of e-commerce firms have [sic] shrunk the profits of wine companies,” with “most” of them seeing huge revenue falls.
No one should be surprised. “The golden age of wine e-commerce is coming” to China, according to a Chinese businessman who co-founded one of the country’s biggest such firms.
One big wine e-commerce firm, Wangliu—said to be “China’s priciest”—is venturing beyond mere sales; “The fledgling company is also looking to engage wine connoisseurs offline, opening experience stores and private clubs in major cities across China.” It’s as if Southern Wine & Spirits was opening winetasting “experience” venues in New York, San Francisco and L.A.
China does have a handful of private distributors “who are looking to source wines, beers and spirits from suppliers,” and that segment traditionally has sold wine to on-premise and off-premise accounts, as the three-tiered system does here. But “there are not many big wine distributors,” like Southern, in China, with online or e-commerce wine distribution websites instead filling the void. This would seem to make distributing wines from smaller wineries—the kind that have trouble getting picked up by big distributors in America—easier in China, although the challenge for small wineries is the same there as here: for Chinese consumers, “brand name remain[s] today the leading factor that influence[s] purchasing choices…due to the great complexity…that make[s] wine difficult to understand.” The winery that can work the e-commerce market successfully, and also help the e-commerce company to intelligently explain its wine, should reap the benefits of success in China.
When I first started writing about wine, professionally, it was for Wine Spectator, but they also wanted me to write for their trade magazine, Market Watch, which I was happy to do, because it was more work for an underpaid freelance writer. I quickly learned to like that back end of the business, the intricacies of sales, marketing, P.R. and all the rest. I found it intellectually stimulating, like a chess game—and I still do.
I soon began to be invited to the numerous tastings in and around San Francisco. Among these were events specially designed by and for distributors and their clients. These were trade-heavy events. While there could be some pretty good wines served, most of the distributors didn’t seem particularly interested in them. They just wanted to be told how to sell them (and perhaps they also wanted just to drink wine and eat some good food!).
Those early experiences colored my view of distributors. As far as I could tell, they could just as easily have been selling widgits as wine. They didn’t care about the product itself (although they were willing to work hard), they wanted to maximize their sales. It was a rather demoralizing experience for me to realize that wine was being represented, through this important face to buyers, by such indifferent people.
Over the years, though, my attitude has softened. Every once in a while I complained (especially in this blog) about the inequities built into the distribution system, and I generally supported my friend, Tom Wark, in his American Wine Consumer Coalition efforts to bypass or improve the three-tiered system, which I felt unfairly discriminated against smaller wineries. However, every time I did so, someone I respected—usually a winemaker—would write in and tell me that I was failing to understand all the good that distributors do. So I began to double-check my premises, since some of these winemakers who were taking the time to write were highly respected by me.
So I’ve been open to re-evaluating my views on distributors for some time now, although I have to say my emotional sympathies still lie with Tom. Last Friday, I was invited down to participate in a meeting of Jackson Family Wines’ Southern California distributors. I couldn’t help but be struck by how much more educated—and interested—in wine today’s distributors are compared to their remote ancestors of twenty and more years ago. These people, gathered down in Orange County for a semi-quarterly meeting, struck me as young, really smart, eager and perhaps most of all, passionate about wine. Although I made a few comments, mostly the event was presided over by sommeliers and other wine experts, who led the rather largish group through some fairly serious tastings that everyone seemed to enjoy—and they were blind tastings, at that! The contrast between those widget distributors of the 1990s and these guys could not have been starker, or more welcome to behold.
There seems to be a tendency nowadays for the leaders of these guided tastings to provoke the audience to stretch their tasting vocabulary. For instance, when these leaders ask what flavors people are getting and someone says, “Mushrooms,” the leader asks, “What kind of mushroom?” I understand this approach, which gets the audience more intimately involved and stimulates their analytical powers. This isn’t particularly my way, since I tend to be more generalized about flavors, and I feel that structure is anyway more important that individual flavors, “structure” including the way the wine feels in the mouth, which is all-important. But if people want to talk about the differences between shiitake and hen-of-the-woods, that’s fine by me.
How much smarter and more educated everyone in the food chain has become: not just distributors, but bartenders, restaurant staff and, mostly importantly of all, the consumer.
* * *
Finally—last words!—remember some years back when everybody was talking about the “Parkerization” of wine, that term referring to a supposed overripeness, over-oakiness and high alcohol content of wine? Well, whether or not it ever was true, nowadays I perceive another style-driving trend: Let’s call it the IPOB-ization of wine (after the In Pursuit of Balance organization). I will begin with a question: Are we seeing some vintners, particularly those producing Pinot Noir, now deliberately picking their grapes underripe, in order to appeal to that small, but influential, cadre of writers, critics and sommeliers who insist that Pinot Noir must be low in alcohol in order to be balanced? I invite your answers. For myself, I think the answer is “yes.” And, as a certain Mr. Parker recently implied, underripe fruit merely results in underripe wine.
Now, I haven’t really been clear on what “In Pursuit of Balance” means since I went to their last tasting, in San Francisco, and Rajat Parr said (I paraphrase), “Some people think IPOB means we only like wines below 14% but that’s not true.” Well, I suppose, then, that “balance” can be applied to any wine, of any alcoholic strength, so what else is new? I’ve never heard of anyone being in favor of unbalanced wines. Then I was reading, in the new April issue of The Tasting Panel (and what an interesting ‘zine that’s turning out to be) a little article by Randy Caparosa in which he made some salient points, most notably that, at the last World of Pinot Noir (which I attended; I was underwhelmed by Raj’s Domaine de la Côte Pinot Noir), “There is still talk of the ‘high-alcohol problem’ in American Pinot Noirs, but in the vast majority of 200-plus wines tasted [at WOPN], an overweening sense of alcohol or ripeness just wasn’t’ there.”
Indeed. One could, I guess, argue that IPOB has had its intended effect, of driving down alcohol levels. On the other hand I could point out that high alcohol per se hasn’t been a problem in good Pinot Noir for years. Still isn’t.
I haven’t yet addressed the issue of HR 5034, now going through the U.S. House of Representatives, because it seemed complicated, and I didn’t want to take a position until I understood the details.
I wanted to try and see this from the distributors’ point of view. There may be a case in favor of restrictions on alcohol sales of the kind they’re trying to push through in 5034. After all, alcohol isn’t your average consumer product, it’s a drug. If it gets into the wrong hands, it can cause lots of pain. So I didn’t want to have a kneejerk reaction and just say, “All distributors are jerks,” even though my initial instincts were strongly in favor of direct shipping. Sometimes, instinct needs to be tempered by informatio, and gathering information takes time. In the end, though, I’m coming out against 5034, because the arguments in favor of it are very weak, and they don’t stand up to intellectual scrutiny.
Most of what I knew about 5034 came via Tom Wark, who’s blogged extensively against it at Fermentation. As Tom explained it to me, 5034 was a sort of end run around the Supreme Court’s famous 2005 Granholm v. Heald decision, in which SCOTUS said (I’m paraphrasing) states cannot prohibit wineries from other states from sending in their wines to consumers, if those same states allow their own wineries to disseminate wines. It was a basic issue of fairness, but also seemed to comply with the Commerce Clause (Article I, Section 8, Clause 3) of the U.S. Constitution, which gives the Congress — not the separate states — the power to regulate interstate shipping.
That was a good development, especially for smaller wineries, who had found themselves locked out of the distribution system. The smaller wineries wanted to be able to ship their wines directly to customers anywhere in the country, especially in the age of the Internet; and Granholm v. Heald seemed to give them that right (although when I interviewed Ken Starr, who successfully argued the case, he told me it would be many years before there was unfettered wine shipping across U.S. states, and boy, was he right).
Tom also explained to me that 5034, if enacted, “would give states the ability to enact discriminatory bans on wine shipping,” reasons too complicated to get into. Bottom line, according to Tom: “The law encourages and will result in states… passing bans on direct shipping that cannot be challenged in court.” (Disclosure: Tom is the paid executive director of the Specialty Wine Retailers Association, which is very anti-5034, and so he’s not exactly unbiased. But I am.)
I always operate on the theory that you can figure out what’s up with an issue by seeing who’s for it and who’s against. So who’s in favor of 5034? Let’s start with the Wine & Spirits Wholesalers of America. In a press release last April, they “encouraged members of Congress to support state-based regulation of alcohol and look beyond the mischaracterizations and misinformation being circulated” by its opponents, like Wark and SWRA. They took a states-rights position — the kind that conservative red states always take when they want to be discriminatory — and said 5034 would “place the burden in litigation where it should be: on the plaintiff challenging a state alcohol law.” That’s pretty much the same flimsy argument that opponents of Brown v. Board of Education used in the 1950s: the Federal government doesn’t have the right to desegregate public schools, and if a black family doesn’t like a school’s admission policy, they can sue that school board in court. If not for Brown v. Board, we’d still have segregated schools today.
WSWA also argued that 5034 doesn’t violate the Commerce Clause because it “does not expand state legislative or regulatory authority into what is currently and appropriately federal jurisdiction.” This seems to me to be disingenuous, an Alice-through-the-looking-glass playing with words. WSWA says that the Federal government, through agencies like TTB, FTC and FDA, remains free to regulate alcohol “in such areas as labeling, advertising and food safety.” Okay, but if the Feds can regulate in those areas, why can’t they regulate interstate shipping? Totally bogus argument.
Finally, WSWA asserts 5034 “does not favor any segment or tier of the industry.” Puh-leeze! Everybody knows 5034 favors wholesalers. Who’s kidding whom?
Who else is in favor of 5034? Well, there’s the National Beer Wholesalers Association (NBWA), whose position is a carbon copy of WSWA’s (and for similar reasons). Then there are 5034’s backers in the Congress, about 100 of them. There’s ample evidence that WSWA and NBWA have contributed boatloads of money to their supporters, as for instance here and here and, especially, here, where you can draw direct lines between WSWA’s main contributors (all the big distributors) and individual congressmen who are beneficiaries of its largesse (and by the way, this isn’t a partisan issue: Democrats and Republicans alike take campaign donations from WSWA and NBWA).
So what we have is a collection of odd bedfellows lined up in favor of 5034: wholesalers, distributors, and the politicians who take their money to run for election or re-election.
Now, who’s against 5034? Like I said, there’s Tom Wark and his Specialty Wine Retailers Association. No surprise there, since their members are smaller wineries and merchants, and their slogan is “wine without borders.” Also against the bill is Free the Grapes!, which is a leading group in favor of direct interstate shipping of wine; various state legislatures (including the New Jersey Senate, where my cousin, Sen. Loretta Weinberg, voted to open up interstate wine shipping); the Wine Institute; Family Winemakers of California, and many congressmen from wine-producing districts, including Rep. Mike Thompson, who represents the North Coast.
For me, the good guys are against 5034 and are in favor of the free, unfettered shipment of alcohol, to and from adults, throughout the 50 states. Isn’t that as it should be in America — isn’t that as Thomas Jefferson intended? I don’t want to say those in favor of 5034 are bad guys, because I’m sure they’re good people who are simply trying to protect their economic interests, same as all of us do. But I’m siding with those trying to defeat 5034. It’s a bad bill. Please call your Congressional representative and urge him or her to oppose it.