I’m So Glad I Live In California: The Three-Tier System & HR 5034, a Novice’s Take
So it turns out for all you lucky Californian’s, we all didn’t know how well we had it till now.
It has been a great long discussion for some months now about HR 5034, a bill that would revolutionize the alcohol trade, specifically effecting the small business owners of wine, beer and spirits. I’m a great wine lover, but a self-professed novice compared to the likes of local legends like Darrell Corti, David Berkeley, Michael Chandler, Tom Wark, Steve Heimoff, and many others – and with all of these different icons taking note of this information I have been collecting articles and wanting to get my teeth into them and fully understand the nuances of this break away movement that is brewing (no pun intended) in Washington DC. So here’s my take on how to fully understand what HR 5034 is. What you need to know is what their trying to dismantle, the three-tier system.
The three-tier system is pretty basic, and perfectly stated in a recent Palate Press Article;
“The only consistency, really, is the three-tier system, which exists in some form in every state. In the three-tier system, consumers (with some exceptions) must buy wine from retailers (or restaurants), who must buy from wholesale distributors, who buy from the producers. Retailers can’t buy direct from the winery and consumers mostly can’t either.”
It’s quite surprising how many people don’t know that there exists “wet” counties – alcoholic beverages are sold with no selling restrictions; “moist” counties – a moist county is a county on the “middle ground” between a dry county (where the sale of alcoholic beverages is prohibited); and “dry” counties -a county in the United States whose government forbids the sale of alcoholic beverages. This is a real, and from all reports, stable matrix of beverage laws for the U.S in 2010.
All these restrictions were put in place by the 21st amendment to ensure that the states could ensure their own liquor laws and provisions. This is where HR 5034 comes in; the long and short of it, as I can surmise, is: by reconstructing the three-tier system the wholesale distributors will create a bottleneck that will ensure all consumers (retail and direct alike) will have to go through them, ensuring a cut of the profit. Here’s the bad side effect: it will eliminate a mass majority of the small business’s that are in this industry because they will no longer be able to sell directly to their consumer. In addition to the loss of this valuable portion of the industry there are also provisions to give the states (not counties) more rights over their liquor laws = example: drying out Chicago of liquor (HUGE Beer Following), which resides in Illinois (a mostly dry state).
This is all bad voodoo for the drinking industry, which leads the question of why would the National Beer Wholesalers Association (NBWA) and the Wine and Spirits Wholesalers of America (WSWA) be the sponsors behind the bill? It’s all in one word, WHOLESALER. They get a cut in the bottleneck they would create. The bill is also known as the Comprehensive Alcohol Regulatory Effectiveness Act of 2010 or the CARE Act, isn’t that nice.
It made me begin wondering how a bill like this could ever gain support, right? There are far more wineries, distilleries, and breweries than wholesale corporations right? Oh contraire, in a great article by Wine Spectator there was one paragraph that cleared it all up.
“California Congressman Mike Thompson also explained why the wholesaler groups are so powerful a lobbying force in Washington. “There’s only a few of us who represent wine country, and there’s only a couple who represent distilleries,” Thompson said, “but every member of Congress has two, three, four, five, maybe six distributors [in their district].”
End game. There is great support for wholesalers in the states that could elect the officials that want to keep getting elected, thus ensuring congressional support through a widespread wholesale constituency. So although from recent reports from the Wine Spectators article that “Speaker [Rep. Nancy Pelosi (D-Calif.)], assured me she’s in opposition to [H.R. 5034] and that House leadership will do everything they can to make sure it doesn’t pass. But it’s important to get the word out there as to how devastating this could be for our areas.””
Although the speaker of the house is one of the most powerful positions in congress, I don’t think this is centered at this point on a bill that (hopefully) won’t make it through, but around the idea that this was a VERY aggressive action taken by the National Wholesalers lobbies. On the oppositions side are the California Association of Wine Grape Growers, Allied Grape Growers, the Wine Institute, WineAmerica, and the Distilled Spirits Council of the United States – but although these associations are dear to my heart, they are not throwing down nearly the same amount of cash in the battle for this bill, it’s all based in grassroots support. My fear is not for now – but the future, this could be just the start of a Tort Wars style battle of liquor laws in the U.S.
So here’s my last word from a consumer, heavy drinker, and a burgeoning policy wonk in the wine trade – I’m so glad I’m living in the more progressive California, and hope the beverage associations I love get brass balls before the next bout.
