See this site to explain the American "system"



http://www.freethegrapes.com/



The good news is that a combination of consumer oriented legislators & court
decisions have allowed enlightened states to have some form of direct
shipping,



The bad news is that some large wine enterprises are $upporting Free the
Grapes, so they can sell direct to stores & restaurants not through
wholesalers.

The lobbyists for wholesalers spread the good cheer around and convince
State legislators that selling direct to accounts or even consumers is
Un-American and would lead to underage drinking.

In some States, the huge nationally/regionally based wholesalers make it
difficult for an independent firm to compete with them. Sometimes the
independents are tolerated, in others the threat of business and in some
cases life intervention are possibilities. The more enlightened wholesalers
have ceased intimidation but have raided independents to secure wines made
popular by one of these small independents.

It should be noted that when the loosely enforced 19th amendment was
repealed, the former suppliers incorporated as importers and wholesalers-It
was de$ided that their would be no national system, and so it was up to each
State to allow the pimping of legislators. Stories are numerous such as
Ambassador Joe Kennedy's making sure even in the London Blitz and the run-up
to WW II, that his company had a constant supply of Scotch stateside.

Local enforcement was lax and the fabled FBI disregarded any venture headed
by former bootleggers. The FBI did supply Franklin Roosevelt with Mr.
Kennedy's use of his post to further enrich himself. Joe K came back to the
US to campaign against Roosevelt being avidly pro-German and against
stopping the Hitlerian set of instruments of annihilation. I believe he was
making a courtesy call on FDR when the President let Joe Kennedy know he
(FDR) knew of his business dealings. A day or so later Kennedy bought
airtime to announce his endorsement of Roosevelt's third term. FDR never
spoke to Herr Kennedy again and kept him out of any government job, dashing
Joe's dream of being the 1st catholic President. As you all know, it was in
all the papers, Joe's son Jack was given almost three years to do the rosary
in the Oval Office.......

Enough history, Merry XMAS to all.

Joe Rosenberg
"Where's the Jim Crow Section of this merry go round. I can't find the
back.." the Late Fred Neil

> The bad news is that some large wine enterprises are $upporting Free the
> Grapes, so they can sell direct to stores & restaurants not through
> wholesalers.

Why is this bad news?

Jose
--
He who laughs, lasts.
for Email, make the obvious change in the address.

Its bad news because wholesalers:
-take the risk of buying wine from wineries and other suppliers so its on
hand when a retailer orders it
-extends credit to retailers and restaurants
-absorb cost of transporting product to retailers
-sells wine for the supplier

Can you imagine a small to midsize store storing all the wine it thinks
customers want?

Can you imagine a supplier having to send wine to 10,000 stores instead of
50 wholesalers?

Major suppliers, that's wineries and conglomerates would love to cut the
wholesaler out because the cost to a retailer deceases. However, if their
retail price could be 40% lower, the price to the store is maybe 20% less.
And they would have total control over sales.

Very few in the wine food chain pass on all of a discount to consumers.
Lets say a wholesaler takes 30% off their price and its an $100 a case
item---Instead of selling the wine for $30 less, a store will sell it for
maybe $10% off or for their best customers $15 off. Usually a restaurant
will not reduce the price on their wine list and keep the savings. Did you
ever see a wine list that says Brunello $60---no winery or vintage--that
allows the restaurant to buy discounted brunello without adjusting prices.

My brother in law in Florida ordered a Merlot on the wine list in a popular
Italian Restaurant---what he got was a Montepulciano d'Abbruzzi---after the
waiter removed his hand from the label after pouring--my sister asked where
was the Merlot we ordered and was told that was the Italian version of
merlot. Even more amazing if it was ordered in Maryland the wine would have
cost the restaurant $6 a bottle, which in most places would equate to $25 on
a wine list. The restaurant was charging $50 for a bottle. They asked for
the owner/manager and he told them how well the wine went with their order
and said he'd charge them only $25 for the bottle. What a deal. He never
explained why they didn't have the merlot. They left a small tip for the
waiter who called them "goddam wine snobs" after they left. (some friends
were at an adjoining table).

The selling of wine involves a good measure of chicanery and/or
larceny--Caveat emptor.

Scrooge.
"Jose" > wrote in message
t...
> > The bad news is that some large wine enterprises are $upporting Free the
> > Grapes, so they can sell direct to stores & restaurants not through
> > wholesalers.
>
> Why is this bad news?
>
> Jose
> --
> He who laughs, lasts.
> for Email, make the obvious change in the address.

"Joe \"Beppe\"Rosenberg" > wrote:

> Its bad news because wholesalers:
> -take the risk of buying wine from wineries and other suppliers
> so its on hand when a retailer orders it
> -extends credit to retailers and restaurants
> -absorb cost of transporting product to retailers
> -sells wine for the supplier
>
> Can you imagine a small to midsize store storing all the wine it
> thinks customers want?
>
> Can you imagine a supplier having to send wine to 10,000 stores
> instead of 50 wholesalers?

Hey Joe - reality check please!

That's the way wine business has been handled throughout Europe
(with the exception of some nordic countries) for ages - without
the slightest troubles.

M.

"Joe \"Beppe\"Rosenberg" > wrote in
news
> Its bad news because wholesalers:
> -take the risk of buying wine from wineries and other suppliers so its
> on hand when a retailer orders it
> -extends credit to retailers and restaurants
> -absorb cost of transporting product to retailers
> -sells wine for the supplier

True, but changing the system does not replace those functions, just who
performs them.
>
> Can you imagine a small to midsize store storing all the wine it
> thinks customers want?

Hey, wait, I thought it was the suppliers that wanted to waive the
wholesalers. Your point is, in fact, favoring the middlemen figure.
>
> Can you imagine a supplier having to send wine to 10,000 stores
> instead of 50 wholesalers?

Who is going to force them to do so? Allowing wineries to ship directly
does not mean they cannot continue using their wholesalers.
>
> Major suppliers, that's wineries and conglomerates would love to cut
> the wholesaler out because the cost to a retailer deceases. However,
> if their retail price could be 40% lower, the price to the store is
> maybe 20% less. And they would have total control over sales.

IMHO this does not make sense. Major suppliers usually do not want to use
wholesalers because their size makes it more efficient to integrate the
wholesaling functions in their own structure. Others, without enough
size, would find that wholesalers are their best chance to get to the
market.

Exclusive territories and exclusive dealing are a complicated issue. And
one that has been forbidden in the U.S. for years. I have always wondered
how a country in which most of the jurisprudence for ET and ED has been
set had such exclusive territories clauses in the wine distribution
system. In fact, my Phd dissertation is just about vertical restraints
(applied to industrial products, not wine), and many of my theoretical
background was founded in american cases.

You will thank me for not writing an un-interesting post about vertical
restraints, but let me say that, under certain circunstances, exclusive
territories can maximize the efficiency of a distribution channel. But
none of this circunstances are really present in the wine channels (the
most important usually being the property rights on pre-sale services is
not too important in wine distribution).

IMHO, there is not a single wine distribution channel that is optimum for
every wine, at least from an efficiency point of view. For the small
winery that makes a cult wine, the mailing list is probably the best way
to get to their consumers. A small production (easy to manage the
shipments), high prices and the ability to partially control speculation
(you know, the wholesaler pays $50 and then sells at $250, making a
bigger business than the winery).

The big wineries with a great brand recognition, probably want to
wholesale themselves, because they have a size that allows them to
organise their own warehouses, a transport net and a big sales team
serving directly to retailers and restaurants. That's how Moet Chandon
works in Europe (or at least in Spain).

A variety of wineries without enough brand recognition need a sales team
that has a great touch with retailers and restaurants, but usually do not
have the size to organise it themselves. Wholesalers, with the knowledge
of the local market know how to "push" the wine into the market. Some of
these wineries will decide on exclusive territories (yes, the current way
of doing it) because of a known externality of competition such as free-
riding of sales effort that takes the market to an equilibrium in which
no wholesaler wants to actually make the effort to push the wine.

The current distribution system of wine in the U.S., largely based in
exclusive territories set up with a legal basis is not only bad for many
wineries but also for most consumers. In a large percentage of cases, the
only who profits on the system is the wholesaler that is taking a stream
of quasi-rents comparable to monopoly extraordinary rents.

Best,

S.

> Its bad news because wholesalers:
> -take the risk of buying wine from wineries and other suppliers so its on
> hand when a retailer orders it
> -extends credit to retailers and restaurants
> -absorb cost of transporting product to retailers
> -sells wine for the supplier

I see why it's bad news to the wholesalers. I don't see why it's bad
news to the consumer.

> Can you imagine a small to midsize store storing all the wine it thinks
> customers want?
>
> Can you imagine a supplier having to send wine to 10,000 stores instead of
> 50 wholesalers?

What does the wholesaler do? Doesn't it send wine to 10,000 stores? If
that's a horrible thing for a supplier to do, it's a horrible thing for
a wholesaler to do.

> Major suppliers, that's wineries and conglomerates would love to cut the
> wholesaler out because the cost to a retailer deceases. However, if their
> retail price could be 40% lower, the price to the store is maybe 20% less.
> And they would have total control over sales.

Maybe I'm thinking about this all wrong, and we should get =more=
middlemen into the business. After all, we don't want the wholesalers
to have total control over sales either. Wholesalers should not sell
directly to stores, they should sell to facilitators. Then the
facilitators could sell to the stores. Sure, the price would be higher,
but it wouldn't be that much higher, since as you say:

> Very few in the wine food chain pass on all of a discount to consumers.

Then, in the restaurant...

> My brother in law in Florida ordered a Merlot on the wine list in a popular
> Italian Restaurant---what he got was a Montepulciano d'Abbruzzi---after the
> waiter removed his hand from the label after pouring--my sister asked where
> was the Merlot we ordered and was told that was the Italian version of
> merlot.

This could easily be solved by having distributors. No wait...

Jose



--
He who laughs, lasts.
for Email, make the obvious change in the address.

> Some of
> these wineries will decide on exclusive territories (yes, the current way
> of doing it) because of a known externality of competition such as free-
> riding of sales effort that takes the market to an equilibrium in which
> no wholesaler wants to actually make the effort to push the wine.

What does this mean? In real words?

Jose
--
He who laughs, lasts.
for Email, make the obvious change in the address.

There is good and bad in the 3 tier current system and the optimum solution
can never be fair to everyone in the trade--its the consumer who pays for
middlemen like I was---but wholesaler would not try to sell or find smaller
producers. Those small firms that did were under-capitalized

The difference between the US 3 tiers and European is one of culture---Most
English & French merchants are customer oriented in what they feel is an
honorable profession.

The liquor business in the USA post prohibition was fuelled by ex
bootleggers and their protection, Retail merchants looked for ways to get
extra merchandise or discounts contrary to State laws--I became quite adept
at accommodating them, and sending samples out of the local jurisdiction. I
had a full time job elsewhere so I took the risk. Politicians & enforcers
became used to looking the other way. Practices that would destroy someone
in the hardware business, are applauded in the "trade". Most of this is
fading as more ethical people join one of the 3 tiers.

Recently the Maryland comptroller and large wholesalers tried to outlaw
direct by local wineries to retailers & restaurants. The end game was some
pols with friends in land development, wanted the land owned by small
wineries to build on so they sought to put the small wineries out of
business as the large wholesaler had no interest in selling local wine and
the consumer would be adsorbing the wholesalers costs. Ten years ago that
would have happened but the Sun Newspaper & and effective lobbying by
wineries got legislation through that kept the status-quo. Unfortunately
one or two legislators were defeated in primaries because they turned on
their financial benefactors. This is a simplification of all that happened
but consumers & small wineries won at last.






"Jose" > wrote in message
. ..
> > Some of
> > these wineries will decide on exclusive territories (yes, the current
way
> > of doing it) because of a known externality of competition such as free-
> > riding of sales effort that takes the market to an equilibrium in which
> > no wholesaler wants to actually make the effort to push the wine.
>
> What does this mean? In real words?
>
> Jose
> --
> He who laughs, lasts.
> for Email, make the obvious change in the address.

Santiago > wrote:

> The big wineries with a great brand recognition, probably want
> to wholesale themselves, because they have a size that allows
> them to organise their own warehouses, a transport net and a big
> sales team serving directly to retailers and restaurants. That's
> how Moet Chandon works in Europe (or at least in Spain).

Not only in Spain, not only in Europe, but more or less worldwide
(excluding countries with monopolies, of course).

M.

Jose > wrote in
:

>> Some of
>> these wineries will decide on exclusive territories (yes, the current
>> way of doing it) because of a known externality of competition such
>> as free- riding of sales effort that takes the market to an
>> equilibrium in which no wholesaler wants to actually make the effort
>> to push the wine.
>
> What does this mean? In real words?
>

It means that when the same wine is wholesaled by several companies in a
certain territory, the market equilibrium can be not to make any sales
effort for this wine (opening bottles for retailers and restaurants,
preparing shelf-talkers, and so on) because the companies pushing the wine
incur in higher costs which reflect on their price and a retailer could
learn and gain interest about the wine through them and then purchase the
wine from a no-frills wholesaler who has a better price. The retailers
would then be free-riding on the sales effort of the full-services
wholesaler.

Best,

S.

Joe "Beppe"Rosenberg skrev i
dette:
> Its bad news because wholesalers:
> -take the risk of buying wine from wineries and other suppliers so
> its on hand when a retailer orders it
> -extends credit to retailers and restaurants
> -absorb cost of transporting product to retailers
> -sells wine for the supplier
>
> Can you imagine a small to midsize store storing all the wine it
> thinks customers want?
>
> Can you imagine a supplier having to send wine to 10,000 stores
> instead of 50 wholesalers?
>
> Major suppliers, that's wineries and conglomerates would love to cut
> the wholesaler out because the cost to a retailer deceases. However,
> if their retail price could be 40% lower, the price to the store is
> maybe 20% less. And they would have total control over sales.
>
> Very few in the wine food chain pass on all of a discount to
> consumers. Lets say a wholesaler takes 30% off their price and its an
> $100 a case item---Instead of selling the wine for $30 less, a store
> will sell it for maybe $10% off or for their best customers $15 off.
> Usually a restaurant will not reduce the price on their wine list and
> keep the savings. Did you ever see a wine list that says Brunello
> $60---no winery or vintage--that allows the restaurant to buy
> discounted brunello without adjusting prices.
>
> My brother in law in Florida ordered a Merlot on the wine list in a
> popular Italian Restaurant---what he got was a Montepulciano
> d'Abbruzzi---after the waiter removed his hand from the label after
> pouring--my sister asked where was the Merlot we ordered and was told
> that was the Italian version of merlot. Even more amazing if it was
> ordered in Maryland the wine would have cost the restaurant $6 a
> bottle, which in most places would equate to $25 on a wine list. The
> restaurant was charging $50 for a bottle. They asked for the
> owner/manager and he told them how well the wine went with their
> order and said he'd charge them only $25 for the bottle. What a
> deal. He never explained why they didn't have the merlot. They left
> a small tip for the waiter who called them "goddam wine snobs" after
> they left. (some friends were at an adjoining table).
>
> The selling of wine involves a good measure of chicanery and/or
> larceny--Caveat emptor.

Funny - reading this from a european point of view.
I allways think of us (europeans) as the defenders of a regulatory market
(with a few exceptions such as Norway and Sweden) and US as the domicile of
free enterprise!

regards and happy christmas from

Jan

--
A few photos can be found on http://jan.boegh.net/foto.htm

Jan Boegh skrev i dette:

> market (with a few exceptions such as Norway and Sweden) and US as

^ nonsense! Noorway and Sweden /is/ in fact the most
regulated markets afaik!. Sorry.

regards


--
A few photos can be found on http://jan.boegh.net/foto.htm

>>>Some of
>>> these wineries will decide on exclusive territories (yes, the current
>>> way of doing it) because of a known externality of competition such
>>> as free- riding of sales effort that takes the market to an
>>> equilibrium in which no wholesaler wants to actually make the effort
>>> to push the wine.
>>
>>
>> What does this mean? In real words?
>>
>
>
> It means that when the same wine is wholesaled by several companies in a
> certain territory, the market equilibrium can be not to make any sales
> effort for this wine (opening bottles for retailers and restaurants,
> preparing shelf-talkers, and so on) because the companies pushing the wine
> incur in higher costs which reflect on their price and a retailer could
> learn and gain interest about the wine through them and then purchase the
> wine from a no-frills wholesaler who has a better price. The retailers
> would then be free-riding on the sales effort of the full-services
> wholesaler.

Thanks.

What may happen then is that some whlesalers would find the wine too
much trouble to carry, and drop it. The rest would then find it more
profitable, and will market it.

Absent chicanery, of course.

Jose
--
He who laughs, lasts.
for Email, make the obvious change in the address.