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Making Sure the Real Wine Gatekeepers Are In The Crosshairs
As the wine downturn continues, let's make sure we point our pitchforks in the right direction.
I anticipate recriminations.
I anticipate them in response to a continued slowing and even a downturn in wine sales here in the United States. Wine sales are flattening. Interest in spirits is overtaking interest in wine, particularly among younger adults. Tasting room visitation is down. Direct-to-consumer wine shipments are down. Add to this the fact that the American economy appears not to be in the best of shape, and you have the ingredients for great angst among those concerned about wine, either as consumers, traders, or marketers.
If history is any guide, the recriminations will be aimed at “gatekeepers” in the industry. However, there are a number of definitions of the dreaded gatekeeper.
At various times and from various perspectives, “gatekeepers” have included wine buyers at restaurants and stores, wine critics, wine publications, wine websites, white men, white Anglo-Saxon protestant men, sommeliers, even wineries with their expensive tasting fees. You’re a gatekeeper! You’re a gatekeeper! You’re a gatekeeper! Look under your seat. You’ll find a gatekeeper there.
If everyone is a gatekeeper and set to come in for some recrimination, then no one is a gatekeeper.
But recently, I came across a group of real gatekeepers.
But first, let’s take a whack at defining the term.
If we were to rush those guarding the gates of wine, knock them to the ground, and trample them as we rushed through the gates, what would we find those poor trampled keepers had been watching? For the consumer, the answer can only be one thing: wine. They were keeping us away from wine. That’s one way to look at it.
The other way to understand the gatekeepers is as prison guards. What would happen if we overran our keepers, knocked them senseless, rushed over them, and out the prison doors? What would we find they were keeping us away from? For the consumer, the answer can only be one thing: wine.
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In one scenario we are being kept away from certain wines. In the other scenario, we are being kept surrounded by certain wines. Either way, it’s not a good thing. But one thing is for sure. It’s not buyers, wine critics, wine publications, wine websites, white men, sommeliers, or wineries that are keeping consumers in or out. They haven’t been doing that for more than two decades.
Recently, the European Union went about making markets in the digital sector more fair and more accessible; the EU set about the task of making consumers of digital services freer to explore all options. To accomplish this they came up with the Digital Markets Act (DMA). The genesis for the DMA was frustration with the largest internet companies and the barriers to entry they had thrown up. Or, put another way, the gates they had put in place and their tendency to guard them at all costs.
In fact, the crafters of the DMA called these largest of internet platforms, “GateKeepers”.
The DMA’s goal was to establish rules for Internet service companies and platforms. Among those rules are:
allow third parties to inter-operate with the gatekeeper’s own services in certain specific situations;
allow their business users to access the data that they generate in their use of the gatekeeper’s platform;
provide companies advertising on their platform with the tools and information necessary for advertisers and publishers to carry out their own independent verification of their advertisements hosted by the gatekeeper;
allow their business users to promote their offer and conclude contracts with their customers outside the gatekeeper’s platform.
treat services and products offered by the gatekeeper itself more favorably in ranking than similar services or products offered by third parties on the gatekeeper's platform;
prevent consumers from linking up to businesses outside their platforms;
prevent users from un-installing any pre-installed software or app if they wish so;
track end users outside of the gatekeepers' core platform service for the purpose of targeted advertising, without effective consent having been granted.
A week ago, the EU named the first six Gatekeepers that would be required to adhere to the rules set down in the DMA. They include:
Meta (Facebook, Instagram)
Due to their size and the degree to which these companies and their services have come to dominate the digital space, it is practically impossible to do business or interact with the world without utilizing their products and services. This allows them to create, control, take over, and dictate how various sectors of business and life operate. The market cap for these six companies is roughly the same as the annual gross domestic product of France, Germany and the United Kingdom combined.
These, dear reader, are true gatekeepers.
There is only one entity in the United States wine industry that can be truly called a “gatekeeper” with the power to control markets, and determine what we sip and what we don’t sip: Wholesalers.
To put a finer point on the matter, we are talking about three wholesalers: Southern-Glazers Wine and Spirits, Republic-National Distributing Company, and Breakthru Beverage, which together control well over 65% of the U.S. wholesale marketplace.
They are aided in their oligopolistic, gatekeeping status by the states, most of which collude with wholesalers through laws that require the vast amount of wine sold inside their borders to flow through wholesalers. The legal structure has come to be known as the Three-Tier System.
There is, of course, no equivalent of the Digital Markets Act for the U.S. wine market.
If in fact the gatekeeper is the entity that wants to keep consumers from accessing certain wines or keep them accessing only certain wines, then when the recriminations start, let’s make sure we are pointing our fingers (pitchforks?) in the right direction. Let’s make sure we dismiss the claims of those that want to identify wine writers, wine publications, somms, and wine buyers as the source of trouble in the wine industry; or at least as the source of the roadblocks. These folks are nothing of the sort. They control nothing of real consequence.
The Gatekeepers in the wine industry are the middlemen, aided by the states and the lawmakers who, it turns out, receive significant support from the gatekeepers.