Posted: Oct 25, 2017
For a golden moment, motivated wine lovers could rely on high-speed internet as a sort of national wine shop. A consumer in Little Rock, Arkansas, for example, unable to find particular bottles locally, could order them from a shop in New York. It required only a willingness to pay shipping costs.
Those days are no more. In the last year or so, carriers like United Parcel Service and FedEx have told retailers that they will no longer accept out-of-state shipments of alcoholic beverages unless they are bound for one of 14 states (along with Washington, D.C.) that explicitly permit such interstate commerce.
New York is not one of those 14 states, as The Times’ wine panel learned to its chagrin in the last year.
All the bottles we sample at our wine tastings are purchased retail. When Bernard Kirsch, our tasting coordinator, could not find the wines he wanted in New York, he ordered from elsewhere, doing regular business with retailers in California and New Jersey, among other places. I, too, like many wine lovers, occasionally bought wine from out-of-state shops for my personal consumption. But that has ended.
Strictly speaking, it was probably never entirely legal in New York or in many other states to have wine shipped in from out-of-state retailers. Yet, these laws requiring a license for interstate wine shipments seemed vague and were rarely enforced.
But now, states — urged on by wine and spirits wholesalers who oppose any sort of interstate alcohol commerce that bypasses them — have stepped up enforcement. Retailers say that the carriers began sending out letters to them a year ago saying they would no longer handle their shipments.
For consumers who live in states stocked with fine-wine retailers, like New York, the restrictions are an inconvenience. For consumers in states with few retail options, they are disastrous. It’s hard enough outside of major metropolitan areas to find wines from small producers. The crackdown makes it that much harder.
Before the internet, the bigger wine shops sometimes printed periodic catalogs for their customers, particularly around the holidays. If those catalogs found their way into hands in other states and enticed a few far-flung sales, it was no big deal one way or the other.
Broadband changed everything. No longer did retailers have to identify and attract potential customers. With a few clicks of the mouse, eager consumers could seek out wine shops all over the country, scour their inventories and order the bottles they wanted.
“That’s one of the happy miracles of the age,” said Jamie Wolff, an owner of Chambers Street Wines in New York.
Like other retailers I spoke with, Wolff was not willing to offer precise sales figures, but he said a significant amount of Chambers Street’s business had been from out of state.
“It seems a shame to tell consumers anywhere that they can’t freely purchase something they want,” he said.
Until 2005, many retailers quietly engaged in interstate business without much fuss. But that year, which roughly coincided with the widespread access to high-speed internet, the Supreme Court ruling in Granholm v. Heald effectively lifted many state bans on buying directly from out-of-state wineries.
Though the ruling applied to wineries, not to retailers, Granholm had a liberating effect on consumers who suddenly found it much easier to find the wines they wanted online. The decision also allows the direct shipment of wines purchased by tourists at wineries to all states.
The efforts to curtail interstate shipping, many retailers believe, are a result of lobbying by wine and spirits wholesalers, supported by generous campaign contributions to state legislators and other elected officials. In New York state, for example, wholesalers have given $2.7 million to candidates for office compared with $678,000 donated by retailers, according to the Nation Institute on Money in State Politics.
“Wholesalers have been looking at this issue for quite some time,” said Daniel Posner, owner of Grapes the Wine Co., a retailer in White Plains, New York. “They went to state liquor authorities and said, ‘People aren’t following the laws.’ Now it’s all coming to a brutal end.”
Posner, who also is president of the National Association of Wine Retailers, an advocacy group, said about half of Grapes’ business was with out-of-state clients, primarily in New Jersey and Connecticut. He said the potential ramifications for his small business, with its 12 employees, were huge.
“As in anything in business, this is pure greed,” he said. “There are very few industries that are so regulated. We have an authority that looks over us, that makes sure we pay our bills on time. We have a very rigid system in place, state by state. These wholesalers, they hold all the cards.”
The wholesalers, for their part, insist that their interest is solely to protect consumers from fraud, threats to health and underage drinking.
In a phone conversation, Craig Wolf, the president and chief executive of the Wine and Spirits Wholesalers of America, a trade group, posed a nightmarish scenario of teenagers in New York ordering Thunderbird — the cheap, flavored fortified wine of skid rows and song — from retailers in Nevada.
“New York can’t hold Nevada accountable,” he said. “Multiply that out by tens of thousands. There’s no jurisdiction for retailers at the federal level.”
I suggested that the example was far-fetched, but Wolf pivoted, pointing to several cases in Europe where people had died from drinking counterfeit spirits. The states, which have the power to license retailers, he asserted, keep them honest. Allowing retailers to sell out of state, he suggested, created a scenario for an unregulated system to run amok.
“With everybody licensed, the supply chain is guaranteed top to bottom,” he said.
Wholesalers have argued for years that such tight regulation, which happens to be to their commercial advantage, is all that protects the wine and spirits business from descending into chaos. The Supreme Court did not buy the argument in 2005, and to me, their economic interest seems a far more likely motivation than public health.
For years, wholesalers around the country have been consolidating into bigger and bigger entities. The American wine market was worth around $62 billion in 2016, and according to Forbes magazine, revenues at the top three wholesalers accounted for almost half of that value. The more fragmented the wholesalers can keep the market, the better they ensure their place in it.
Retailers will adapt to the restrictions on interstate sales, though it will not be easy. Devin Warner, the president of the Chicago Wine Co., a retailer, said 50 percent of its sales go out of Illinois.
“We’ve felt the pinch of states closing down,” he said. “We’re just going to have to look for other ways to replace that business.”
At the same time, retailers are lobbying for bills that would loosen restrictions on web purchases. A bill in New York that would permit out-of-state retailers to ship to New York died in committee last year, Posner said. He is hoping the bill will be reintroduced in January.
“The internet has allowed many industries to go forward, but this is sending us backward,” he said.
Independent retailers also face the threat of consolidation. Costco is now the biggest wine retailer in the country, and Amazon is now getting into selling wine, a move that has been given brick-and-mortar significance by its recent acquisition of Whole Foods Market, which has many outlets with retail wine licenses.
This does not affect New York retailers so much as New York law restricts retailers to one license, and therefore one store, in the state. But around the country it means fewer choices for consumers. Curtailing out-of-state shipping only makes it worse.
In an age where you can order just about anything on the internet, including wine, consumers deserve safe access to great retailers over state borders.
By Eric Asimov
The October 23, 2017
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