A little over a week ago we informed you about HR 5034, or the CARE Act, which would, if passed, severely restrict the ability of direct market transactions between wine collectors and wineries or distilleries. This new bill did not, however, emerge from a vacuum—its provisions are based on advancing and further codifying many older laws. In this post, we’ll take a look at the origins of HR 5034 and the current paradigm of the wine industry, and why legislators seem deeply attached to fighting for the status quo.
To understand current state laws dictating wine sales, one needs to look back at the era immediately after Prohibition, when sales of all alcohol was illegal. After this amendment was finally repealed, states were given the power to regulate their own interstate alcohol commerce. However, the forces that had first instituted Prohibition to begin with—temperance advocates—remained a strong and influential lobby, and across the country they demanded a structure mandating a middle entity. This structure, they argued, would keep producers from exercising a stranglehold on the market. In the past, certain producers had had so much control over certain regions’ liquor stores and restaurants that they could often dictate that their product, and not their competitors, were allowed to be served.
However, the current state of alcohol commerce has not eliminated this power from the system, but merely transferred it to wholesalers, who wield a sort of “gatekeeping” strength not found in most other industries. A wholesaler will decide whose product to stock and sell to retailers based largely on their confidence in selling that product. For wine collectors, this means that a significant amount of the wines to be found in retail stores are from the largest companies—bestselling wines such as those by Kendall Jackson, Sutter Home, or Beringer, all of whom spend millions each year on making their brands more visible to consumers. As a result, the system encourages a “big get bigger” mentality in the wine industry, and other producers must fight for wholesalers’ attention through positive press in an industry magazine or an award—the sort of marketability that tells a wholesaler that they are more likely to sell that stock.
Unfortunately for wine collectors with more eclectic or eccentric tastes, these laws currently make it very difficult for the citizens of certain states to seek out more obscure wineries and sample their product—rather than order a bottle directly, they must go to the winery themselves. Indeed, such wineries show that a vast majority of their sales come from tasting events. And it is important to note that even if you make the effort to travel to a winery far away from you, interstate transport laws will regulate exactly how much you can bring back with you…no stocking up all at once!
Wholesalers, then, have a vested interest in the passage of HR 5034, not to mention keeping the current state as it is—and so they are very active in making sure their local government officials hear their demands and champion them on the floor of Congress. Those who oppose the measure will need to organize and follow the same channels in order to push back against the entrenched lobby.
