Wine, Direct Shipping, and the Consumer

Winery Insight Featured Article - April 2003 by Timothy O. Rice

Of all the legacies of Prohibition, the tangled web of state laws, regulations, and restrictions might be the most controversial and mind-numbingly senseless of them all.

To even begin to understand how the current situation came about, you have to go back to 1933.  A dozen years of Prohibition under the aegis of the XVIII Amendment to the Constitution had wrecked the American wine industry, encouraged smuggling and law-breaking, fed the rise of crime syndicates, and generally failed.  But somehow it was still a major political football, with few caring to straighten out this problem because of the potential mess at the polls.  To get the XXI Amendment passed, a sop was thrown to public conscience and the voting power of the Women's Christian Temperance Union.  In that compromise, each state was guaranteed the right to regulate the sale of alcohol within its borders.

This is what started the problem in the law.  Based on regional power bases and concerns, that set the stage for a growing divergence in what Americans could do about buying wine.

Some states stayed 'dry' for decades.  Some went the route of creating a state-owned monopoly in wholesale and retail distribution of all alcoholic beverages.  Most went to some variation of the "three-tier" system.

In the "three-tier" system, producers can only sell to wholesalers.  Retailers must be licensed, and can only buy from wholesalers.  The middleman wholesaler handles the paperwork and collects taxes for the state.  Naturally enough, this created rigid systems that limited the consumer's options and were resistant to change.

Over time, the wholesalers became bigger and bigger.  Due to the scale of their business, they tended to cater to large producers (the top 50 American wineries produce 95% of American wine).  Small wineries (the other 2000+ American wineries) had to fight for exposure and access to the shelves, often against impossible odds.

Naturally enough, the small wineries objected.  As the explosion in new American wineries went on and on over the last 30 years, many Americans stopped by winery tasting rooms and discovered that small wineries can make a surprisingly good product.  After they went back home, they popped the cork on that bottle they had purchased, savored it fondly, and thought they would like some more, please.

That's where the problem came in.  Usually they didn't live near that winery tasting room.  They'd found it on vacation, or while visiting friends, or on a day or weekend winery-hop.  If it was over state lines from where they lived, there was an excellent chance the winery could not ship them any wine.  As the years went by, more and more people became frustrated with this system and its inconsistencies.  The rise of the Internet put more pressure on this, as people became accustomed to be able to order what they wanted when they wanted to, without hindrance.  But when it came to wine, all too often they came up against roadblocks.

Karen and I live in New Jersey.  In 2001 Karen and I went to the Finger Lakes in New York and visited wineries, finding several that we enjoyed.  But because we live in a state where direct shipping via common carrier is prohibited, most of those wineries can not or will not ship to us.  This leaves us with the choice of doing without some gem of a wine we discovered at a little tasting room on a back road, or driving 300 miles or so to pick some up, or maneuvering to find an acceptable way around all this.  But if we lived less than ten miles North of where we do, we'd be across the border in New York State and they could ship to us.

Try shopping at one of the wine stores on the Internet.  Early on, they ask for your location to determine what they can ship you.  If you are in a state like New Jersey, you have a different (and smaller) selection than someone who is in a state that allows direct shipments to consumers.

That, in my opinion, is just silly.  It is also not fair.  We are Americans.  This is not the way the country was supposed to be.  The Interstate Commerce clause should put this all in the hands of the Federal government, and there should be one standard for handling interstate shipments, not the jumble of laws that exists now.

Good news may be on the way, though.  Ten years ago, only four states allowed direct shipping to consumers.  Today there are 22, so we have progress.  But that still leaves 28 where it is illegal to ship directly to a consumer, and in seven of those it is a felony to do so.

The 'hot' states on this issue at the moment are Maryland, Texas, New York, and Virginia.  All have legislation or legal cases pending on the issue.  If they should all come down as victories for the direct shipment crowd, I think a tidal wave might develop that will clear out most of the others.

Now much of the push you will see on this issue, the publicity, comes from a few sources.  The  Coalition for Free Trade, Free The Grapes!, Family Winemakers of California and  the Wine Institute are all supporters of allowing direct shipping.  All are representatives of the winery industry, with some participation by consumers.  Visit their sites for excellent presentations of their positions on the issues.

Opposed to this view are the wholesalers, generally represented by the Wine & Spirit Wholesalers of America.  While most of their presentation may seem dry and related to preserving the existing system for tax and financial issues, there are also questions about unsupervised access to alcohol when underage drinkers can purchase through the Internet.  I encourage you to see what both sides have to say on the issue.