You Can't Buy That From Here

Wineries can ship a bottle of wine to consumers in 39 states and counting. So why are retailer shipping rights going in the opposite direction?
Feb 26, 2013

We Americans have access to more wines today than ever before. Your local wholesaler carries a vast array of wines from which your local retailers select their inventory. If you can't find what you want that way, in 39 states and Washington, D.C., you can order a bottle from a winery in another state. Wherever you live, you could likely drink a different bottle of wine every day for the rest of your life. Call me greedy, but I don’t think that’s enough.

Say you're trying to track down a bottle you want from Wine Spectator's annual Top 100 Wines of the Year: 69 percent of the Top 100 wines from 2006 to 2012 were imported.

Your local wholesaler or state liquor authority decides which, if any, of those imported wines are available to you. If they don't offer it, and you live anywhere other than the 14 states, plus the District of Columbia, that permit out-of-state retailers to ship directly to consumers, you're out of luck.

That's down from 18 states in 2005, whereas the states that allow wineries to ship to you have grown by leaps and bounds since a 2005 U.S. Supreme Court decision. That number was in danger of dropping to 13 this year when Nebraska legislators proposed a new law prohibiting retailer shipping, though the vigilance of consumer rights activists there has likely prevailed, keeping the state open.

Why this decline? A recent study in Maryland indicates that everybody wins with winery direct shipping; states get more tax revenue and consumers get more choice, with little impact on wholesalers. Most states permit their local retailers to deliver wine anywhere in the state. Nonetheless, local businesses feel threatened by the prospect of retailer direct shipping.

Many small, neighborhood wine shops fear large out-of-state retailers (think Wine.com) will be able to undercut their prices. And in general, wholesalers oppose direct shipping in all its forms, often encouraging politicians to keep national competition out of local markets.

In Nebraska, for example, where that new wine shipping legislation is under consideration, wine and beer wholesalers contributed more than $42,000 to state legislators in 2012, compared with less than $1,000 contributed by retailers or wineries, according to the National Institute on Money in State Politics. In 2010, wholesalers contributed more than $120,000 to Nebraska state legislators, while retailers, Diageo and Bacardi contributed a combined $5,150.

It's possible retailer shipping could pose a much greater threat to local wholesalers than winery shipping, which accounted for just 1.1 percent (2.95 million cases) of total wine volume sold in the United States from May 2011 to April 2012, according to an annual report issued by Ship Compliant. (Those sales accounted for 8.6 percent, or $1.35 billion, of the total wine sales market during a similar period).

There's no telling exactly how much wine is sold through retailer shipping. Ship Compliant has too few retailer clients to make an estimate based on those sales, and the pro-shipping Specialty Wine Retailers Association doesn't collect sales data from its members.

The largest online wine retailer by revenue is Wine.com, which sold more than 200,000 cases of wine, represented by more than 13,000 SKUs, for a total of about $75 million in 2012, according to CEO Rich Bergsund. However, those numbers include wine sold to more than just the 14 states that permit out-of-state retailers to ship to their residents.

How does Wine.com sell wine to residents of states where out-of-state retailer shipping is illegal? In many of those states, Wine.com sets up its own warehouse, from which all Wine.com deliveries in that state are fulfilled. The catch is that in those states, Wine.com can only offer you the wines that are available through that state's wholesalers.

Other Internet giants have recently undertaken online wine sales, but Amazon and Facebook are not actually wine retailers, but portals through which consumers can order wine directly from a winery.

It makes sense that a wholesaler wouldn’t want to compete with a winery, which could sell its product directly to you for the same price it sells it to the wholesaler. But retailers are already buying their wine from one wholesaler or another. Are you really going to pay the cost of shipping a case of wine halfway across the country when you can buy the same bottle down the street?

So who are the wholesalers really afraid of competing against with out-of-state retailer-to-consumer shipping? It must be each other.

Courtesy of Ship Compliant
Direct Shipping Legal and Legislative Issues
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