America’s antiquated system of wine distribution
A blog posting on Schiller Wine, a wine lover who lives in the greater Washington DC (US) and Frankfurt am Main (Germany) areas:
America’s antiquated system of wine distribution
What
people outside of the US often do not understand is that the US is very
much a “Union of States“ and a very decentralized country, often
lacking desirable homogeneity. This is evident in many aspects of live.
A prime and well known example is the death penalty, which exists in
some States but not in others. Most States impose a sales tax, but not
all, and those that do impose a sales tax levy it at different rates.
In Germany, by contrast, there is uniformly death penality in all
States and the sales tax - the VAT- is uniform across all States.
Switzerland
is another country that resembles in many aspects the US. There, taxes
and laws differ significantly from Canton to Canton. In fact, each of
the 26 Cantons has its own constitution and is sovereign to the extent
the sovereignty is not limited by federal law.
In the US, one
area that comes up again and again in this context, at least among wine
consumers, is the way the Americans have organized their wine
distribution system. This is in general not only very cumbersome, but
differs from State to State. Some States have modernized their wine
distribution system, others are well behind. One State that is well
behind is Maryland. Dave McIntyre
from the Washington Post is inviting readers today to put pressure on
the Maryland legislators to reform their obsolete wine distribution
system.
My daughter’s parents-in-law live in Maryland. When
they order wine on-line, they cannot have it shipped to their Maryland
home. They either have it shipped to my home in Virginia or our
daughter’s home in New Hampshire. Maryland is one of 17 States that do
not allow shipment of wines directly to consumers. There are many other
examples. In some States you have to go to a government-run store to by
wine. Most States do not regulate prices, but some do.
The
only common denominator among the American States is the so-called
three-tier system, which exists in some form in every State. In the
three-tier system, consumers must buy wine from retailers. Retailers in
turn must buy wine from wholesalers. Wholesalers in turn must by from
from the producers. Retailers cannot skip the second stage and buy
directly from producers. Consumers cannot buy directly from the winery
either.
Picture: Christian G.E.Schiller
The
basis for today's wine distribution system in America is the the 21st
Amendment, which repealed Prohibition and which specifically gave the
States the authority to regulate alcohol sales. Prohibition was
repealed 75 years ago, but the three-tier system has remained.
Generally,
you hear 3 groups of arguments, why States do not want to modernize the
wine distribution system and rather like to stick with an antiquated
regime: (1) The current strictly regulated system makes the collection
of taxes on alcohol easier than in a liberalized system. (2) The
minimum drinking age in the US is very high by international standards,
21 years. The three-tiers system offers an extra tier through which to
limit the alcohol consumption of the young consumers. (3) There are
little incentives for those in the wine business and the legislators to
change the system as it works fine for them, with the latter often
getting generous campaign contributions from the former. In other
words, the system serves the interests of a group of insiders at the
expense of consumers -- not to mention Maryland's 41 wineries, which
are also banned from shipping to consumers.
For more information, Jeff Siegel wrote an interesting article about the issue in the online magazine palate press a few weeks ago.