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boone
05-25-2010, 10:50
http://www.courier-journal.com/apps/pbcs.dll/article?AID=20105240372

CorvallisCracker
05-25-2010, 11:03
Is this the accursed HR 5034?

dean_martin
05-25-2010, 11:20
I'm assuming without reading this bill (dangerous, I know) that the effect on distillers is not intended and that it should/could be cleaned up a bit.

I'm assuming (again) that it has more to do with states prohibiting their residents from buying beer and wine directly from out-of-state wineries and brewers. Don't tell anyone, but I had to open a UPS Store mailbox in another state to order wine directly from some of our favorite wineries. If the bill allows someone in a state like mine to order wine or beer directly from an out-of-state producer then I'm for it. If that's not the effect, then I have no opinion without further study.

CorvallisCracker
05-25-2010, 11:41
If the bill allows someone in a state like mine to order wine or beer directly from an out-of-state producer then I'm for it.

No, I think it's just the opposite.

The reason I think it's HR 5034 is because that bill is supposedly an accommodating response to the "letter from 38 state attorneys general", which is referenced in both this article (http://www.winespectator.com/webfeature/show/id/42526) about HR 5034 and in the article to which Bettye Jo linked.

Although the concept of giving the states greater regulatory power may appeal to ideologues, in this case it's nothing more than a gambit by the alcoholic beverage distributors and their congressional lackeys.

dean_martin
05-25-2010, 12:08
No, I think it's just the opposite.

The reason I think it's HR 5034 is because that bill is supposedly an accommodating response to the "letter from 38 state attorneys general", which is referenced in both this article (http://www.winespectator.com/webfeature/show/id/42526) about HR 5034 and in the article to which Bettye Jo linked.

Although the concept of giving the states greater regulatory power may appeal to ideologues, in this case it's nothing more than a gambit by the alcoholic beverage distributors and their congressional lackeys.

Ok, I got ya. This thing doesn't do a damn thing for consumer choice then and keeping my out-of-state mailbox will be a waste of money. I guess it's a reaction to rather than a codification of the 2005 Supreme Court ruling that struck down Mich and NY laws restricting direct shipping from out-of-state wineries and the "without justification" language would probably make it easier for states to justify such restrictions, e.g., can't regulate sales to minors, collect taxes, etc.

I have a hard enough time getting good American craft beer as it is. We've made strides on the law in my state, but still have a ways to go. And in my closest neighboring state which doesn't have such draconian laws, it seems like the distributors (who distance themselves from consumers) have more control over what's available than the retailers.

DeanSheen
05-25-2010, 12:14
seems like the distributors (who distance themselves from consumers) have more control over what's available than the retailers.

Exactly, this is all about the distributors, especially the beer distributors, further strengthening their position at the expense of the consumer.

StraightBoston
05-25-2010, 13:40
Scott's got it right -- this is an anti-consumer-choice bill for the benefit of the MA distribution cabal (I get my *legal* shipments sent to a friend in next-door NH). Interesting KY/TN take on it, though -- I agree that regulating the product itself probably wasn't the intent.

CorvallisCracker
05-25-2010, 13:54
Scott's got it right -- this is an anti-consumer-choice bill for the benefit of the MA distribution cabal (I get my *legal* shipments sent to a friend in next-door NH). Interesting KY/TN take on it, though -- I agree that regulating the product itself probably wasn't the intent.

No, probably not, but if this is true:


The bill also includes an amendment to the Act of 1890, otherwise known as the Wilson Act. The Wilson Act states "that all fermented, distilled or other intoxicating liquors or liquids transported into any state or territory" are subject to the same rules as alcohol produced within the state. The proposed bill calls for maintaining the states' control over alcohol shipped in, but no longer requires the state to treat it the same as alcohol produced within the state.

then it might be possible for a state to allow one of its distilleries to label something "bourbon" which does not conform to the federal definition.

It's a case of "collateral damage", something you often get with badly written laws. Which this one is.

cowdery
05-25-2010, 14:38
It is HR 5034, aka the Wholesaler Monopoly Protection Act. The unintended consequencs are potentially disasterous because they are unintended. The place to start is that this law benefits no one except distributors.

The 21st Amendment to the Constitution has three short sections. This is section two (emphasis mine).

Section 2. The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.

This statement creates an exception to the Commerce Clause of the Constitution (Article I, Section 8, Clause 3), which normally requires a national market and allows the federal government to appropriate for itself virtually any type of product or service regulation that it believes should be standardized across the whole United States. The 21st Amendment explicitly says that right stays with the states. HR 5034 aims to reinforce that authority. Many people say it's simply unnecessary--the 21st Amendment itself is all you need--and many others say it could cause a lot of mischief for no benefit to anyone except the entrenched self-interest of the distributors.

Producers are against it mainly because they favor going in the other direction, restoring the normal working of the Commerce Clause and breaking up the three-tier system so they can sell directly to national chain retailers like Wal-Mart.

OscarV
05-25-2010, 15:00
It is very important that this bill fails.
Should we write and/or call our House Reps and/or Senators?

CorvallisCracker
05-25-2010, 15:04
It is very important that this bill fails.
Should we write and/or call our House Reps and/or Senators?

Couldn't hurt.

Contact your representative:
https://writerep.house.gov/writerep/welcome.shtml

Contact your senators:
http://www.senate.gov/general/contact_information/senators_cfm.cfm

TNbourbon
05-25-2010, 15:53
First of all (because I have priorities, however 'straight' or 'unstraight' they may be), it's always good to see Bettye Jo back on the forum. Miss ya, gal!:kiss:
Unsurprisingly, her point is cogent and direct: this law would damage the bourbon industry.
Ironically, in a state like Tennessee (which, granted, is perhaps like few others!), what is good for the beer distributors is likely bad for the liquor distributors, who are quite separate -- deliberately so, so that they don't compete with one another. This could foster such competition, no?
And, if you screw up the rules for bourbon, what do you imagine you do for the 'un-Bourbon', Jack Daniel's (pace, George Dickel), which essentially has no codified rules to begin with?
Are we going to start having 'international agreements' between Massachusetts and Tennessee? Was Alexander "States Rights" Stephens right?
(Sometimes I really miss a 'tongue-in-cheek' 'smilie'!:grin:)

craigthom
05-25-2010, 18:08
Producers are against it mainly because they favor going in the other direction, restoring the normal working of the Commerce Clause and breaking up the three-tier system so they can sell directly to national chain retailers like Wal-Mart.

I don't think I want them selling directly to Wal-Mart. The next thing you know bourbons will get younger to meet the wholesale prices dictated by Bentonville.

jburlowski
05-26-2010, 17:08
I agree with the sentiment of the post.

And, I agree that it's good to see Bettye Jo back here again!

SBOmarc
07-02-2010, 16:24
For what it is worth I contacted Senators Feinstein and Boxer to voice my hope that they would not support this bill.

I have done so before for other bills and have not been very successful, but when it comes to my drinking...

CorvallisCracker
07-02-2010, 16:43
I'd contacted both my district rep and our senators, and learned that all three were already against it. Oregon wineries do not want to lose their ability to ship out of state and have emphatically made their feelings known.

cowdery
07-02-2010, 16:50
Any state with a significant producer community has to be against it.

cowdery
07-29-2010, 16:12
This has to be a first, me recommending an Issue Analysis from the Freedom Works Foundation (Dick Armey's outfit), but this paper about HR 5034 is right on.

The title's a dud but the paper is pretty good.

"No Wine Shall Be Served Before Its Time—At Least Not Without Wholesalers Taking a Cut." (http://www.freedomworks.org/publications/no-wine-shall-be-served-before-its-time)

He flubbed the old Paul Masson slogan. It was, "we shall sell no wine before its time," but his fact-checking is solid otherwise.

It is a libertarian argument and one that I endorse. The way alcohol is regulated in this country is a good example of government using its power to protect the private profits of favored clients. If passed, HR 5034 will only make it worse.

mrviognier
07-29-2010, 20:49
Having been a producer and a wholesaler I think I understand both arguments pretty well. I have no issue with the sale of alcohol across state lines...provided that applicable taxes are paid, and that the products are delivered in a manner to ensure they are received by someone 21 years of age or older.

I DO think it's silly that this issue has some thinking wholesalers are an unnecessary, lecherous segment of the industry. The fact is is that the three-tier system works. It's the most-efficient way to get alcoholic beverages distributed in this country, and anyone who thinks things would be better if producers had unfettered access to sell everything direct to consumers (or retailers or restaurateurs) does not truly understand the issues/costs involved.

That said, I think it's equally silly for wholesalers to feel that to provide producers the ability to sell direct to consumers/restaurants/retailers in states where it's legal to do so would spell an end to their industry.

Two weeks ago I attended a conference in Chicago hosted by WSWA. One of the seminars brought in the owner of Binny's (retailer) and head buyer for Lettuce Entertain You (restaurant). I nearly laughed out loud when both espoused a disdain for wholesalers...and a desire to buy direct from the producers. While I can appreciate their dreams of a perceived higher profit margin, they really hadn't thought the logistical and financial issues of self-wholesaling through.

The overwhelming majority of producers are good at one thing: production. They're not in the business of warehousing, transport, delivery, etc. Conversely wholesalers aren't producers, and retailers/restaurateurs aren't distributors. The three tier system, while by no means perfect, works.

ILLfarmboy
07-29-2010, 21:12
.. The way alcohol is regulated in this country is a good example of government using its power to protect the private profits of favored clients. If passed, HR 5034 will only make it worse.

That's the way most regulation ends up, even when it isn't originally intended to do so.

callmeox
07-29-2010, 21:23
Two weeks ago I attended a conference in Chicago hosted by WSWA. One of the seminars brought in the owner of Binny's (retailer) and head buyer for Lettuce Entertain You (restaurant). I nearly laughed out loud when both espoused a disdain for wholesalers...and a desire to buy direct from the producers. While I can appreciate their dreams of a perceived higher profit margin, they really hadn't thought the logistical and financial issues of self-wholesaling through.

The overwhelming majority of producers are good at one thing: production. They're not in the business of warehousing, transport, delivery, etc. Conversely wholesalers aren't producers, and retailers/restaurateurs aren't distributors. The three tier system, while by no means perfect, works.

What makes you think that the business owners had not thought of the logistics and financial issues? At the risk of the appeal to authority fallacy, Binny's didn't get to be a 24 store chain by fiat, luck or governmental interference. Give the guy some credit for being a businessman and knowing his business.

Producers produce, wholesalers wholesale, etc because the law says that things have to be that way. Assuming that producers are too ignorant to build their own distribution and warehousing networks without the help of wholesalers is nuts. (that's the nicest thing I could think to say)

Why would a producer of beverage alcohol products be any worse at logistics than a company who makes duct tape or cotton swabs?

The three tier system is a necessary evil because the law says so. Without the protection of the law, my non-industry consumer opinion says that I doubt that it would survive.

TomH
07-29-2010, 21:23
Mat,

If your position that wholesalers serve a value added role, it should be able to be upheld by competition in the marketplace, rather than being dictated by regulations (frequently made by legislators receiving sizable contributions from the industry).

Tom

cowdery
07-29-2010, 21:29
There is nothing wrong with a three tier system. A distribution tier exists in many other industries. The difference is that only in alcohol is it mandatory. The legitimate interests of the state, in tax collection, promotion of temperance, and prevention of underage sales, could all accomplished without a state franchise system that limits market access and consumer choice, and makes products more expensive than necessary.

You honestly mean to tell me you don't think Walmart could efficiently buy directly from Diageo, Beam Global, Bacardi, Brown-Forman, et. al., and distribute that merchandise effectively to their stores? The wholesalers aren't fighting for their legitimate interest and they certainly aren't fighting for the public interest. They're fighting to protect a very lucrative and unnecessary monopoly.

Wholesalers are correct in their analysis that small wineries selling directly to consumers is the nose under the tent to Diageo selling directly to Walmart. I don't want to eliminate wholesalers, I want them to compete in the marketplace and not hide behind their government protectors.

mrviognier
07-29-2010, 21:32
Perhaps I wasn't clear, so let me say this: I have no qualms with producers being able to sell direct...as long as taxes are collected and the underaged aren't served. It won't do away with wholesalers, and it won't be the answer for producers.

mrviognier
07-29-2010, 21:47
Chuck. There IS a difference in selling a bottle of ketchup and a bottle of Bourbon. The system in place does not limit market access nor does it stifle consumer choice. If there's a market for an alcoholic product, it will be sold in that market.

And if you think wholesalers are the ones getting fat on excessive profit, you're mistaken. The average U.S. retailer works on margins of 30% to 50% or more, the producer around 100%. Wholesalers average 15%-20%.

Hmmm. That's some lucrative monopoly we have.:rolleyes:

Josh
07-30-2010, 06:42
The system in place does not limit market access nor does it stifle consumer choice. If there's a market for an alcoholic product, it will be sold in that market.

I appreciate your inside perspective Mat, but that statement is just baloney. I suggest you take a look at the numerous threads complaining about lack of access to a wide variety of stuff, from the BTAC to Four Roses, to Rittenhouse Rye. If you want to pin that on government regulation, fine, but I suggest you do some more reading around here.

Consult the following threads, among many others.

http://www.straightbourbon.com/forums/showthread.php?t=10881

http://www.straightbourbon.com/forums/showthread.php?t=14228

http://www.straightbourbon.com/forums/showthread.php?t=12517

Also, consult the line item in our household budget pertaining to gasoline, since I've burned a lot of it making runs to Chicago and Indiana and Kentucky trying to get stuff that is unavailable here. And I'm not the only one, lemme tell ya.

mrviognier
07-30-2010, 07:08
Josh, a wholesaler is in business to sell product. There is no conspiracy or collusion on the part of wholesalers to block a product or producer from entering the market. To do so is diametrically opposed to our making a living. If you can't find a product here in Minnesota - a market where there are over 50 wholesalers and no franchise laws (except for beer), than it's attributable to:

- Limited production;
- A conscious decision on the part of a producer to stay out of a market; or,
- The product having been in the market previously, but not having found traction in the market.

And, by the way, every single one of the brands you mention are hard to find solely on the merits of limited production and high demand.

cowdery
07-30-2010, 11:42
If you are going to defend alcohol wholesalers generally, Mat, then you can't fall back on relatively benign Minnesota and ignore the rest of the country.

As for the financial benefits of monopoly protection, Dun & Bradstreet says that alcohol wholesalers are far more profitable than the typical wholesaler, earning 66 percent to 83 percent more in profits than the typical wholesaler over a 10 year period.

Your citation to margin variations is about as bogus an argument as you can get. Margins tell you nothing. It's profits and risk that matter.

DeanSheen
07-30-2010, 12:09
Josh, a wholesaler is in business to sell product. There is no conspiracy or collusion on the part of wholesalers to block a product or producer from entering the market.

Entering the market, perhaps, but being viable in that market they collude to block beer all the time. Ox has a good story of a local micro beer Holy Moses being pushed out on tap locally because of a similar macro competitor Blue Moon.

This movie does a good job of explaining what happens when distributors push macro brew products designed specifically to take up shelf space from the micros.

Beer Wars

http://beerwarsmovie.com/

mrviognier
07-30-2010, 12:25
If you are going to defend alcohol wholesalers generally, Mat, then you can't fall back on relatively benign Minnesota and ignore the rest of the country.

I brought up Minnesota because Josh lives in Minnesota, and he was complaining that it was wholesalers here who make/made it difficult for him to find certain products. Nothing more. to it.

Look...it's obvious to me that this is a touchy issue for all concerned. If by 'defending alcohol wholesalers' you mean that I think a system that includes the three-tier is better than one that doesn't, you're right. The three-tier system - despite its flaws - works.

I've owned retail stores, restaurants, an import company and a winery, and I now manage a wholesaler. Having spent 30 years in all tiers of the beverage business, I know a few things to be true:

- The three-tier system works.
- Franchise laws need to be eliminated in all states;
- If set up correctly (taxes collected, minors not served, etc.) producer-direct sales to consumers are fine.
- Producer-direct sales to retailers are going to have a far more devistating effect on retailers than they will wholesalers...and will do far more to restrict product choice than any conspiracy theory you hold about wholesalers.

mrviognier
07-30-2010, 12:41
Entering the market, perhaps, but being viable in that market they collude to block beer all the time. Ox has a good story of a local micro beer Holy Moses being pushed out on tap locally because of a similar macro competitor Blue Moon.

So, the distributor is to blame here? I'd argue the issue is really about the producer and not the wholesaler. That and the economies of scale involved. When a micro producer wants to sell beyond their own hometown, they have to go into it with both eyes open. They better have a compelling product, the ability to sell against the competition, and a realistic view of the challenges.

Joshua
07-30-2010, 12:55
Let me jump in this heated thread to point out that there are both a -UA and a +UA. -UA (Josh) lives in Michigan. +UA (Joshua) lives in Minnesota. This is entirely due to me not looking at names on the member list before going with Joshua. I actually felt pretty bad about it when I saw there was a "Josh."

Thankfully, he's always a good sport about the +UA/-UA business.

DeanSheen
07-30-2010, 12:56
So, the distributor is to blame here? I'd argue the issue is really about the producer and not the wholesaler. That and the economies of scale involved. When a micro producer wants to sell beyond their own hometown, they have to go into it with both eyes open. They better have a compelling product, the ability to sell against the competition, and a realistic view of the challenges.

What?

The distributor colludes with the macro to manipulate shelf space and block out competition. This is beyond competition, this is using the 3 tier system to manipulate market share by limiting choices. Up-thread you maintained that Wholesalers did not actively work to block choices as Wholesalers do not present market barriers to producers. I maintain this is an example of Wholesalers, not market forces, doing exactly that.


- Producer-direct sales to retailers are going to have a far more devistating effect on retailers than they will wholesalers...and will do far more to restrict product choice than any conspiracy theory you hold about wholesalers.

You mean like how efficient it is now when I want a specific beer that is distributed in my area and I have to go to my local store and ask the retailer to ask the wholesaler to bring the beer in then wait until it gets to the store weeks later? If the store owner could order directly from the producer it's very possible that the response would be faster since the producer has more of a vested interest in product placement and sales than a distributor. As a consumer, I'm willing to take the producer-direct sales gamble or at the very least see more efficient distributors compete openly because the option exists.

T Comp
07-30-2010, 13:25
Quite enjoyable to be on vacation and enjoy the lively art of conversation albeit in its modern form. As I get paid to argue for a living I wouldn't jump into this fray... unless you paid me :grin: . I have e-mailed by Congresswoman my opposition along with points made in Mr. Cowdery's letter on his blog.

Josh
07-30-2010, 14:30
I don't mind being confused with +ua at all. People tend to be nicer when that happens.:lol:

All kidding aside, many of those brands I mentioned in the "liquor buying experience" thread are indeed limited production. But many of them are not. Four Roses just came into Michigan this year and it flies off the shelves. There was obviously a market for it here, one that was not being served by our distributor dominated system in Michigan.

Even so, why should I have to put up with such a limited selection? Why should I have to basically smuggle liquor into the state and break the law just to have a few sips of Weller 12 or Heaven Hill White label? If we're all gonna be about what's best for the consumer, why not put choices in the hands of the consumers, instead of deciding for them what they can and can't drink legally?

cowdery
07-31-2010, 15:20
I will concede that distributors make an easy and sometimes unfair target. Their misguided effort to shove HR 5034 down our thoats isn't helping. I don't fault the distributors, they're simply trying to win with the hand they were dealt. My problem is with the dealer.

As for "Beer Wars," I had to laugh at the astonishing ignorance of this blurb: "a pretty damning indictment of not just the beer industry but contemporary unfettered unregulated capitalism's disturbing excesses." Duh? There is no more regulated and fettered industry than beverage alcohol. Most of the abuses are done under color of "regulation," not through any lack of it.

mrviognier
07-31-2010, 15:30
I don't mind being confused with +ua at all. People tend to be nicer when that happens.:lol:

I'll blame the confusion on my poor eyesight. Can't be the Pappy I was drinking.


I will concede that distributors make an easy and sometimes unfair target.

And I'll agree to that!

I say we change the topic to something less heated. How 'bout that Pope in Rome?:grin:

StraightBoston
08-01-2010, 17:28
All kidding aside, many of those brands I mentioned in the "liquor buying experience" thread are indeed limited production. But many of them are not. Four Roses just came into Michigan this year and it flies off the shelves. There was obviously a market for it here, one that was not being served by our distributor dominated system in Michigan.

Even so, why should I have to put up with such a limited selection? Why should I have to basically smuggle liquor into the state and break the law just to have a few sips of Weller 12 or Heaven Hill White label? If we're all gonna be about what's best for the consumer, why not put choices in the hands of the consumers, instead of deciding for them what they can and can't drink legally?

I'm not sure it's valid to put the lack of availability of Four Roses on the MI distributors -- the limited regional rollout is by intention, according to Jim Rutledge, because they really didn't have enough KSBW stock to go nationwide all at once. Weller 12 also seems constrained (or at least, at times) due to availability from the warehouses at BT.

As for HH white label, I've never seen it in Massachusetts, but it's readily available on the bottom shelf next door in Rhode Island. (Whereas in KY and TN, there seems to be an entire section just devoted to Heaven Hill in different colors, proofs and ages!)

In general, the selection in MA is pretty grim except for 2 or 3 wonderful stores -- as I recall, MI gets all varieties of VOB but I've never seen it here! I don't know how much of that is due to the iron hands of the distributors and how much is due to regional preference.

I do blame the distributors lobby for the inability to mail-order into the commonwealth...

Josh
08-01-2010, 18:29
I'm not sure it's valid to put the lack of availability of Four Roses on the MI distributors -- the limited regional rollout is by intention, according to Jim Rutledge, because they really didn't have enough KSBW stock to go nationwide all at once. Weller 12 also seems constrained (or at least, at times) due to availability from the warehouses at BT.

In general, the selection in MA is pretty grim except for 2 or 3 wonderful stores -- as I recall, MI gets all varieties of VOB but I've never seen it here! I don't know how much of that is due to the iron hands of the distributors and how much is due to regional preference.

I do blame the distributors lobby for the inability to mail-order into the commonwealth...

We only get the 90 proof VOB in Michigan, and it's impossible to find. Seriously. The one place that used to sell it near here no longer carries it.

As far as I can tell, in Michigan the distributors run the show in the liquor business. All the state really does is set prices and collect taxes.

Lemme see, in the past year I've been unfair to a retailer and distributors in general. This thread could be seen as being unfair to state regulators too. I made some comments about Buffalo Trace in the past, so that covers a manufacturer. All that's left is to piss off some consumers and then all my bases would be covered.

How about this: All Scotts are ninnys, and their mothers wear chinese army boots. That should do it.

UPDATE: I know there are more than two active Scotts on the board. By limiting it to two I offend all Scotts even more.

OscarV
08-01-2010, 18:36
How about this: Both Scotts are ninnys, and their mothers wear chinese army boots. That should do it.

There's never a Moderator around when you need one.:skep:

CorvallisCracker
08-02-2010, 17:36
All Scotts are ninnys,

My wife says I am.


and their mothers wear chinese army boots.

My mother is wearing lavender flats which match her lavender dress, which was her favorite. Sugar Maple was her favorite tree, so we buried her in a Maple casket.


UPDATE: I know there are more than two active Scotts on the board. By limiting it to two I offend all Scotts even more.

I don't see where you're limiting it to two, but if that's the case I'll assume you're refering to Ox and Bird.



...minors not served...

Oh yeah, that banner, a favorite of those who are trying to obscure their real motivations.

"You'd better agree with me, because we're doing it for the kids."

Of course, since Sept 11, 2001,

"You'd better agree with me, or the terrorists win"

has been almost as popular.

Here's a FACT: shippers (such as FedEx) always require an adult's signature when delivering alcoholic beverages.

I order wine every winter from California, and my wife (who works from home) signs for it. Despite being in her mid 50s, she's twice had to show identification.

The distributors, their lobbyists and every member of Congress know that an adult's signature is required, but are hoping most people don't. In short, they want people to be both ignorant and gullible and they hope to take advantage of it.

So Mat, waving that banner even in passing is enough to earn you a permanent entry on my Zero Credibility list.