Back during Prohibition in the 1920s, Americans were forced to pay homage to seedy, toothless bootleggers to get a buzz.
When Prohibition ended, the regulation of all alcohol fell into the states' laps. Some states — Georgia, Florida, and South and North Carolina included — established a complicated patchwork of liquor laws, known as the Three-Tier System. In order to do business in these states, a winery must establish a relationship with a wholesaler before their product lands in the consumer's hands. The system, according to the government, is necessary to collect taxes and to control underage drinking. But today, Three-Tier has evolved into an anti-competitive nightmare, with the wholesalers holding the state-sanctioned prize: control over which wineries can distribute wine in the state.
Currently, 2,100 wineries call the U.S. home. Of these, roughly 20 percent are represented by wholesalers in all 50 states. Although this limited selection may be great for most folks, the adventurous wine consumers seeking the obscure, hard-to-find gems face a brick wall of legalities. If you've ever tried to order wine online or ship wine to the Southeast, chances are the Web site or winery informed you that it's illegal (or a felony, as in Florida). Since the alcohol isn't following the Three-Tier path, the winery cannot legally ship the product. For the most part, people ship boutique wines unavailable at home, but since local wholesalers don't profit from directly shipped wine, they can block the sale using the existing laws.
In 2000, when unrelenting wine lovers in Georgia had their ban partially lifted, lawmakers put an interesting spin on the buying opportunity. Consumers are now allowed to purchase five cases of wine, provided the wine does not have wholesaler representation in the state. This solves the consumer issue of buying from small boutique wineries, but not getting your hands on the limited release, small production wines from larger wineries already selling in Georgia.
But retailers in Florida have definite concerns about the interstate shipment issue. James Mela, owner of Vintage Wine Cellars in Tampa — in a state where anti-competitive lawsuits are pending — finds the limitations extremely unfair to the consumer, but also wonders what will happen to the Florida wine industry once the Three-Tier System is bypassed. He worries consumers will forgo his store to purchase the higher-end allocated wines over the Internet.
But will they? In theory, if the shipping restrictions are lifted, consumers could essentially sidestep the retailer to purchase wine. But with the hundreds of choices out there, who will help them figure out what to buy online? At a shop, a knowledgeable wine person can guide you to new and wonderful juice, and help you make the perfect choice.
Luckily, even where there is an open wine playing field, retailers' sales don't seem to be affected. In California, where consumers buy wine without restrictions, retailers thrive. The outlets compete on selection and price, but consumers still reserve the right to purchase online.
So perhaps there is life for the retailer after the restrictions are rescinded. There's only one large organization preventing laws from being lifted in other states where litigation is raging: the Wine and Spirits Wholesalers of America (WSWA). Next week: Their side of the story.
This article appears in Sep 18-24, 2002.