EPISODE #11 CALIFORNIA SENATE SELECT COMMITTEE TESTIMONY

Episode #11 details the testimony I gave at a joint hearing of the California State Senate & Assembly on the Direct Shipping of wine to consumers in November of 1997, when I was President & CEO of Henry Wine Group in California.

Henry Wine Group was the only Wholesale Distributor of wine in the country at the time and to this day still, which spoke out and backed the right of the wine producers to ship directly throughout the country to  the consumer without going through the 3-tier system. 

I was also a member of the Board of the Coalition for Free Trade (CFT) and later served as Vice-Chair from 1999 to 2001. CFT is the advocacy group that would successfully have a lawsuit go all the way up to the Supreme Court. In May of 2005, the Supreme Court ruled in favor of the entity that we backed in this action. A significant event that changed the world of wine shipment, albeit with limitations that are still being fought today. 

It was amusing to me in retrospect to be pitted against Wine & Spirits Wholesalers of America, i.e., WSWA, in this battle. 

I believe you will enjoy this escapade. Take a listen or read the transcript below.

Thanks for being a listener to the Fine Wine Confidential Podcast. For more information go to www.finewineconfidential.com 

Transcript

EPISODE # 11 CALIFORNIA SENATE TESTIMONY ON DIRECT SHIPPING OF WINE

 Fred Reno  

Well, hi folks. Welcome back to the Fine Wine Confidential Book Podcast. I am excited to share the next episode of Book Podcast #11, which tells the story of my testimony to the California State Senate Committee on my thoughts about the emerging debate over whether to allow direct shipping of wine to consumers online. This was back in 1997, and the argument has continued, even though the Supreme Court's limited ruling in May of 2005 cited the Commerce Clause of the Constitution, which permits it. If I look back to that time in 1997, two states, very enlightened states of course, Florida and Kentucky, had passed laws making it a felony for a winery to ship directly to consumers in their state, effectively putting that producer out of business, as they would lose their federal basic permit to operate if convicted of a felony. And the fight continues on different levels even today. Take a listen

 In the fall of 1997 as the President and CEO of Henry Wine Group, the only distributor in the country that openly supported the right of wine producers to ship directly to consumers then and to this day, and as a board member of the Coalition for Free Trade, I was asked to testify at a joint hearing of the Senate Select Committee on the California Wine industry, chaired by state Senator at that time, Mike Thompson and the assembly Select Committee on California Wine chaired by Assembly Member Valerie Brown at Meadowood resort in Napa, California. The subject was the future of direct shipments of wine. I jumped at the chance, agreeing immediately to lend my voice to this issue.

 The hearing took place on Monday, November 10, 1997. The people who attended that day were from all aspects of the wine industry; besides the handful of California vintners, there were representatives from the Wine Institute, ATF, the California Department of Alcoholic Beverage Control, California Retailers Association, Coalition for Free Trade, of course, and Wine and Spirits Wholesalers of America. WSWA, enemy number one against any change that would threaten their monopoly on handling the sale of wine from producers in this country through the legally mandated three-tier system. As the hearing moved through the morning, I was not at all aware that I would be called to testify alongside Doug Metz, the attorney and spokesman for the WSWA interest that day. I was surprised when Senator Thompson introduced Metz and me as representing the distributor side. Metz was the first to testify.

 His testimony was somewhere between WSWA is trying hard to find a solution to these issues that small vintners have, and we cannot let underage children buy alcoholic beverages on the internet or anywhere else. Here is a direct quote from Metz regarding the WSWA position on the internet sale of wine. Quote, “It's different. It's not LL Bean, it's a different product. Do the American people really want to make access available? Do they really believe in free trade? I don't think they do. The polling I've seen says up to 82% of the American people think it's a bad idea to have alcohol advertised and delivered via the internet”. 

That is just one example of the backward thinking employed in the early days to try to keep the internet from becoming a tool for the sale of wine. And of course, there was more of the same old crap the WSWA had been spouting for some time to frighten and scare both the consumer and the regulators of alcoholic beverages. Their position was that we currently have the best of all worlds with this regulated system. So why change it? They insist that the three-tier system not only protects the consumer but also delivers to them their choices for alcohol at a cost advantage. Such nonsense, I thought to myself, as I got ready to respond with my testimony. 

Then it was my turn to speak. After introducing myself and identifying that I was a fine wine wholesaler in the state of California, and because I did not have a prepared script, I chose to give them my unique perspective on the issue and why it was necessary for mid to small-sized wine producers to be able to sell directly to consumers. The best way to explain my position, I said, was to contrast the way I was received when I was vice president of sales at William Hill Winery in the mid to late 80s, and then later as Vice President of Sales and Marketing at Sonoma-Cutrer. I used my experience with one unnamed distributor in Florida, who was the same in both instances. 

It was amazing. I said, between having a push brand like William Hill and a pull brand like Sonoma-Cutrer, I was the same person with the same set of skills, and it was the same distributor. I went on to say a lot about how I was treated and the obstacles I ran into. I also wanted to bring to the committee's attention how difficult it could be for a small wine producer to break into the three-tier distribution network. In fact, there were many wineries that approached me at Henry Wine Group that I had to turn down. So, if I wouldn't represent them, who would? That was the backbone of my arguments at the hearing. At the conclusion of my testimony, one of the legislators asked me to explain what I meant by a "push" versus a "pull" brand. My response was simple; a push brand is one the distributor has to work hard to sell and establish. A pull brand is one that they just go take orders for, like liquor, beer, for example, Jim Beam Bourbon or Budweiser; the legislators appeared to understand my point. I finished my testimony by posing a question and a statement. 50 years from now, are we going to sell wine in America the way we are forced to by the current system that we have today? I believe the answer is obvious: NO. So, if you look at the time continuum and begin to walk it back at yourself, 50,40,30,20, years, at which point does a change begin? Well, that change can begin right now. You are all in a position to decide what that change looks like and do it now. I then pounded on the table in front of me, with emphasis. At that point, Senator Thompson thanked me as I got up to return to my seat, the vintners in the room gave me a standing ovation. Little did I realize that I would hear about my testimony from the unnamed distributor in Florida at a different venue less than three months later.