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Wine in the Wake of Charlottesville

August 17, 2017 - 6:55am

Do Americans drink more during moments of cultural upheaval? Do they reach for the bottle when its culture and people are ignited and roiled by doubt, consternation and the unknown?

We know Americans drink more when they collectively celebrate. Just ask beer producers around Independence Day. Talk to wine retailers about their sales in advance of Thanksgiving and Christmas. Query sparkling wine producers about sales on December 31.

As we watch the Charlottesville debacle and tragedy play out, are we examining our thoughts with the aid of booze? I don’t know. But I am curious about this.

I wonder if Americans drank more during the Cuban Missile Crisis. Did we mix more drinks as the Watergate hearings played out? Did the Challenger Disaster lead Americans to uncork an extra bottle of Cabernet?

The way we use alcohol is somewhat complicated. While it is and always has been a product we use to help us celebrate and mark momentous occasions, alcohol is also a tool we use to help numb and soothe our stressed psyches. While I don’t have data (yet) on whether or not the Charlottesville Moment resulted in increased sales of alcohol, I suspect it has.

If you believe this post is insufficient as a public response to the shocking events of Charlottesville or that it is a somewhat crass way of addressing the events of the past week, I’d only remind you that this blog has for more than a decade primarily been aimed at the business and marketing of wine.

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It’s Official: Cannabis and Wine are a Poor Pairing

August 3, 2017 - 8:42pm

Cannabis and wine are alike only in the same way that wine is like carrots. Both are produced with plants. I’ve been inching toward this conclusion for quite some time. However, it took the experience of listening to presenters and exhibitors at Wine Industry Network‘s brilliantly produced Wine & Weed Symposium on Thursday, for me to fully embrace this conclusion.

This was not, however, the conclusion being delivered at the Symposium. Nor is it the position that the Cannabis legalization champions have touted over the past decade as the legalization movement gained so much momentum that recreational pot is or will so be legal in 8 states now, including, of course, California.

In fact, cannabis legalizers have long championed the connection between weed on the one hand and wine and alcohol on the other. There have actually been pieces of legislation named “Regulate Marijuana Like Wine” and “Regulate Marijuana like Alcohol.” Now, in Wine Country, the cannabis industry is making a very strong push to associate itself with wine.

I don’t buy it. However, I’m in the minority on this.

At the Wine & Weed Symposium, a poll of attendees was taken. We learned that half the people in the room worked in the wine industry, 28% in the cannabis industry and 18% in both industries. But the really interesting thing was that when attendees were asked if there will be more collaboration or competition between the wine and cannabis industry, 77% said collaboration, while only 7% said competition. I was among the 7%.

As I sat and listened to some pretty smart cannabis people talk about the regulatory and perception problems they face in California and as I sat startled to discover that legalization will likely put upwards of 60%-70% of current cannabis growers out of business, it struck me hard that cannabis has far more to gain by associating themselves with smoothly regulated and well-accepted wine, than wine has to gain by associating itself with cannabis.

The cannabis industry in California will profit and benefit from understanding how wineries attract visitors and how they cater to them. The Cannabis industry will benefit from the wine industry by understanding how it navigates the regulatory environment. The Cannabis industry will benefit by its somewhat still suspect product being placed alongside historically and happily embraced wine at food related events. The Cannabis industry will benefit from the wine industry’s experience figuring out how to use appellations. Cannabis will benefit from the throngs of wine tourists who will take a side trip to a cannabis producer. Cannabis will benefit from those adults who have already been accustomed and trained to use wine to take the edge off who will take that training and turn their attention to the now-legal cannabis and away from wine. 

How exactly does the wine industry benefit from cannabis legalization?

The only thing I can see in this regard is that there may be a few pot smokers who come to Wine Country to indulge and learn and who take their first side trip to a winery. But this segment of the market is about as small and niche as it can possibly be.

Wine’s reputation certainly won’t be enhanced by it being somehow associated with cannabis.

But there is also that issue of cannabis being like wine in the same way that wine is like carrots. Yes, they both grow in the ground, but they are two entirely different products. While there is certainly a segment of wine drinkers who drink wine for the buzz, it is entirely possible for someone to consume wine with no intent to get drunk and to succeed in staying straight while still appreciating the way wine tastes, while still appreciating how wine accompanies food, and while still indulging in the connoisseurship of wine. This happens all the time.

Outside of the medical uses of cannabis, there is no other reason to consume it other than to get high. This difference between weed and wine creates an entirely different culture surrounding the two products. As Claudio Miranda of Guild Enterprises noted at the Wine and Weed Symposium, one difference between the two products is that wine is never promoted by touting its ability to bring on inebriation nor by the types of inebriation it induces. Cannabis, on the other hand, is promoted almost exclusively in this manner.

Finally—and I’ve said this before but it is worth repeating—cannabis is most definitely going to impact the sales of wine. There will be a certain number of people who drink a couple of glasses of wine at night or with dinner to take the edge off who will switch to pot. Some will simply drink less wine. Others will stop drinking wine altogether. This will negatively impact the sales growth of wine and anyone who is saying otherwise is either in the cannabis industry and wishes to engage the help of the wine industry to normalize their product or they simply aren’t thinking straight.

This recent article in High Times outlines the reality of how cannabis legalization will impact alcohol sales. This article in Forbes reports on an estimated $2 Billion loss of beer sales. There is no reason to believe wine is so special in some way that it won’t also be impacted.

I’m a fan of cannabis legalization. There are too many good reasons to get high and pot is extraordinarily good at getting you there. It delivers significant medical benefits. And it will produce significant tax revenue that will benefit everyone in states where it is legal and taxed.

I’m grateful to the folks over at Wine Industry Network for putting on the Wine & Weed Symposium. Not only was it a great event that offered tremendous information on this new legal industry, it also solidified my belief that cannabis legalization is not good for the wine industry and that the wine industry as a whole has very little if anything at all to gain by cooperating with the cannabis industry.

 

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The Pros and Cons of Living in Napa Valley

July 28, 2017 - 2:34pm

The longer you live in the paradise known as Napa Valley, the more you appreciate the benefits and downside of being a resident of paradise and the more apparent the “Quality of Life Equation” becomes. And there is an equation.

On The Positive Side:

CLIMATE: There simply is no arguing this point: The climate in Napa Valley is a near perfect environment for humans. The air is dry, save for the quickly developing and dissipating fog, which is itself moderate and pleasant. The sun shines consistently and rarely is too intense. The chill is never bracing and almost always pleasant and welcome. We play golf 12 months per year. Humidity, oppressive or otherwise, simply does not exist.

NATURAL BEAUTY: Valleys. Rolling hills. Mountains. Rivers. Creeks. Bays. Abundant agriculture. Often stunning sunsets. Majestic oaks. Open space. it is a distinctive kind of natural beauty, but true natural beauty nonetheless.

CULTURE: Napa Valley possesses a concentration of fine dining that is remarkable. The available recreational opportunities range from golfing, fishing, and hiking to numerous sporting, competitive and biking and more. Numerous entertainment venues exist from jazz clubs to headliner performances to comics. Religous communities are well represented. We have a community college that offers everything from remedial education to expanded adult classes. The Valley’s proximity to San Francisco and Oakland provides access to the most sophisticated cultural opportunities on the globe.

COMMERCIAL/SHOPPING: From boutiques to chains to services, most of what one needs access to is readily available in the Valley.

PROXIMITY TO EVERYTHING: Everything…Literally. Snow. Ocean. Three airports. Metropolitan area.

On the Negative Side

COST OF HOUSING. It’s ridiculous. Pure and simple. Here is a list of homes on the market in Napa County between $450K and $550K. Now, consider this list of homes on the market in Yamhill County, Oregon in the middle of the Willamette Valley wine country. The difference is stark…and depressing. Try to buy one acre and a 3 bedroom home in Napa Valley. You have to pay $600K and be willing to live in such a remote place that it will take a half hour to get anywhere. Moreover, you have to be willing to live in a piece of crap home. For that same price in Yamhill County you get 4,000 square feet, 5 bedrooms, 3 acres, just outside the town of McMinnville. Bottom line, Napa Valley is unaffordable for the vast majority of Americans. Rent is no better.

REGIONAL TRAFFIC: I left San Francisco the other day at 2 pm on my way home to Napa Valley. I arrived in the town of Napa at 5:30 pm. It was a 55-mile drive. This is par for the course. The traffic from Napa Valley to the rest of the Bay Area can be impossible.

LOCAL TRAFFIC: Some folks rail against the traffic in the Valley. It CAN be bad during commute times, going up and down Valley.

CHILDCARE: For low and middle-income families, there are relatively few quality and affordable childcare options and activities for children of most ages.

COMPANY TOWN: It’s all about wine. Sure there are other “industries” and “services”, but this Valley is a nearly mono-commercial. This is monotonous.

The bottom line on Napa Valley is that it is a beautiful place to live with numerous amenities if you can afford it. 

 

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Demolishing Natural Wine

July 26, 2017 - 8:15am

One of America’s most experienced, accomplished and insightful wine writers recently demolished both the idea of “natural” wine and the intellectual artifice of the “natural” wine movement. This is notable because outside of intellectually disciplined observers of the wine world and some hacks like myself, there hasn’t been all that much push back against the foundations of “Natural Wine”.

In the course of schooling the natural wine movement at Wine Review Online, Paul Lukacs made the following point that deserves highlighting:

“Equating high quality with only one form of production is a mistake.  Some wines made by large commercial corporations taste wonderful, while some made by small-scale, hands-off vintners are flawed.  The assumption that only artisanal producers are able to make appealing wines is nonsense.  It also is, as Bianca Bosker suggests, a kind of snobbery, one based on a falsely romanticized understanding of history.”

Yes. It is nonsense. Yes. It is snobbery. But it’s also marketing, pure and simple.

Has anyone noticed that advocates of the “natural” movement have no interest in and actively oppose any formal definition or regulation of the term “Natural Wine”?

Recently, Doug Wregg, a strong and vocal supporter of Natural Wine, made clear that he opposes any definition of the term when he said the following in an interview with Sprudge Wine:

“I also believe that if you legislate (in terms of definitions) then you inhibit the freedom of the vigneron and the vigneron is the human element in the “terroir” of the wine, the one who guides from grape to bottle.”

The only thing that would be inhibited if there were a legal definition for “natural wine” would be the use of the term. Vigneron would still be free do whatever they choose with their grapes and their fermentation vessels. Mr. Wregg, as well as every other opponent of legislating a definition of “Natural Wine”, understand that the key to the success of natural wines is not the wines themselves, not their support of the magical nonsense known as “biodynamic farming”, not the occasionally unflawed bottlings of “natural” wine, nor the frequently well design labels attached to natural wine. Rather, they understand that the success of this category of wine is built primarily on the rhetorical use of the term “Natural”. Without unfettered, unregulated access to that term and everything it implies about the wines they don’t believe should wear that label, their movement would be no movement at all.

In the course of removing the intellectual foundations of the idea of Natural Wine, Lukacs makes a very salient point about the movement:

“The objection [by natural wine advocates to mass-produced commercial products], however, is not to how these wines taste.  No, the problem is who makes them.  The natural wine movement is at heart anti-capitalist, anti-corporate, and anti-globalist.  It also is anti-democratic, for it views the world of wine as inherently hierarchical, with artisanal producers who make only small amounts of hard to find wines occupying the ladder’s top rung.”

Again, Lukacs is exactly correct about the ideological origins of the natural wine movement. The thing is, there is nothing new about people directing their purchasing habits in the service of their politics. What would have been nice, however, is if this view of the world led to an embrace of the thousands of small, family owned, terroir-dedicated artisan winemakers who have been working for decades around the globe to produce wines of authenticity. But it didn’t.

Instead, the natural wine movement began a campaign of nonsensical rhetoric aimed at convincing naive wine drinkers that everything but “natural wine” is mass-produced, “anything that isn’t “natural” is potentially harmful, and any wine that doesn’t fit the fluid definitions of natural is unnatural.

As a marketer, I have to give the mug slinging Naturalistas credit. They have done a wonderful job of relying on pure rhetoric, flash, and misdirection to build a category and sell wine. That’s not an easy thing to do.

For those interested in a balanced, nuanced, researched, rational discussion of the natural wine movement would do well to read Paul Lukacs’ Wine Review Online article, “Natural Wine, Really?

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Nevadans Get a Taste of the Parasitic 3 Tier System — Not So Tasty

July 25, 2017 - 4:06pm

One of the best ways to evaluate the efficacy of a system or process is to present it to someone who has not spent time engaged with the system. That’s exactly what happened in Nevada when advocates of marijuana legalization and those overseeing implementation of recreational marijuana’s regulatory system were confronted with the 3 Tier System that governs alcohol distribution. That same 3 Tier System was adopted when Nevada voters approved Question 2, the initiative that legalized recreational marijuana sales and use.

However, Nevadans saw what happened when wholesalers were stuck in the middle of the distribution system for no other reason than they had the political clout to weasel their way in. Marijuana shortages occurred. The State had to take emergency measures to keep pot on the retail shelves and not lose millions in tax revenue. Wholesalers gummed up the system with lawsuits. All this led to a very interesting evaluation of the three-tier system for marijuana distribution in Nevada in a story published in the Nevada Independent:

Is the three-tier system relevant?

The dispute has raised questions about the importance of the three-tier system, which was established in the wake of Prohibition as a way to avoid business arrangements that policymakers believed led to aggressive sales and excessive alcohol consumption. Prior to Prohibition, manufacturers could operate restaurants that exclusively sold their liquor in an arrangement called a tied house, but policymakers thought it would encourage temperance to add distance between the tiers.

Distributors argue that voters intended to set up a system closer to the one that governed liquor as a way to ensure integrity in the tax collection process. They say the vertically integrated marijuana system is a case of the fox guarding the henhouse.

“The reason the alcohol distributors were included in the distribution chain to begin with in Question 2 was to provide a check and balance so the Department could make sure that we would validate what was being picked up at the supply side was exactly what was being delivered at the retail side,” said Allan Nassau of the Independent Alcohol Distributors of Nevada. “This would assure that the Department would have another link in the supply chain to verify what was being sold so they could collect the proper amount of excise tax and no impropriety would occur.”

Question 2 campaign spokesman Joe Brezny argues that the integrity check comes from a “seed to sale” tracking system, and that vertical integration is an effective system for marijuana because it allows retailers to maintain tight quality control over their products. He said the streamlined model also helped lower prices.

Brezny pointed out that sometimes, marijuana cultivation and production are on the same site as a retail store, so distribution would involve moving a package from one room or floor to the next in the same building.

“What happens if you put an independent distributor in the middle of that? That’s the definition of a bottleneck,” he said. “Other than the three-tier system in alcohol where that has a historical reference from ending alcohol prohibition, I don’t know any other product in the product chain where that is a requirement.”

Besides, he argues, even the three-tier system for liquor has deteriorated in recent years. Microbreweries brew and sell their product at the same site without distributors, and wine tasting rooms at vineyards do the same.

“It’s a dinosaur,” he said. “Microbreweries and craft vineyards with tasting rooms are the proof that the three-tier system is a relic of the past.”

It’s the easy acknowledgment of the 3 Tier System’s utter absurdity and uselessness that most comes through in Brezny’s comments. He’s only worked within the system for a short while and he immediately notices that it’s a complete outlier from nearly every other method of product distribution.

It’s sometimes difficult to explain alcohol distribution law to someone not working in the alcohol business. You explain the product MUST go to a wholesaler. You explain the retailer may not conduct business with the restaurant. And you get a blank stare back at you. It’s not that you aren’t explaining the system well. It’s that the system is so absurd, useless and obviously a racket aimed at enriching a small collection of parasitic businesses that those outside it can’t fathom its meaning and purpose. But them in the middle of it and they immediately understand the problem.

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How to Join Forces To Take on Wine & Spirit Distributors Southern-Glazers

July 24, 2017 - 1:27pm

The recent lawsuit against Southern Glazer’s Wine and Spirits filed this month in a California federal district court accuses the wine and spirits distribution giant of defrauding not just the plaintiff in the case, but retailers across the state and country. As I noted in a previous post, if even half the accusations in the suit are true you’ve got a degree of fraud and illegality that is shocking. Moreover, the complaints listed in the lawsuit include actions that retailers and restaurateurs have somewhat quietly acknowledged go on regularly.

I recently spoke with Kelley Gelini of Wakeford Law, one of the principal attorneys working on the case of Nguyen, et al. v. Southern Glazer’s Wine and Spirits now in the United States District Court of Nothern California. I asked her about the meaning of the case and efforts she is making to bring the case to class action status.

Why is this lawsuit of importance to the beer, wine and spirits industry in America, and not simply to the primary plaintiffs?
According to its website, Southern Glazer’s distributes more than 150 million cases of wine and spirits annually, and covers nearly 90% of the legal drinking age population in the United States, making it the country’s largest distributor of wine and spirits. As detailed in the lawsuit, Southern Glazers has engaged in a long term unlawful practice of using the account numbers of its own customers for illegal, fraudulent and anticompetitive purposes. It is clear that Southern Glazers is harming its own customers by these practices. Perhaps less obvious is the effect these same illegal practices have on suppliers who struggle to bring their products to market, and smaller distributors who are virtually crushed by Southern’s anticompetitive tactics.

This lawsuit has the potential to bring about powerful change in the wine and spirits industry at all levels of the 3 tier system. 

2. In proceeding with the lawsuit, what kind of information are you seeking from retailers as well as others who have worked in the wholesale and producer sectors of the alcohol industry?
We would like to hear from any Southern Glazers customer who has received shipments of products from Southern that they did not order, or who was charged for products they did not order, or who was forced to purchase products they did not want in order to get those they did. We would also like to hear from any retailer who suffered tax implications from any of these types of fraudulent practices. We would especially like to hear from anyone who has documents such as statements or invoices which reflect any of the above-described practices.

We also invite any suppliers who are either currently or formerly represented by Southern Glazers and who believes their route to market was blocked or hindered by virtue of this representation to contact us. And finally, we would like to hear from other distributors who struggle to compete in the face of Southern’s anti-competitive tactics.

We invite anyone with information to email us at information@wakefordlaw.com or kbarrett@scalaw.com, or contact us by phone to 415-578-3510 or 510-891-9800.

3. Can a retailer in California or outside the state join the lawsuit as a main plaintiff or as a member of the class you are gathering as part of the suit?
Yes.

 4. What prompted the filing of the lawsuit?
Initially, we were contacted by one retailer whose Southern Glazers account was fraudulently charged by Southern Glazers for products never ordered nor received. Once we began to investigate this particular retailer’s case, we were astounded by the sheer numbers of other retailers who have been damaged by these very same tactics.

5. What kind of response or feedback have you received from the industry, including from wholesalers, retailers, and individuals working in those sectors?
The response has been absolutely overwhelming. We have been contacted by literally hundreds of people including other of Southern Glazers’ affected customers, suppliers, and even distributors. There is a common theme here – hundreds, if not thousands, of Southern Glazers own customers who trusted Southern Glazers to treat them fairly, and hundreds, if not thousands, of customers who were harmed by Southern Glazers illegal, fraudulent and anti-competitive practices.

It’s hard to say how this lawsuit will end up. It is, however, far more likely that justice will be done if any retailers or restaurateurs who experienced any of what Ms. Gelini mentions comes forward and works with her and her colleagues.

 

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1966 Rock n Roll vs The Greatness of 2017 California Wine

July 13, 2017 - 4:54pm


In 1966 Bob Dylan Released Blonde On Blonde, the Beach Boys released Pet Sounds, and the Beatles released Revolver. It’s arguable that no three albums together had more influence on the history of Rock n Roll. And it all happened in one year. It was a seminal year for Rock n Roll and one we can look back on it and, again, make the case that it was the pinnacle of the Rock genre.

I wonder if 2017 might, in later years, appear to be the pinnacle of the California wine industry—at least from the consumer’s perspective.

This is not to say that it’s all downhill from here for California wine. After all, the year following the release of Blonde On Blonde, Pet Sounds and Revolver, we got Aretha Franklin’s I Never Loved a Man The Way I Love You, The Doors’ The Doors, Jimi Hendrix’ Are You Experienced and The Beatles’ Sgt. Pepper’s Lonely Hearts Club Band.

But just as 1967 can be looked back on as the year we learned what Rock n Roll can do for art, I think we can look at the state of California wine today and ask, can it possibly get better?

Napa Valley is currently making the best Cabernet and Cabernet blends in its history. With their creamy and powerful middle, they are also displaying great reference to their terroirs. Over in Sonoma, the pursuit of Pinot Noir is producing truly great wines with vintners now apparently in complete control of their cooler climate vineyards on the coast. Meanwhile, in Anderson Valley, we have perhaps the most underrated wine growing region in the United States. If Anderson Valley were located in Burgundy it would rival in reputation Chevalier-Montrachet, Corton Charlemagne and Richebourg the wines are so beautiful and distinctive. And appriciate how good the wines of Lodi, the Foothills, Santa Barbara, Santa Cruz and Monterey are today.

Equally important, consider the diversity of wine being produced in California from the North Coast’s powerful bottlings to the coast’s ethereal Pinots, to the cold climate renditions of Syrah to the selection of great Rieslings being produced in well-scouted vineyards. And the diversity within the AVAs is wider and broader than ever. What the consumer wants in terms of style and variety can now be found inside the borders of the state. It is a remarkably good time to be a consumer of California wine.

When you listen to the intense majesty and innocence of Brian Wilson’s Pet Sounds or the genre changing development heard in Revolver you appreciate the significance of those works. Fifty years later they produce in their fans reverence. Now consider the fans of California wine. Sure, some are label sniffers and point chasers. There were groupies too. But the real fans of California wine can now traverse the state and never be but a few miles away from great wines, and most well within their price range.

It’s not a matter of who are the Brian Wilsons, Paul McCartneys or Bob Dylans of California wine. It’s a matter of reckoning with the possibility that we are living in the moment when they are here and producing the best wines that can be produced in the state.

I of course only have limited perspective. I’ve only been drinking and tasting California wine for 30 years. And mine is only one opinion. But it is a fact that the wines of California have never collectively been as good as they are today. And it’s not even close.

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Booze Wholesalers Cause Emergency in Nevada Pot Sales

July 11, 2017 - 8:25pm

Believe me when I tell you, I am very familiar with State of Emergencies. They are no fun.

I got my BA at Humboldt State University and lived through the now legendary “Blight of ’86”. No one really knows what exactly happened to cause it. But we all lived through those harrowing days. All the local dealers had the same story: “Sorry, No dope.” Even Brent, the most famous dealer on campus was out…For weeks. Growers stayed in the hills. Dealers were nowhere to be seen. Students were regularly caught scrounging their green shag for small kernels of bud (that’s an arduous process, let me tell you). And not a small number of professors were giving remarkably boring lectures. It was hell.

My understanding is that when the Blight finally ended right before Spring Break it was due to a few business students taking a caravan south all the way to San Diego and returning with just enough pot to keep a small, insular collection of scholars in weed. It was harrowing.

This is all to say that I feel for the people of Nevada who are going through a similar State of Emergency. Apparently, just days after cannabis legalization there is a severe shortage of pot and dispensaries are saying they’ll run out completely if something isn’t done.

The problem is the alcohol wholesalers.

This isn’t a joke. Honest.

It turns out that when Nevada voted to legalize recreational marijuana sales, one provision of the law as that alcohol wholesalers had first right of refusal on distributing pot from producers to retailers for the first 18 months of legalization. Sound familiar? However, when the state sent out notices asking for wholesalers to step up, something like seven did and few of those didn’t qualify, so the state opened distribution licenses up to non-alcohol wholesalers in order to assure there would be enough in the middle tier to distribute the newly legal drug.

Well, the alcohol wholesalers didn’t like that and sued. They won, but the state has appealed to the Nevada Supreme Court. None of this matters to cannabis retailers who are running out of product and won’t be able to meet their bills and will be forced to layout workers. And the state isn’t too happy. Estimates are that the state brought in more than $1 million in taxes in the first 4 days of legalized sales.

So, the governor has declared a state of emergency, which will lead to the licensing of non-alcohol wholesalers to help move product from producers to retailers.

I don’t mean to be the “Guy who told you so”, but I told you so. A year ago I warned the cannabis industry to beware the wholesaler. “They’ll screw you”.

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Is the Southern-Glazers Wine Distributors Lawsuit Really A Surprise?

July 6, 2017 - 8:01pm

In a way, it’s shocking that a lawsuit and claims like this haven’t been filed before, given just Southern/Glazer’s target size. On the other hand, the claims of “unfair, unlawful, deceptive, and fraudulent business practices”, meticulously laid out in this class action suit against Southern/Glazers are shocking. Hell, if a quarter of them are borne out, it would be a shocking example of hubris, fraud, and corruption by the largest and most powerful entity in the American wine and spirits marketplace.

Anyone who has been in the wine industry long enough has heard complaints about many of the types of charges listed below. Some of the most lurid complaints about wholesalers I’ve personally been told over the years are nearly identical to this charge listed in the lawsuit: “Threatening to cut off supplies to customers who do not buy a sufficient quantity of liquor, or liquor of select varieties.” Among the most common charges that nearly everyone in the business has heard of, particularly if you work with restaurateurs or retailers, is this one—also taken from the lawsuit filed Wednesday against Southern/Glazers in the District Court of Northern California: “Threatening to cut off supplies to customers who do not buy a sufficient quantity of liquor, or liquor of select varieties.

And these aren’t even close to the most astounding of charges in the lawsuit.

Someone called me yesterday and asked if I’d read the lawsuit. I told them I had. They asked if I thought there was any validity to the charges laid out in the suit and what would be the consequences if they were proven true. Here’s what I can say about all that. I have no idea or insight into whether the charges laid out in this particular lawsuit against Southern/Glazers is true. How could I? I don’t know the main plaintiff. Can I imagine they are true given what I’ve seen and been told over the years? Well, the strength of my imagination is only as great as the depth of my knowledge and experience. My knowledge and experience of what big wholesalers are capable of is pretty extensive. Finally, if half of what is alleged in the complaint is true, someone’s gonna pay up LOTS. Additionally, we’ll find out exactly what million in campaign contributions over the years buys you.

Below are the actual allegations against Southern/Glazers as laid out in the lawsuit filing. I’ve made some formatting changes to make it easier to read. Where “Representative Plaintiff” or “Class Members” is noted, it is a reference to those who are bringing the complaint against Southern/Glazers.

Adding so-called authorized purchasers on Representative Plaintiff’s and class members’ Direct Warehouse Sales Authorization to Purchase Forms, without their knowledge or consent

Leading Representative Plaintiff and members of both classes to misreport their tax obligations to state and/or federal taxing authorities>

Compelling Representative Plaintiff and members of both classes to re-state their tax obligations for prior tax cycles to state and/or federal taxing authorities, and to incur time and expense in retaining legal and financial professionals therefor.

Selling liquor to bars/restaurants/clubs that do not possess liquor licenses using Representative Plaintiff’s and class members’ liquor license numbers and/or their Southern account numbers.

Singling out customers who pay C.O.D. and/or are known to maintain poor accounting practices (e.g., for “ghost shipping” practices).

Selling liquor to third-parties on Representative Plaintiff’s and class members’ accounts at lower prices than to legitimate/licensed purchasers.

Selling liquor to different parties at different prices, in violation of federal alcohol regulations and state and/or federal law.

Permitting its officers, managers, agents and/or other employees to purchase liquor on Representative Plaintiff’s and class members’ licenses/accounts, using cash and/or charging class members for the liquor, then storing (i.e., not delivering it) in order to meet quotas (and in violation of 4 CCR §76).

Permitting its officers, managers, agents and/or other employees to give away liquor, by pricing such at $.01.

Permitting its officers, managers, agents and/or other employees to give away liquor by printing sample labels for full regular-sized bottles.

Permitting its officers, managers, agents and/or other employees to purchase liquor using class members’ liquor license numbers and/or their Southern account numbers, temporarily store the liquor (in violation of 4 CCR §76), then returning the liquor later, in order to meet quotas, oftentimes without refunding the money.

Using so-called “A Forms” (which lack bar codes and invoice numbers and are, thus, nearly impossible to locate) to facilitate liquor transactions, in violation of 4 CCR §17.

Not providing annual invoices, unless requested, in order to conceal the practices cited herein

Permitting its officers, managers, agents and/or other employees to purchase liquor “off-invoice”.

Permitting its officers, managers, agents and/or other employees to sell “off-invoice” liquor to retailers without licenses, or to retailers who will then resell the liquor to other retailers, in violation of state and/or federal law.

Permitting its officers, managers, agents and/or other employees to sell “off-invoice” liquor to private individuals, in violation of state and/or federal law.

Threatening to cut off supplies to customers who do not buy a sufficient quantity of liquor, or liquor of select varieties.

Refusing to sell products to class members without them purchasing “tie-ins” (other types of liquor than those the customer wishes to purchase).

Giving kickbacks, free samples and other unlawful incentives to restaurants/retailers, in order to keep them from reporting the violations specified above.

Working and/or conspiring with third-parties to allow for the unfair/unlawful practices above and below.

Ignoring complaints from sales representatives and/or retailers about the unfair and unlawful business practices detailed herein.

I’ve always believed it impossible for state mandated middlemen to avoid corruption. The unjustified power and monopoly granted to wholesalers where their use is mandated would always be defended to the end by any means necessary. And I’ve believed that such a lucrative position would always lead not just to corruption, but also to crime. We’ll see.

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Wine Distributors Forced to Eat Their Own Excrement

July 5, 2017 - 8:22pm

Monarch Beverage Company, one of Indiana’s largest wine and beer distributors, lost its appeal in the 7th Circuit Court of Appeals. That court said the state could bar beer and wine distributors from also distributing spirits.

Boo-Fucking-Hoo!!!

Monarch thought it unfair and unconstitutional that the state barred it from selling something in the way it thought it should be able to sell it. The irony.

I wonder what Indiana’s wineries are thinking upon hearing about this decision, particularly when they think back 10 years when Monarch and other Indiana distributors lobbied that state’s legislature to revoke wineries’ rights to self-distribute to retailers and restaurants. Which they did!

The court sided with the state that keeping beer and wine distributors from also distributing liquor promoted temperance by artificially keeping consumer prices higher:

it’s hardly irrational to think that separating beer and liquor wholesaling is likely to impose higher distribution costs than if beer and liquor wholesaling were combined. That, in turn, keeps liquor prices higher, with the salutary corresponding effect of reducing consumption.”

Monarch learned the hard way that if you make stupid, anti-competitive arguments that depend are weird rationales just to line your own pockets for long enough, eventually, the courts and the state are going to believe you. 

I shed tears for the absurd rationales that keep in place ridiculous laws like those that keep beer and wine wholesalers from also distributing liquor, laws that keep producers from selling directly to retailers and laws that keep consumers from buying directly from out-of-state retailers and wineries.

But I don’t shed a single tear for Monarch Beverage Company. They got what they deserve.

 

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Is Anyone Still Pretending Cannabis Legalization is Good For Wine?

July 3, 2017 - 8:48am

More Wine & Cannabis News to chew on:

According to a survey of 10,000 California Cannabis users, 87% have reduced their consumption of alcohol in reaction to their cannabis use. Meanwhile, 13% have completely ended their use of alcohol.

First, there is no way to spin this as good news for the wine industry.

Second, anyone who is surprised by the finding that legal cannabis will negatively impact the wine industry should ask themselves how reduced sales of wine is good for the wine industry.

Third, these findings again raise the question, what disposition should the wine industry take toward the growing legalization trend?

On this third question, it’s interesting to note the that at the upcoming Weed and Wine Symposium, the last panel of speakers will address this issue:

“A panel of cannabis industry leaders will share their thoughts on why the passing of Proposition 64 is also good for the wine industry and that a collaborative mindset can create an “All Ships Rise with the Tide” scenario for wine regions throughout the state. The panel will also address threats, such as the competition for consumers, labor, and water.”

This begs some questions for the wine industry to contemplate:

Does anyone really believe that weed and wine pairings will in any way increase appreciation, let alone consumption of wine?

How many winemakers want a car full of stoned tourists showing up in their tasting rooms at 4 pm?

If the survey above is correct and 87% of cannabis users reduce their alcohol (wine) consumption, which sector of the wine industry will see demand drop?

Is there any good reason for the wine industry to collaborate with the cannabis industry in a way that will further consumption of cannabis?

We are going to see more surveys like the one referenced above. Nevada began legally selling recreational cannabis over the weekend. A year from now we’ll have a better idea of just how much that development has reduced wine sales in the state. Likewise, we have about a year and a half in California before we confront lower wine sales or much-reduced wine sales growth.

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Two Critical Tools For Wine Writers and Bloggers

June 29, 2017 - 7:14am

Wine writers and wine bloggers who aspire to both understand and report on the business of wine can’t ignore the politics of wine. Few other businesses are so significantly defined by and impacted by regulations, lobbying and politics.

Will consumers have legal access to the products they want? That depends on politics.

Will wineries be able to make use of new technologies to distribute their wines more widely? That depends on politics.

Will independent and specialty wine retailers have the tools to survive the online juggernaut of Amazon/Whole Foods, big box stores like Total Wine and Costco and other new entries into the market? That depends on politics.

Will the Three Tier System continue to define winners and losers in the wine business? That depends on politics.

But in order to cover these and other issues, wine writers and bloggers need the tools to monitor and understand the political environment and machinations that take flight from state capitals every year. The good news is these tools exist and are free to use.

TRACKING LEGISLATION: Bill Track 50 is an online service that allows one to carefully define issues of interest with keywords then retrieves legislation and bills at the state and federal level that match the keyword searches. The results are presented in an easy-to-understand way and alerts are delivered via email when movement on the bills take place. It is a remarkable service that is now being offered to writers and bloggers for free with the caveat that the service is linked to in articles on occasion. I use BillTrack 50 religiously in my work for the National Association of Wine Retailers. I HIGHLY RECOMMEND IT.

TRACKING CAMPAIGN CONTRIBUTIONS: FollowTheMoney.org, maintained by the National Institute on Money and Politics, is a remarkable source of sunshine. By using this service, which is free, one can instantly observe who is giving cash to politicians and who politicians have taken money from. Their database is relatively easy to use and holds data going back to the 1990s. Again, I HIGHLY RECOMMEND IT.

Covering the business of wine is a relatively small niche for writers and bloggers that, surprisingly, is rarely explored. Yet, those writers who understand wine, who understand better than others the zeitgeist of the consumer wine market and who understand that access to wines consumers want is becoming more complicated, are best positioned to cover the business of wine. Politics is part and parcel of that business.

With BillTrack 50 and FollowTheMoney.org are two key tools necessary for understanding and reporting on the business of wine.

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Money, Power, Reputation and the Napa Valley Wine Auction

May 30, 2017 - 8:44am

The most startling thing about the Napa Valley Auction, which happens this coming weekend, is the remarkable concentration of wealth it attracts. But this is what is required in order for the event to raise the remarkable sums for local charities. Still, it’s startling.

One of the best ways to witness this conspicuous monetary power is to position yourself somewhere near southern Napa on Wednesday, Thursday, and Friday of this week and observe the air traffic overhead. You’ll see a fleet of private jets landing at the Napa airport. For aviation buffs, it’s pretty cool.

Of course, the Napa Valley Auction also serves to re-cement the perception of the Valley’s wines as among the top bottlings in the world. The Napa Valley Vintners take this goal fairly seriously, as they should. In today’s world, it is still believed that value, importance, and significance is determined by the amount of money dedicated to or possessed as well as by the number, quality, and significance of the celebrities that lend their names and time to something. Money and celebrity are at the heart of cementing the Napa Valley reputation.

It has been some years since I attended the Auction. I don’t have the disposable income to contribute to the take, I don’t own a winery, nor do I rate quite enough as a communicator to be invited. But I still get to see the planes. And that’s fun.

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What Wine Blog Readers Read

May 20, 2017 - 7:56am

It’s always a good idea that on occasion we look to see just what exactly people are reading. Looking back over the past 12 months, Fermentation: The Daily Wine Blog has attracted readers to a relatively narrow set of themes. But this makes sense since I tend to write about a narrow set of themes. Still, it’s telling that the two most popular posts here over the past 12 months are consumer facing, rather than my normal trade facing missives.

In order of most frequently read over the past 12 months:

Top Ten Differences Between Napa Valley and Sonoma Valley
For those interested in making a decision on which region to visit

10 Warnings for Visitors to Napa Valley
It’s not all paradise here. It’s good. But visitors might want to be prepared

The Wineries’ Betrayal of Consumers
Wineries have not always had consumers’ best interests at heart

The Coming Repeal of the Three Tier System of Wine, Beer & Spirits
My own explanation as to why the Three Tier System will be dismantled

Wild Yeast Fermentation: “There’s No Such Thing”
This post caused controversy for obvious reasons.

Lib Dib Cracks The Code of Modern Three Tier Distribution
The most recent post to crack the top ten.

The Two Wine Industries—Seperate and Distinct
We have two wine industries that need two sets of tools for selling

The Billion Dollar Wine Boondoggle
Bans on consumer access to wine is costing billions.

Are Burgundy Wine Growers Cheating Terroir
If you hinder the climate from doing what it wants to do, are you messing with terroir?

Help Fight…For the Love of Wine
A plea.

 

 

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Wine Wholesalers Announced that YOU Are the Enemy

May 18, 2017 - 12:07pm

 

There is a simple way of determining in the wine industry and any other industry or situations, who your opponents are: Line up potential opponents and ask them what they oppose. It’s direct, simple and lacks provocation.

Recently, the only national association of wine and spirit wholesalers provided a list of those things they oppose, making it a simple chore to determine if wine and spirit wholesalers are your opponents/enemy.

At the recently concluded Wine & Spirit Wholesalers of America convention, the organization’s CEO, Craig Wolf, presented a handy little list of those things that “challenge” wholesalers. See if you or your business or your sector of the alcohol beverage industry is on that list.

“The middle tier is facing greater challenges today than we ever have before.Big retailers are leading a new wave of litigation designed to break down prohibitions on interstate shipping of alcohol to consumers. Amazon and other large retailers are looking to change the rule in order to buy and sell products outside the three-tier system and dominate the marketplace to the detriment of independent retailers of beverage alcohol. RETAILERS—CHECK!!

“Brewpubs, craft distilleries, small wineries and now even big breweries are seeking expanded retail sales and self-distribution rights. Large distilled spirit suppliers, in the interests of equal treatment of beer, wine and spirits, and a number of small craft distillers, now are contemplating seeking direct consumer sales of their products.” CRAFT BREWERS, CRAFT DISTILLERIES, SMALL WINERIES, LARGE BREWERS, LARGE DISTILLERS—CHECK!!

“Consumers are increasingly desiring the convenience of online ordering and rapid home delivery, and believe the tiered system of independent retailers, wholesalers and suppliers and other important regulatory controls are archaic and anachronistic. And they also believe that legitimate and time-tested regulations are impediments to the on-demand economy and need to be reconsidered.” CONSUMERS—CHECK!!

“There is today a coordinated effort at almost every level to dismantle a regulatory structure that is without question the safest, most accountable, efficient and consumer-friendly and profitable system for the distribution of beverage alcohol in the world today.” EVERYONE AT EVERY LEVEL OF THE INDUSTRY — CHECK!!

It must be tough when the entire alcohol beverage industry, including the end-user of the product, is arrayed against you, but that appears to be what the wine and spirit wholesalers see. On the other hand, you have to ask yourself why your interests are aligned against everyone else in your industry. Is it possible that your interests are so singular and so detrimental to the rest of the alcohol beverage industry that you are the heart of the problem?

No one doubts the value of box movers. Wine, beer, and spirits are heavy and you need brute strength in this industry. But if you look closely at what the wholesalers believe they are fighting against it is in almost every case the following: greater consumer access to products and the legally mandated use of wholesalers. Let me put this another way, what the wholesalers are defending is legally instituted protectionism and bans on consumers accessing the products they want.

Given this, it’s sort of surprising the list of “challenges” the wholesalers believe they face isn’t substantially larger.

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SPIRITED: The Right Match for the Evolution of the Craft Revolution

May 15, 2017 - 3:39pm

Today, the silos that once kept the beer, wine, spirits and cider categories separate entities have been smashed to pieces. Not only do we see wineries making cider, brewers making cider, wineries making spirits and spirit producers making beer, we see them all borrowing from one another marketing concepts and branding ideas. And this is not just limited to the artisan or craft alcohol producers. As larger companies pick off craft producers of wine, beer, spirits, and cider, they too are employing “cross-platform” tools for selling and marketing.

Now, a new magazine has emerged that matches this new zeitgeist: Spirited.

Despite the name that implies a focus on spirits, Spirited is a hybrid trade/consumer print publication from Sonoma Media Investments in Sonoma County, California that is effectively communicating the cutting edge ideas that animate the craft alcohol world. Their motto, “The Essence of Craft”, at first seems cut off. But in fact, the tagline stops exactly where it should.

Now in its second issue, Spirited was founded by Debra Del Fiorentino and Ethan Simon, two veterans of the beverage industry. Brought in to edit the new business/consumer hybrid is Alexandra Russell, formerly the managing editor of North Bay Biz, a Bay Area business magazine that pays particular attention to the beverage industry.

The idea of bringing all craft beverage business coverage together in one magazine isn’t common, but it’s the right idea for these times. As Simon said to me, the idea was to cover all aspects of all products that occupy the three tier system. This is another way of saying that the producers, wholesalers, distributors, and retailers of alcohol and their suppliers all swim in the same pond these days and it’s a pond that blends many beverages and many interests. And he is right.

Consider what Russell writes in her Editor’s column in Issue Two of Spirited:

“This issue, we turn our attention to marketing and the many forms it can take, from social media, mobile devices, and the sought-after millennial demographic and what it takes to introduce a new product to market and how packaging can influence a consumer.

It’s not about wine. It’s not about beer. It’s not about spirits. It’s not about cider. It’s about the ideas and issues and challenges that are faced equally by producers of craft beverages.

I also want to draw the readers attention to the fact that Spirited is published in print form. Yes, you remember that thing. You can get some of the content at www.spiritedbiz.com, but the stuffing is in the print publication. They didn’t have to go the print route. They could have forgone the ink and binding and stayed with ones and zeros. But as the publishers understand and as so many have mentioned to me recently, there is something very comforting and necessary with print and the publishers of Spirited are supporting that notion.

I get excited when I see a new, professionally produced magazine focusing on my industry. For the past few years, we’ve seen lots of publications that covered wine fall away, replaced by blogs, amateurs, Thrillist-like coverage of beverages, or with no replacement at all. Now there is Spirited to step into the space and with an attitude and focus that perfectly matches the evolution of the American craft beverage revolution. It’s good news for everyone who cares about the industry and cares for good coverage of the world of craft beer, spirits, wine and cider.

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