By wine-o

January 13, 2006 12:36 PM | Link to this

By the way, adding a 30 day window for payment in no way affects the split case charge. From a practical standpoint, it has no bearing on whether I pay now, or in 30 days. If I do not have the room or the funds for a case of wine, buying it on credit will not affect that. The proponents of hb 306 have trumpeted this as a concession for raising the fee. To me, as a proprietor of a small shop, it smacks of an attempted tradeoff such as when buying a car. “Yes, your payments will be higher, but there is no interest for the first six months.” Bottom line is I pay more in the long run. In my opinion, that is how this will affect my shop — end of story.

By wine-o

January 13, 2006 12:00 AM | Link to this

Well,at least I haven’t lost my talent for irritating people. While I fail to see how a Yellow Tail Beijing Valley joke is “tasteless and unappreciated” when made in the same sentence with an analogy comparing Big Business, er, I mean Glazers of Ohio to Walmart (which has contributed to the $70 billion trade deficit the U.S. has to China by sacrificing U.S. goods and jobs), hey if the shoe fits, I will wear it. While the analogy may have been extreme (and for that I do apologize to the many hard-working folks at Glazers of OH) this is a very contentious issue, bound to inspire strong feelings on both sides of the equation. I could argue each point, such as the sales report I viewed a year ago showing that on average OH wine price was only 2-3% higher on the largest 80 brands of wine, but instead I leave with this: There is a lot of information and disinformation coming from both sides of the equation, and it remains to be seen how HB 306 will affect each business. I for one welcome conjecture and change regarding OH laws, but if the worst case scenario were to happen, that is not a situation that I want to put my store, livelihood and career in jeopardy over 2-3% on the 80 largest brands. We shall see, but until then I believe the battle lines are clearly drawn.

By Dennis

January 12, 2006 9:48 PM | Link to this

In response to the increase in the split case charge, this is another area that should be part of a complete overhaul of the OH regulatory system. Ten years ago in California the bottle charge was $2. But the difference was the retailer had 30 day terms (i.e. credit) from the wholesaler. I could buy a case on the first of the month and pay for it on the 30th after I had a chance to sell it. Instead in OH I would buy 3 bottles a week COD. The wholesalers get credit terms from the wineries and importers. Why should wine retailers have to pay COD when virtually every other retail product is sold on credit to worthy customers? The $2 charge was no big deal to absorb on the top end wines that we only stocked in small quantities.

By an interested reader

January 12, 2006 8:57 PM | Link to this

Wine-o I used to be in the industry some time ago and am surprised by the number of misconceptions you have of the industry and this bill. 1. “Large order discounts” are specifically addressed in HB306 as currently illegal. I also believe that the bill supports one price to every retailer 2. In other states where the franchise laws were abolished…after this happened there were MORE distributors! Right now in Ohio there are less than 3 or 4 large wine wholesalers anyway so your argument is moot. 3. I once worked for a “small” wholesaler and know from experience that “small wineries” are, bottle for bottle, most profitable for wholesalers. 4. The split case charge is mandated by the state of Ohio to alleviate the added expense of processing loose bottle order vs. full case orders. HB 306 addresses this as well by offering 30 day terms to retailers which would promote more full case ordering. 5. Your Yellowtail “Beijing” comment is tasteless and unappreciated. The reaction to this bill has been unfortunate although understandable. With the same laws in place since prohibition, it’s simply the only system alot of us know or comprehend. Have other states adopting similar changes seen total domination on the bottom two tiers of this three tier system? The answer it clearly, “NO”.

By wine-o

January 12, 2006 3:52 PM | Link to this

HB306 has been introduced by Glazers to benefit Glazers. Period. If anyone thinks that this is an altruistic act to benefit the OH consumer they are kidding themselves. This is simply a case of one mega company trying to stack the deck when they deal with other mega-companies. They will be able to offer large order discounts that other small retailers and distributors will be unable to match. In other states that this measure has been introduced by Glazers the number of Distributors has reduced to 3-4 large companies. As of now Glazers has very few mom and pop wineries, and they will NEVER increase the number because there is less money for them in it now, let alone after HB 306 is passed. Even the Coalition for Fair Wine has stated that the wine prices “may slightly” decrease. Wow. May slightly? Ask small town retailers of any field if they benefit from having Walmart move in and price dump? At least the yellow tail Beijing Valley will be $1 less a bottle. On a more personal note, besides the long term loss of small wineries and selection, if HB 306 passes the split case charge (the fee every distributor charges per bottle not sold in case form) will increase from 0.25 to $1 forcing retailers such as myself without the room or funds to buy everything by the case to RAISE prices or take a $1 loss on every bottle sold. The alternative is to reduce my selection in half and buy everything by the case, thus assuring too much inventory of one thing and not enough of something else. There will be no recourse of action if distributors decide to dump wineries that don’t perform (input DEAL for this word) in favor of the large world wide conglomerates that can afford to take huge losses on one item to gain on another. By the way, the reason that wine prices fluctuate from state to state has a lot to do with the taxes in that state, and the prices in NY and Chicago are cheaper because distributors and even some retailers self import, thus eliminating the middle man and reducing cost. HB 306 has no effect on this. Yes, OH needs an overhaul, and nothing is perfect here (just try to buy Bordeaux in Columbus, sheesh!) but Glazers should not be the ones to do it. Their representative at the hearing were bigwigs from Kendall Jackson. Nuff said.

By ruth

January 12, 2006 12:18 PM | Link to this

The rebate program does exist in Ohio and is a great deal for the consumer, however it has not been offered to all retailers. The larger retailers (Krogers) have been offered this program.

By Mark Fisher

January 12, 2006 7:27 AM | Link to this

Look for more on this topic on “Uncorked” either Thursday or Friday, including opponents’ response to the FTC report described in the posting. And the Dayton Daily News also will publish a follow-up story on this issue in either Sunday or Monday’s paper. Cheers! Mark

By JennyC

January 11, 2006 9:01 PM | Link to this

Jens, We discussed this today at your store and I agree with you. Keep up the great research and blogging!!!

By Tony

January 11, 2006 10:52 AM | Link to this

Jens, here are some of the Champagnes I bought recently in San Diego: Perrier Jouet Flower bottle: $69.99 Moet & Chandon Brut Rose: $ 34.99 Piper Heidsieck: $ 23.99 Montaudon: $ 19.99 Castellane:$ 19.99 Mumm Extra Dry:$ 19.99 Heidsieck Blue Top $ 29.99 Marie Stuart $22.99 Marie Stuart Rose $34.99 The best proof of differences in pricing is at Trader Joe’s: They sell a bottle of champagne made by Chateau Malakoff in Epernay under the label Jeanmarrie in San Diego for $ 17.99. That exact same bottle sells in Dayton’s TJ for $ 27.99. Why $ 10 more? They tell me because of the tiered system in Ohio and fixed markups.

By jens at cincinnati wine warehouse

January 11, 2006 10:39 AM | Link to this

I am not advocating the status quo. My comments are primarily aimed at finding out who/what groups are advocating what changes and what are their economic interests. (As to pricing, one can always point out that in some other state a particular wine is 25% less than in Ohio, but what about a macro study on all wines.) Further, I have seen groups who proclaim to have the interests of the consumer in mind in lowering prices, but really have a direct economic interest in grabbing business. Just as the Wholesalers rally behind the banner of protecting kids from getting Internet wine. There is a lot of smoke in all these arguments. What I think is important is that there should be a level playing field for wineries, distributors, retailers and consumers for in-state and out-of-state, but if we shut down all shipping and self distribution, as Illinios is proposing, the in-state wine industry will die. And I would not like to see a future of wine distribution that follows the history of a Wal-Martization of retail where there are great prices, but little selection. As a consumer of wine, I don’t want to be limited to 50 wines at $6.99. And I believe that the consumer is served by having many small fine wine shops. I think it is sad that most of the small hardware stores are gone, and we are forced to go to Home Depot. So my comments are more about what the future will look like in wine retailing and not protecting my own interests in selling “expensive” wines.

By Larry

January 11, 2006 4:54 AM | Link to this

Jens, You’re fighting a losing battle. You need go no farther than to take a trip across the river to Cork n’ Bottle and do an A-B comparison to see why the Kentucky Liquor establishments advertise heavily in the Cincy newspapers. YOU, the Ohio retailers, are getting stiffed out of millions in retail sales because knowledgable consumers have no cumpunction to go to areas where the real deals are — and read that DC, Chicago, and about anyplace BUT Ohio for major purchases. California is a different deal, because the wineries won’t let anyone undercut the prices that the wineries sell for. Which brings up an interesting point: the last time I was on the West coast in 2004,I could have bought all the Kenwood Jack London Cab or Merlot I wanted to buy (at the winery)for $14 a bottle. Um… care to comment on what it costs retail in Ohio??? I hate to say it but this whole agrument is about keeping the status quo. There are far too many retailers in zero mininmum markup states that are thriving to say otherwise. Gosh, we could even take the DC approach, and allow direct importing, cutting out the wholesaler entirely (ala Geico with car insurance) now wouldn’t THAT just be a novel, pro-consumer idea!!!

By jens at cincinnati wine warehouse

January 10, 2006 10:49 PM | Link to this

Mr. Coalition, I don’t want to pick a fight here, but as you say the simple argument is that Ohioans pay more for wine (do you mean on an individual wine or across the board in a macro sense), but who is backing your organization and what are they trying to accomplish with this legislation? Many times the public is fed an argument but there are ulterior motives at work. As far as “Chicken Little” I am not sure what you mean. What do you see as the future of the wine business in Ohio? National distributors selling directly to Big Box Chains? How would small restaurants and retailers get their product if local distributors are pushed out of business? Will Ohioans still have access to 10,000 wines from small producers through local small retail fine wine shops? Or will we all be drinking [yellow tail} from Costco? Just curious.

By jens at cincinnati wine warehouse

January 10, 2006 10:33 PM | Link to this

I just this weekend heard from a customer about the mail-in rebates. I didn’t believe it as I had not heard that it was allowed due to the minimum mark-up rules. I will need to research. I agree with kirk in that the large production national wines will be discounted down. And I have not seen large price differences in Ohio versus other states. Producers net their prices down to get to MSRP. Quantity discounts do exist informally and probably should should be allowed in the system. As far as the COD policy, it has its pros and cons. My inventory is paid for, but at times it would be nice to get 30 days on special orders. Obviously the distributors prefer COD as there is no credit risk as there is in Kentucky. This will be interesting!

By kirk

January 10, 2006 9:08 PM | Link to this

One additional comment. The more effective way to offer consumers a better price is to allow quantity discounts. I’m not advocating that approach but it would have more impact on prices. OR take advantage of the state’s new law allowing mail-in rebates on wine purchases. $1.00 to $2.00 off a bottle is nothing to sneeze at, and I saw a $40-off-a-case coupon on Smoking Loon. Its a little work, but those offers are legit and you will get your check. You wont see MIR’s on Caymus but you will on your everyday wines. Take us to the bank.

By kirk

January 10, 2006 9:03 PM | Link to this

I have 11 years working with wineries, and 16 total in the industry. I have called on wholesalers in 8 different states. My experience is that wholesalers outside of Ohio work on profit margins that vary drastically, but they always strive to average out at 25% gross profit. That is exactly what Ohio’s 33.3% markup delivers. The fact is that large, high-volume suppliers have leverage over distributors in many markets to make them sell at much lower profit margins, and so those same distributors will sell at much higher margins(north of 30%) on high-priced or more boutique brands to achieve their 25% average. What does this mean to the consumer? It means that you may get a great deal on your sutter home white zin, or KJ Chard, but that Bogle, Cuvaison, or Caymus will be covering any margin shortfalls the distributor has. The larger the winery the more likely a distributor will work on lower margins, the smaller the brand the less likely. The bottom line is I don’t think that we would see substancially lower prices if the wholesale markup was abolished. Speaking for myself, currently I give my wholesaler discounts about 2-3 times greater in Ohio so that I can achieve the retail price point that I want. If the wholesale markup was abolished I would likely reduce my discounts. I want my price point to stay where it is and my profit to go up. Net, no change to the general public.

By Coalition for Fair Wine Laws

January 10, 2006 10:06 AM | Link to this

In answer to Mark’s initial question, the essence of this fight for consumers is simple: Ohioans pay among the highest wine prices in the country. Ohio is one of only two states in the entire country, because of laws passed by wholesalers to protect their profits, that still mandates a wholesale minimum mark-up on a bottle of wine. For example, a bottle of Folie A Deux Red is sold across the nation to retailers at a cost of $6.50-$7.35 per bottle except Ohio. In Ohio, that same bottle in a non-promotional month will cost a retailer $8.66 and $7.99 during a promotion. That hefty price increase is obviously passed along to Ohio consumers and this can lead to Ohioans looking for other ways to purchase their wine, including going across state lines. Antiquated laws like this are harmful to both Ohio retailers AND Ohio consumers. Please take the time to read the details of the FTC report that will be released today and take the time to listen to the facts of this issue, not the wholesale lobby’s rhetoric and “Chicken Littleâ€? scenarios about the future of the wine industry in Ohio. The fact is, these laws are broken and HB306 can fix them.

By cathy

January 10, 2006 12:48 AM | Link to this

I feel I don’t have enough information to comment wisely… but the Coalition for Fair Wine Laws mentions that, since Prohibition ended in 1933, Ohio is now one of only 14 states that still has wine franchise laws. This makes me wonder whether anyone has done any research of the other 36 states to determine how well their wine-selling systems work. If so, please share…

By jens at cincinnati wine warehouse

January 9, 2006 11:00 PM | Link to this

I agree with the observation by Dennis that the result will be that large national brand wines will only be be at chain stores at lower prices due to the pricing power of large quantity orders (read truckloads!). Small stores will have to compete on service with small production wines. (hoot, you mean I won’t be able to sell Kendall Jackson Chard!) But will discriminating customers pay a little more for artisinal wines from small local shops? That model is not working at hardware stores, barbers, bookstores, grocers as they are pushed aside by the Wal-Marts of the world. Time will tell!

By Dennis

January 9, 2006 5:59 PM | Link to this

I worked for several years in California at a gourmet grocery store running the wine department. California allowed free trade on all alcoholic (wine, beer & liquor) beverages. The only price restriction was we could not sell below our wholesale cost, to prevent stores from running a loss-leader — like most grocery stores do on staples such as milk and eggs. There was enough business for all types of retailers (mom-pop liquor stores, grocery/big box chains, & specialty shops) to co-exist, if they knew their niche and focused on their particular customer base. The principal motivation for the wholesaler that is pushing this change is to allow them to work special pricing with large chains. To allow the same price at Kroger in OH, IN or KY for the weekly grocery ad. It will also allow the wholesaler to offer a better deal to large quantity buyers (i.e. the big chains). The result will be that only the large national brands/importers will be seen at chain stores. Specialty stores will have to rely on smaller wholesalers that specialize in limited production boutique wineries. I believe the entire OH liquor regulation system should be looked at in its entirety to bring it into the modern era, not just making piecemeal changes with no master strategy for the process.

By Ruth

January 9, 2006 4:49 PM | Link to this

I have just returned from Los Angeles and found the prices on wine to be the same or higher on the more common brands (Kendall-Jackson, Blackstone, Yellowtail, ) In addition I have had customers comment both from New York and Washington D.C. that wine prices were less in Ohio. However, as Tony said, Champagne was much higher and we don’t even need to discuss liquor. I feel that certain changes would be good both for the consumer and retailer but I am not sure based upon the above information that wine prices would be less expensive for the consumer.

By jens at cincinnati wine wharehouse

January 9, 2006 4:48 PM | Link to this

Bob, the discussion going on in Ohio right now is very intriguing. I am in the business and am not sure what side to go with. I think it is VERY important to look behind each one of these groups’ positions to see who and what is supporting each group. As they said during the Watergate investigation, “Follow the money.” Everyone has an agenda. Having said that, I believe that small production wineries (in state and out-of-state) should be able to sell to consumers and self-distribute. Distributors do add value to small restaurants and wine stores. Why is the State of Ohio the liquor wholesaler in this State? Duh, it’s the money! Why does a national distributor want to change the rules against the in-state distributors? This is going to be very interesting and consumers should get educated quickly and contact their legislators.

By jens at cincinnati wine warehouse

January 9, 2006 4:37 PM | Link to this

Tony, could you please give me a citation where you found a Champagne in Ohio that is 75% more in cost than California (and not a post-off or close out). Many times these conversations/debates about Ohio liquor laws are based on misinformation. I believe that the pricing is somewhat higher in Ohio(I do not have figures), but the availability of wines is good with a broad selection. There ARE issues about the Ohio laws, as there are in many many states, but it is best to keep the rhetoric and hyperbole out if we are to have meaningful discussions.

By Bob

January 9, 2006 3:43 PM | Link to this

I don’t qualify as giving you an industry perspective but I will give you a consumer oriented one. Reading through the web sites of both sides, surprise!, you see that both have their own agendas. Neither agenda is consumer oriented. What is so magic about wine (or beer for that matter) that we need the state involved in the process at all? I will conveniently ignore the demon alcohol argument for now, but that aside, there is no good reason that there should be any laws limiting how wine is sourced in the state. The government should have some responsibility in preventing the sale of alcohol to minors… but other than that oversight they should not be involved at all. Free market forces would work to the advantage of consumers. I also think that those in the business would see that it would also work to the advantage of those who deserve the consumers’ business. Those importers and retailers who are knowledgeable and provide added value will prosper. Those that simply live off a guaranteed markup will perish. Certainly the giant box stores may then dominate the market for swill. If that is what some consumers want they will be well served. Those consumers who want good wines, fair prices and knowledgeable service will patronize those merchants who do the best job of catering to them. The proposed legislation on the outside looks like a step in the right direction, but I do understand how retailers would be opposed to a half-baked solution. I would have more respect for Ohioans for Choice and Competition if they advocated dismantling the whole ‘fair trade’ system rather than just opposing the proposed legislation and keeping the status quo..

By Tony

January 9, 2006 1:46 PM | Link to this

You are asking the fox to renege the chicken coop?? The laws governing wine and liquor in Ohio are against the consumer and competition. Why is champagne in Ohio close to 75% more expensive than in California?? Other states have “consumer” oriented laws, and I have never seen or heard anybody complain about not being able to find a specific wine. The USA is about competion, not protection!