The wine business has unique traits without parallel in other markets. Wine is an agricultural product, but it’s also a lifestyle commodity, in some cases, wine bottles are collectible items, in others, merely quaffable thirst-quenchers for Sunday evenings.
Wine is one of the few products that can cost a few bucks per bottle or a few thousand retail. There are around 2,000,000 brands only in the US, and wine-producing countries make over 7 billion gallons of our favorite drink every year.
Wine is here to stay; it’s been around for thousands of years and is now made in all corners of the globe. Dozens of grape varieties, and a handful of wine styles, wine is both unmeasurable, and undeniably engraved in today’s society.
Wine Labels and Regulations
Every country has its own wine laws; after all, this is an alcoholic drink. The legislation protects wine producers and wine regions from counterfeit. The European Union developed the AOP system (Appellations of Origin) to guarantee the quality and provenance of its most famous wine styles.
The US has a similar policy in place, the AVA (American Viticultural Areas). In a nutshell, the information on the label must be accurate and the government monitors this closely.
Understanding labeling wine laws is essential to get a grasp on the wine business, but so is understanding the laws that regulate the surrounding market, from producers to the end consumer.
Wine Sales and Distribution
To sell wine in the US, you must first go through a special path called the three-tier system. Set in place soon after the repeal of prohibition, the three-tier system controls the commercialization and consumption of alcoholic drinks.
In short, a producer cannot sell its products to anyone, but a registered distributor who has to sell the product to licensed retailers, and only they can sell alcohol to the consumer.
The system is trickier than that, every state has its own rules, and the government can intervene as much or as little in the process as they want. Some states have relaxed their alcohol laws a bit, but others are as strict as actual dictatorships.
Direct to Consumer
Wine producers in many states can’t sell their wine to customers, something exclusive to the wine trade that questions the definition of what free trade and freedom mean. Today 17 states are in the list of alcohol control states, including Utah, where the government holds a monopoly on all alcoholic beverages, both as wholesalers and retailers.
Liberal states like California allow producers to make on-site sells to visitors, making the wine tourism industry a significant part of the producer’s bottom line.
Laws vary widely from state to state, and what’s totally OK in some, might be strictly forbidden in others. This is why we advise careful examination of your local laws before jumping into the business.
Online sales have been flourishing, and not only for wine but for everything, from groceries to electronics. The three-tier system also holds online wine sales back, as it’s virtually impossible to ship wine across the country, again, because of control states.
Big retailers have circled the strict laws establishing local distribution centers that comply with local laws, while other online wine stores just don’t give service to certain states.
On Premise Sales
Restaurants are an important part of the wine business. Once with a valid license, they can serve their customers, which leads us to the next question: How is wine priced?
A restaurant might sell a bottle of wine two, three, or even five times what they paid for the bottle. A winery might sell its bottles of wine to distributors for as little as $5; the same bottle you end up buying at a restaurant for $30.
Taxes play a big part in the wine market’s inefficiency. Most states charge a per-volume fee, that can go as little as 0.20 cents per gallon (California) to as much as $3.26 per gallon (Kentucky).
Why The Complexity?
All of this might seem a little unfair, but it’s all the result of lack of moderation in the first half of the 20th century. Alcohol consumers, including wine lovers, are known for over-drinking now and then, but education and social responsibility are quite different today compared to a century ago. Perhaps we’re ready for the government to cut us some slack?