A break down of the American wine trade
I hear people complain all the time about the prices of wine in the state of Utah. I suppose I can’t really argue with that in most cases, but the prices that we pay for wines has as much to do with the people as it does with the state itself. The American wine trade is built on a three-tier system and knowing this system can be of great benefit to individual wine buyers. This system was developed to protect everyone down the chain from falling prey to monopolies, and for the most part, it is pretty successful. The only place I notice a major failing in the system is in the case of some control states where they abuse the use of their monopoly and offer no other option to their consumers. In both a free market scenario and a controlled one, this is basically how it works.
The first tier is a great one to understand for the consumer. This tier is comprised of domestic wineries and importers. Both of these parties are required to sell to a distributor or wholesaler. This protects small retailers and restaurants. If big retailers like Trader Joe’s could buy directly from wineries in Europe or other wine-producing areas, they could easily develop exclusivity by undercutting any other retailer that doesn’t have the resources to import the wines. The other great benefit this tier offers to consumers is that you can find an importer that you like and taste through their portfolio. For example, if you are a lover of Spanish wines you might want to take a look at the back labels next time to see who is bringing the wine into the States. You might find that Jorge Ordonez wines tend to be big and bombastic, lacking complexity and regional attachment to tradition, whereas Bon Vivant or Eric Solomon wines might express a little more elegance and artisinal nature. Being that a given wine is tasted and chosen by the same palates within an importing company, if you like one, there is a good chance that you will like many of them. This service comes at about a 35 percent markup.
The second tier is one that is less obvious and sometimes less significant than the first or the third. These are the people that buy from importers and wineries and sell to restaurants and retailers. These distributors develop portfolios from various first-tier businesses and store, ship, and sell these wines all over the country. In the case of a control state such as Utah, it is the state that wears this hat. In Utah there are brokers that are only able to offer information about the wines that they represent as it is illegal in this state to offer a wine buyer a taste. This service can cost about 25-35 percent over the importer’s price in a free market state.
The third tier is the retailer, restaurant, wine club, Internet site, or State. These people are the ones that we trust with selecting the wines that we drink and pricing them fairly. They should educate us and provide us with the wines that fit our palates. This is where I feel that Utah falls short and takes unfair advantage of its forced monopoly. In a competitive market, wine retailers will often only mark their wines up 25-30%. The state of Utah marks up 92 percent. Granted the state is both the wholesaler and the retailer, but they don’t wholesale to anyone but themselves. Restaurants in this state pay the same as consumers. Have you ever wondered why wine in restaurants seems so overpriced? Not to mention, there is no way for retailers to do their job and tailor their stores to the public. They can only choose the wines that are carried by the state and one man controls the state selection. Brett Clifford is expected to decide what everyone in the state wants to drink from nowhere more exposed than his office. I don’t think that he does a bad job considering the difficulty of his task, but the selection in Utah certainly lacks enough variety and character to quench all of our palates. It is unfortunate that this tier is not able to fulfill its full potential in Utah, as I truly believe that it would be a great benefit to restaurants to be a true third tier and not a weird forced fourth tier. It is mostly the consumer that suffers from our system.
Zev Rovine is the sommelier and resident cheese monger at the Spotted Frog Bookstore Cafe and Wine Bar where he teaches weekly wine classes. His wine education comes from the American Sommelier Association in N.Y.C. and he tries his very best not to spill the Pinot on the bestseller section. If you have any wine queries or comments he is easily contacted via e-mail at email@example.com .
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