DAN'S WINE BLOG- A STAR STRANGLED BANNER

Friday, October 29, 2021

Those of you who have had anything to do with exporting wine to the USA, you will know what a convoluted and shambolic system the USA has for the sale of wine.

For starters wine is controlled by The Bureau of Alcohol, Tobacco, Firearms and Explosives – great company for wine to be in – all that is missing is illegal drugs. Then there is their unique, “Three Tier System”, which means that you have to have separate companies to ‘import the wine’, ‘wholesale the wine’ and ‘retail the wine’. That is, it is illegal for an importer to wholesale or retail wine, etc., so no vertical integration as seen in most countries. Added to that, all fifty states have different liquor laws – including some being, “dry”, and that many states do not allow the shipment of wine across the border to consumers. For example, if you live in one of the mid-west states, you are not allowed to buy Californian wine via the internet or mail order.

The wine industry is thus incredibly disjointed and fragmented with a maze of different regional legislations and yet despite this it is very, very, successful.

Well, word from the USA has it that President Biden may be about to change all of that.

The whole shemozzle started with Prohibition back in the late 1920s, which was repealed in late 1933. Upon repeal the regulation of alcohol was devolved to the individual states, with each enacting its own unique legislation. Tennessee, Kansas and Mississippi are dry, with individual counties having to specifically legislate in order to be able to sell alcohol within the county. While Alabama devolved the legislation down to individual counties and cities.

Now under an executive order issued by the Biden administration in July, the Attorney General, Treasury Secretary and the Federal trade Commission have to assess threats to competition and free trade within the USA. Whereas this was aimed mainly at the drug companies and technology companies, there is an instruction therein, to review the alcohol sector. The aim is to improve the access to market for small and new companies and reduce/remove restrictive practices that prevent their entry into the market place.

So far this century there has been significant consolidation in the alcohol industry with the mega players snapping up successful start-ups, especially in new market segments such as Ready to Drink, seltzers and boutique breweries. It is worth noting that the number of independent wine distributors has halved in the same time frame as the big corporates gobble up the smaller, independent ones.

Small to medium sized wineries along with retailers argue that the state- based structure of the system allows wholesalers to engage in anti-competitive activities and stops the direct dealings of producers with retailers. This is especially so in those states where liquor sales are government controlled.

Initially this will not be a long and drawn out process as the relevant agencies have been given a mere 120 days in which to report back to the President.

Nobody knows what the eventual outcome of this will be (ranging from no change, through to a radical overhaul), however the fact that it is being looked at for the first time since enacted is a great thing, and hopefully will lead to easier trading conditions – especially for Australian wine exporters to the world’s largest wine market.

Fingers crossed!

Cheers, have a great week, enjoy some fabulous Aussie wine and stay safe!

**STOP PRESS**:??The Pennsylvania Liquor Control Board which controls all alcohol sales in that state, on September 17, introduced rationing to a list of popular products due to supply disruptions and shortages. The limit on a long list of products is two bottles per person per day.?Imagine being limited to only two bottles of Bourbon a day!!!

Sounds like Pennsylvania needs to import more Australian wine!!!