New York merchants can buy direct from wineries - almost
November 28, 2006
By Howard G Goldberg in New York
Licensed retailers and restaurants in New York State can now buy directly from out-of-state producers on the internet, a state lawyer says.
Thomas Donohue, the lawyer for New York's State Liquor Authority, has given the nod to the use of newly-developed technology that enables New York to hand middlemen a new commercial benefit without essentially changing the state's three-tier system.
A store or restaurant interested in buying, say, six bottles of a boutique's limited-edition wine will be able to order the wine on the internet by visiting a site listing all wineries participating in the program.
Instantaneously a transaction takes place in which the order goes to a prearranged wholesaler, whom the winery's computer bills for the purchase.
The wholesaler's computer sets aside taxes on the purchase, bills the retailer or restaurateur and, deducting its margin, pays the winery. The producer sends the bottles directly to the buyer.
For a nominal extra outlay, the system gives middlemen additional business because previously they had declined to carry the wine in question on the grounds that supplies were too limited and demand too small to warrant the costs of buying, shipping, warehousing, selling and delivering the wine.
All this has been brought about by the Liquor Authority's lawyer, who has advised the Inertia Beverage Group, a Californian company, that its technology can be used to automate sales this way.
Paul Mabray, Inertia's chief executive officer, calls New York's approval 'groundbreaking.' He is in talks with five wholesalers and two have expressed interest in coming aboard.
After debuting his system in New York, Mabray hopes to enter California, Arizona, Washington State, Texas and Florida next year.
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New York State's Liquor Authority Lawyers should spend more of their time figuring out how to regulate free trade, not supporting monopolistic and aged laws that make commerce ridiculous. Many in the industry support the three tier system and its efficiencies, if using it could be a choice. But don't require it. So how is the 'margin' negotiated? There should be a way that ensures that NYS gets it taxes and the product to a retailer or restaurant without involving a wholesaler. The supplier or retail account would just have to prepare for high shipping costs. Russell Joy, Napa, USA
As a small wine producer in California, I applaud the efforts of New York to create a system where wine retailers and restaurants can have direct access to small producers. The large wholesalers often don't have the time or inclination to handle and market the small allocation we might have available for that market. We want to insure that the states get their fair share of taxes and that wine doesn't fall into the hands of underage drinkers. But we also want to have access to markets that we currently don't. I'm curious to see if the margins the wholesalers will receive are reasonable relative to the service they provide. If so, this could be the beginning of a good trend. Tim Olson, Olson Ogden Wines, California, USA
Thanks for commenting. I am with Inertia Beverage Group and a part of this initiative.
Tim Olsen hits the nail on the proverbial head with the program. Distributors play a very vital, but complementary role. The goal of the program is to facilitate a direct relationship between the winery and the trade account. Inertia and the distributor are very much enablers in this regard, but the program is designed to empower the winery to work with the trade while Inertia brings technology and the distributor brings some necessary administration to the table--all very seamlessly and in the
background of the buying process.
In our humble estimation, this will be a game-changer for small, boutique vintners in seeking new markets and trade accounts that look for the unique and uncommon brand. Jeff Lefevere, Inertia Beverage Group, USA
I agree with Russell & Tim. This is a huge and needed step to chip away at the influence wholesalers have over what wines & spirits are available to retailers and restaurants in New York and other states. The key to success will be the amount/margin a wholesaler charges the buyer for a process that ultimately will be completely automated; ordering, shipping, invoicing and payment of taxes. This is a great initiative with potential rewards for all parties.
Scott B. Smith, Illinois, USA
New York has shown great strides to enhance consumer product selection through their local wineries and retailers. In October, they announced state funding of over $260,000 for local wineries to develop their web presence. This initiative is a step in the right direction, however we are still plagued by that intermediary unit - the wholesaler. Once states can find a way to consolidate or properly allocate taxes on wine shipments, we will finally be able to fully experience the ecommerce experience of wine. We can't expect to simply bypass the wholesaler until legislation is in place to handle or monitor the collection of these taxes. So, while not the ideal resolution, I commend New York and Inertia on the steps they are taking. Mark P. Spangler, Wine Marketer / Classic Wines, USA
This is just another end run to give wholesalers business they don't deserve because they won't go out and sell like they are supposed to do in the first place. All they do is take orders on the wines they have and those wineries who need some “hard sell” , because they are unknown, get no representation. Wholesalers are order takers for brands that have already established their markets through advertising dollars the suppliers spend.
The best way to get wineries represented is like in many other states, allow them to ship to INDIVIDUALS, who order on line because they have done the research and know what they want. Stop rewarding liquor stores and their wholesaler buddies who spend all their time killing legislation that will allow access to wines over the internet DIRECTLY. Set up a system that the wineries have to pay the appropriate state taxes when they ship directly and then the State will not be out any revenue. Thanks for listening….. A California consumer who is lucky enough to live in a state that allows open access to wines from every source. Steve Hughes, thewinegroup.com
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New York State's Liquor Authority Lawyers should spend more of their time figuring out how to regulate free trade, not supporting monopolistic and aged laws that make commerce ridiculous. Many in the industry support the three tier system and its efficiencies, if using it could be a choice. But don't require it. So how is the 'margin' negotiated? There should be a way that ensures that NYS gets it taxes and the product to a retailer or restaurant without involving a wholesaler. The supplier or retail account would just have to prepare for high shipping costs.