More Reasons Why Wine Monopolies Suck (Fight the Power!)

UPDATE (1PM ET): I’d like to send out a special welcome to all of the PA State government folks who, according to my site stats, have been reading this post. The wine world wants to know your viewpoints on these topics, so please shout ’em out in the comments section of this post if you’re inclined.

I suppose by now it’s no secret that I can’t stand the archaic, and probably unconstitutional three-tier monopoly wine distribution system still in effect in some states, including my hometown in the “Communistwealth” of Pennsylvania. The lucky numbers of you out there in blogosphere-land that are allowed to purchase the wine of your choosing, for a fair price, and have it shipped directly to your doorstep don’t really know the suffering that we unlucky hordes in PA have to deal with when shopping for wine.

Most readers will remember the board game Monopoly, in which players compete to take control of the highest amount of properties and services that they can, resulting in fees so high that the other players go bankrupt trying to pay them. States that operate under a monopoly of wine sales and distribution (like PA) are kind of doing the same thing, but in real life.

These stats should be abiding by the decisions of the Supreme Court and open up their borders to competition from wineries and direct shippers. The trouble is, the State monopolies have a crap business model, and they’d get handed their own jock straps in a fair capitalist marketplace. So instead, they are willing to go to extremes to protect their monopoly position.

Let the Dude enlighten you by way of an example…

• Let’s say that I badly wanted a wine that was not available for purchase through the Pennsylvania Liquor Control Board (PLCB). This isn’t difficult, since their selection, in the Dude’s opinion, is poor.
• Let’s also say that I spied a nice little beauty of a wine for sale on the Internet from someone else in another state. For this example, we’ll go to the way-cool folks at Domaine547, who sell all manner of tasty vinos. On their website, I spy the 2006 Scholium Project Gemella, Lost Slough Vineyard, and decide that I want a bottle for myself. (I checked – the PLCB doesn’t have it).
• Let’s assume that Domaine547 is a licensed direct shipper with the State of PA. That would mean that a) the PLCB doesn’t carry the wine so b) I’m allowed to order it from Domaine547 so long as they’re a licensed direct shipper with the state, provided that the following mandatory charges are added:

“The Direct Wine Shipper will have a shipping charge, and must add a $4.50 handling fee, Pennsylvania’s 18% liquor tax, 6% sales tax (and 1% sales tax in Philadelphia & Allegheny counties).”

Following is a rough estimate of what this would cost me, before shipping charges are added:

That’s an extra $13.25 out of my pocket. The additional charges constitute nearly a 40% premium above the sales price. At that level of markup, I might as well buy the wine in a restaurant instead of trying to have it shipped to me home. Imagine trying to buy something really pricey to being with, such as a case of Ch. Petrus (at upwards of $700 per bottle) with that kind of markup. Most PA state residents simply wouldn’t bother. And neither would the on-line wine sellers – it’s just not worth their time, because the state customers are unlikely to view it as a reasonable expenditure. That’s a “Lose – Lose” situation. Except for the state of PA, who are winning. At my expense.

The bottom line is that this system does not support real competition or competitive pricing – it amounts to a token gesture to appear to be opening the borders of the state to direct shipping (in this case, “direct” means shipped to a PLCB store, where you then have to go to retrieve it). In reality, all this system does is bolster the existing state monopoly on wine sales and distribution.

And finally, consider also that many high quality wine producers are shunning the State of PA because of state regulations that require them to add PA labels and bar coding to their wines. Why? Well, according to sources quoted by the Pittsburgh Post-Gazette, PA wine labels actually reduce the value of high-end wines because of the state’s reputation for poor wine storage, bad customer service, and overall expense of doing business.

In the words of Public Enemy, we’ve got to Fight the Power!