Two kinds of chains

    Last week, a wine and spirits retailer in New Jersey (NJ) sent to his mailing list a plea for his customers to support smaller retail shops against a move by large chain stores to kill a particular provision of NJ Alcohol Beverage Control regulations that limits an individual or company to two licenses to retail wine and spirits.

Let me say up front that if it were up to me, I’d dismantle every state’s alcohol beverage control on grounds that I have yet to face one that wasn’t either corrupt or at the least, a bureaucratic nightmare.

In every state, you must pay for a license to distribute and sell wine. You must also pay certain fees beyond the annual license fee. You pay the money to a state bureaucracy that, at best, needs only a money rake and a telephone number, and of course, a hearing room, where regulators can impose fines for breaking one of their Byzantine rules. Licenses aren’t revoked all too often; it would be rather stupid of regulators to remove future revenue.

Let me point out what we are up against with licensing and regulating wine.

NJ borders New York (NY) and both states border Pennsylvania (PA). But if you were to buy the same bottle of wine in all three states, on the same day, you’d likely not only pay wildly separate prices, you’d find yourself in wildly weird territories of retail ownership—private in NY and NJ, mostly government owned in PA, and sometimes connected to a grocery store in NJ, not in NY.

You would, of course, have to find that same wine in all three states and that may not be so easy: distribution is one of the problems connected to varying regulations throughout the fifty United States.

In NJ, you might see wine stored in a refrigerator near the beer; perish the thought in NY.

In PA, you might find that the person selling you the wine barely has an idea that wine is different from gin.

If you are like me you wonder if consumers are that different from one another from state-to-state that we need to be regulated under a separate set of rules. Of course, the rules have nothing to do with us. They are there to feed special interests and state coffers. The separate interests shift from state to state, while we, and the wine, remain the same.

The two-license limit in New Jersey was instituted in the early 1960s, I have no idea why, but it must have been because some retail chain outdid itself and opened too many alcohol beverage shops for the good of some interest group—maybe an association of smaller NJ retailers.

Strong retail associations have been known to influence regulators. In NY, the retailers association (along with the beer lobby) has for years successfully fought allowing wine sales in grocery stores.

Still, I am certain that people get around the two-license limit, especially those with a large extended family; each family member can own his or her license; get it? The best part for the extended family: NJ allows small retail shops to “pool” their wine buying. It helps them take advantage of discounts that distributors give to retailers who can buy by the pallet (an advantage of large stores in NY that truly hurts small retail shops; NY does not allow retailers to pool their buying).

Big chains certainly can buy by the pallet, but they can’t easily get around the NJ two-license limit. They want it changed back to the old ways.

It’s funny that in this country of deregulation it is near impossible to break the alcohol regulatory fiasco. Follow the money and you’ll know why.

Sadly, it’s a fact of American life that conglomerates and chains have swept the landscape, pushing into the dustbin many small businesses ( wiped out my wife’s out of print online book search service.) We are seemingly helpless against the trend, and for that, I have sympathy with the NJ retailer who is trying to sell the idea that removing the two-license limit will wipe him out of business.

In his plea for consumer action, the NJ retailer talks about the marvelous services retailers like him offer to consumers—the personal service, the knowledgeable staff, etc. He claims that the chain stores will never offer such service. I agree with him, which makes me wonder what his worry really is.

Years ago, I argued with a wine retailer in NY who was dead against allowing wine in grocery stores. His point was similar to the NJ retailers point, that if we put wine into grocery stores consumers will be stuck with no small stores and a bunch of poorly operated chains offering mediocre wine sold by ignorant people.

I counter-argued that I saw such a situation as he described as an opportunity. If I held a NY retail license and wine could be sold alongside groceries, I would add gourmet items to my shop, and I’d focus on the wines that the chain couldn’t or didn’t want to sell. I would continue to offer good service and a knowledgeable staff, too.

In some cases, it appears that those large chain stores aren’t the problem. The problem often appears as if small wine retailers are happily bound by the regulatory chains that they should despise.

NJ Retailer

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Copyright, Thomas Pellechia
December 2007. All Rights Reserved.

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