Considering Alcohol, The Whigs and the Candle Industry
On gaining the proper perspective
Defining the problem is half the battle to solving it.
I’m in the lovely community of Overland Park, Kansas, a suburb of Kansas City. Here, beginning today, hundreds of alcohol attorneys, compliance specialists, state regulatory professionals and others interested in the American alcohol regulatory system are gathering for the Annual National Conference of State Liquor Administrators. It’s sure to be a hoot.
I’m here not only to represent the National Association of Wine Retailers but also to sit on a panel that will examine this issue:
“The Age of Conflation and the Collapse of the Three Tiers: Manufacturers Becoming Retailers, Retailers Becoming Manufacturers. Where Does it End?”
The premise of this panel is that the additional privileges that certain members of the alcohol industry have gained in recent years (such as producers selling direct to consumers and producers self-distributing) amount to a “conflation” of the three tiers and that this might not be good for the alcohol industry.
As you might imagine, I have strong feelings about these questions and this is likely why I was asked to sit on this panel. What I’m going to report from my perch on the stage is that “conflation” is the wrong way of understanding and even talking about these expanded privileges that producers and retailers have obtained over the past few years. The better way to understand producer DTC, producer self-distribution, and cocktails-to-go laws for bars and restaurants is as a push-back by those who are forced to work within a regulatory system that isn’t designed to address the social, cultural, and economic issues of the 21st Century.
But equally important is understanding the point of view that is necessary to see these expanded privileges as some sort of “conflation” of privileges and the tiers.
The thinking is, for example, that when a producer of alcoholic beverages sells directly to a consumer they are acting as a retailer. Or that when a producer sells their products directly to a retailer or restaurant, they are acting like a wholesaler. The mistake in thinking that allows this conclusion comes by looking at what the producers is doing, rather than how they are doing it.
For example, a winery selling to a consumer out of their tasting room is undertaking a retail transaction just like a retailer does when a consumer grabs a bottle of wine off a shelf and brings it up to the register. But that retailer is selling hundreds if not thousands of different wines that they originally obtained from a wholesaler. The producer is selling only the wine that they made themselves.
In order to consider what the winery is doing as a “conflation” of the tiers or of privileges afforded licensees within each tier, you have to consider the strict separation of the tiers as the normal and proper form of doing business that requires significant concern when the strict nature of the three tier system of producers selling only to wholesalers who sell only to retailers is violated. This requires a particular mindset.
Another way of understanding what the winery is doing when they sell directly to a consumer is as the natural and right evolution of a marketplace that is a response to drastically changed social, cultural and economic circumstances.
The differences in these two mindsets are what separates the “reformers” from the “institutionalists” in the alcohol industry. It’s the same kind of differences that separated the Republicans from the Whigs in the American Antebellum political system. And we know how that went for the Whigs.
Consider this: When the framers of our current alcohol regulatory system set about to create a new system for regulating alcohol in the wake of the Repeal of Prohibition, their primary concern was preventing the return of a set of circumstances that existed in the first decade of the 20th century. That was a time when the candle industry remained an important part of the American economy.