Despite the perpetuation of small and local family winery image projected by associations like the California Wine Institute, the real power is in the hands of a few big corporates who dictate the policies to their advantage, writes Rajiv Seth.
Unlike beer or spirits, the wine industry has the unique opportunity to exploit the perception of small, local, family-owned wineries for all of its members, including giant multinational alcohol conglomerates. Trinchero Family Estates and Jackson Family Wines even use the word “family” in their corporate names. Several of the largest Big Alcohol conglomerates commonly use stories about original winery founders, as well as the word “family” in marketing and advertising content for the corporate-owned Multinational brands writes.
The perpetuation of the small, local winery image extends from the corporate conglomerates to the industry’s lobbying groups. The Wine Institute, a major trade organization, is based in California. The Wine Institute calls itself the Voice of California Wine and says that its efforts benefit the California wine industry. Yet most of the organization’s leadership comes from the Big Alcohol lobby, and its successes benefit the owners and executives of those corporations, whether they are located in California, New York, Kentucky, Virginia, England, or Australia. The Wine Institute supports: the reduction or elimination of alcohol taxes/fees/tariffs; direct shipping from producer to consumer; eliminating the wholesaler tier from the wine marketing chain.
Big Alcohol leads Wine Institute
In June 2009, Wine Institute members elected multinational leadership from Big Alcohol to lead the organization. The new Chair of the Wine Institute is Ray Chadwick (President & CEO, Diageo Chateau & Estate Wines); the second vice chair is David Kent (CEO, The Wine Group). E & J Gallo Winery and Trinchero Family Estates hold two director and two alternate director positions per corporation, respectively, on the Wine Institute Board. Thus Big alcohol lobby dominates most of the wine institute positions.
Wine Distribution Channels
The world over, the system of alcohol distribution is three tiered: Alcohol producers make the beverages, wholesalers distribute the beverages to outlets, and retailers sell the beverages to the public. The structure helps ensures adequate overview of alcohol sales, and helps prevent aggressive marketing and sales tactics by producers. It is intended to maintain order in the marketplace and protect public health and safety.
The distribution tier is a vital component of the three-tier system. Distributors help act as a buffer between potentially overzealous producers and retailers. Yet there is much tension between the producers and distributors, and the large wine producers actively seek to consolidate distributors for their brands and control the distribution channels to benefit their own brands.
For example, Constellation Brands (based in upstate New York) is consolidating its U.S. distributor networks as fast as it can, while treating the distributors it keeps- to enhanced profit levels. As of September 2009, Constellation had achieved its goal of one distributor per state in 19 markets, with plans to transition another 11 states within 2010.
On the other hand Diageo continues to consolidate to a single distributor in each US state, with plans to complete its consolidation as soon as possible. So far, Diageo has consolidated its distribution in 39 states and Washington, D.C., representing more than 80 percent of the company’s U.S. wine and spirits volume.
The industry claims that a distributor “cartel” is to blame for the three-tier system, and is responsible for the on going consolidation of distributors across the Globe. Yet the push to consolidate the Distribution tier comes directly from the producers. As Gerry Ruvo, Skyy Spirits Chief said recently:” Consolidation is inevitable in tough economic times. Everybody needs to build scale so you have more influence over distributors.”
A great deal of the wine industry’s efforts to influence alcohol control is comprised of efforts to gain special exemptions from alcohol regulation. One arena where the distribution tier can potentially be circumvented is in the direct shipment of wine from a supplier to an individual
According to an industry campaign called “Free the Grapes,” wineries are urging to ship wine directly to individuals, while neither beer nor distilled spirits can be sold via direct shipment the world over. In some countries wineries can generally ship wine to other states. Wine producers’ success in gaining authorization to ship their product directly to consumers sets a precedent for beer and distilled spirits producers to circumvent the three-tier system as well.
Political prowess
Wine is an important part of the Big Alcohol political machine. In 2008, E & J Gallo Winery contributed $492,645 to US politicians. That same year, Diageo and Diageo-Guinness USA contributed $327068, while the Wine Institute contributed $227,745, and Family Winemakers of California spent $17,694. Big Alcohol’s 2009 political contributions in California largely went to “Budget Reforms. In all, wine-related contributions were nearly 75 percent of Big Alcohol contributions to Budget Reform in 2009.
Conclusion
Despite their efforts to be seen as small and local, the companies that own wine in US, Australia, China, and some other wine producing countries, there is a vital part of Big Alcohol involved in there operations. They are global corporations with integrated, robust product portfolios of wine, spirits, and beer, with many brands being imported into the state. These multinational conglomerates spin false and misleading stories of small, community-based wineries just trying to survive, while they lobby hard through their well-funded and aggressive trade organizations, influencing state and federal politicians, waging successful lobbying campaigns to undermine critical public health policies.
Hiding behind a narrative of local, family-owned wineries, the global corporations that own world wine business are determined to deregulate alcohol in every state through diminishing the three-tier alcohol system, consolidating distribution, and most importantly, by applying undue influence on the political process that includes defeating efforts to increase alcohol taxes and fees at both the state and federal levels. Policymakers and the general public should not be fooled by industry rhetoric. World wine business is synonymous with Big Alcohol.
Rajiv Seth
 Rajiv Seth is a wine educationist, Author and an expert in International Wine Legislation especially European Union. He is an expert in advising winery Laboratory set up and has written a number of manuals for Lab assistants of wineries. In1987, he became the first Indian to be awarded a gold medal from WSET, London. He has advised IGPB on a number of trade related agreements and technical issues. He also writes for DelWine. Contact him at royalcellar@yahoo.co.in. |
