Sunday, February 8, 2009

wine as a grocery

Many years ago, when the New York State legislature funded the start up New York Wine and Grape Foundation, Walter S. Taylor of Bully Hill Vineyards used to warn that taking government money leads to having to bend to the whims of bureaucrats.

These days, the whims of New York bureaucrats are pointedly in the direction of trying to find money to run the government. So, in the scramble to make ends meet, Governor Paterson’s proposed budget hits the wine industry, and in a number of ways: he wants to do away with that $2.8 million a year the state puts into wine and grape promotion and research; he wants to raise excise taxes on alcohol; and he wants to open up wine licenses to the grocery industry.

I’m neither for nor against the first proposal, except to say that the NY wine industry has had 25 years of state funding for promotion and research and in that time the industry has neglected to make an effort to become self sustaining in promotion and research; I dislike the second proposal because it means higher prices; and I’m for the last proposal, which is the one I want to address.

Some of the money that the state spent on promotion and research showed that wine is a healthy food; if so, where in the world should wine show up on shelves?

At the very least, the governor’s proposal to allow wine in grocery stores is consistent with the research.

NY wine and liquor retailers are not unanimously parading the streets in support of the wine in grocery store concept, and they have a valid reason to be upset. They’ve been forced to play under rules that created special “sin” shops. It wasn’t the retailers fault that the system was set up that way since 1933.

On the other hand, the system was set up so that wine and liquor retailers are in a semi-protected business. Not just anybody can get a license to sell wine—ostensibly, anyway—and you can’t plop your wine shop a foot away from an existing wine shop. A new wine shop must be within a certain radius distance from existing retail shops, and when a retail shop application for license is submitted, the state liquor authorities ask existing shops in the vicinity if they have any objections.

Now that the state wants to change the rules, retailers are indeed in a pickle. Maybe the state can give retailers some choices.

Retailers are afraid that grocery stores will gain buying leverage that will force the wine and liquor store out of the low priced/high volume wine market and then out of business.

The state should allow cooperative buying so that small stores can make large purchases from distributors to take advantage of the same volume discounts that will be available to grocery chains. As the rules stand now, large wine retailers have that discount buying advantage over small retailers and that isn't nice.

OK, that's the retailers-what about the consumers?

Existing retailers claim that consumers will lose out because grocery stores won’t offer small producer products.

If true, that situation could be turned into an opportunity for small retailers to develop a niche, provided the state allows them to sell beer and groceries. To compete, small shops can provide small producer wines, beers, and gourmet foods and they certainly can provide more personal and educated service.

There are other concerns. My point is that there may also be solutions.

One solution, however, doesn't look like a solution at all. A group of retailers have targeted New York wineries in their attempt to prevent wine in grocery store legislation. They have met and made some sort of pact to remove from their shelves the wines of any New York producer that supports the concept.

That's a dumb solution.

The last time I checked, retailers make a living by making a profit on the sale of the items that they retail. Removing product from the shelves works against that system. It also lessens reasons for consumers to come to your store, or to support you when you need them to press their legislators.

Threatening to remove wine from the shelves brings up that old saying about cutting one’s nose to spite one’s face…

Besides, wineries don’t make alcohol policy. Their only interest is to get wine to the consumer. That’s why they sell it to wholesalers and/or direct to retailers.

Speaking of policy, I don’t think the governor has much interest in whether or not wine is food that should be sold at grocery stores. He needs money and he sees grocery chains as a way to pay big dollars for licenses to sell wine. He also knows that this subject has been kicking around in NY for decades.

Retailers need to come up with creative ideas to offer the state that would solve the governor’s financial need, the grocery industry’s desires, the wholesalers and retailers interests, and, most of all, consumers.

Hint: blackmailing wineries isn’t the answer.

To effect legislation, you lobby the legislature.

NOTE: Sorry to report to all who have been reading the Contrarian blog on that the owners of the site have decided to end the blog.

If you are reading this entry anywhere other than on the vinofictions blog, be aware that it has been lifted without my permission (and without recompense), and that’s a copyright infringement, no matter that the copyright information appears with it.

Copyright Thomas Pellechia
February 2009. All rights reserved.


  1. I'm not sure what all the fuss is about.
    Grocery stores in FL have sold beer and wine for decades. Retailers with a brain, simply don't carry the same products because they can't compete on those products. But retailers still thrive and the public gets to choose.
    And everybody pays the tax, regardless of where they buy.
    Best, Jim

  2. Jim,

    The fuss is all about protection.

    NY wine and spirit retailers have lived in a protected world--it gives many of them the freedom to ring up Lotto sales and still be able to feel like they did a day's worth of work!

    My point: under the NY system, anyone can run one of these shops, and under the system almost anyone does. Even in the urbane and sophisticated NYCity market, I'd guess the know-nothings out number the wine savvy retailers. Imagine how it is in rural locales.

    It boils down to not being prepared and not wanting to compete.

    As I've said, it isn't all the fault of the retailers. It's the system they have had to work under and we all know how hard it is for people to change directions.

  3. Ah yes; I am familiar with that argument having heard it for years from Souther Wine and Spirits here regarding shipping wine into the state.
    Protectionism does no consumer a service.
    Best, Jim

  4. Well, some of the local wineries are angry with retailers who have targeted them because they support wine in grocery stores.

    One retailer called a winery owner wanting his stand on the issue. The winery owner said he had taken no position. The retailer said that's not a good enough answer for me to keep your wines on my shelves.

    You see what I mean? Rather than negotiate a deal for themselves with the state for the changing world outside their doors, retailers retrench, blackmail, and refuse to see what is before them--they learn that from the wholesalers.