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The Gentlemen's Game 

Big box stores square off in wine wars

The distribution and sale of beer in North Carolina is a briskly competitive business, but the sale and distribution of wine has always been known as a "Gentlemen's Game": deals done with a handshake, boundaries respected. In Charlotte, most wine has been sold in small, locally owned wine shops and in grocery stores. Within the last 10 years, Charlotte has seen more of the finer wines showing up in some of the better grocery stores. Times have quickly changed. Warehouse membership clubs, such as Costco, now sell a larger variety of wines, including such premium wines as Far Niente. Other "big box" stores such as Cost Plus World Market (with its 16,000 square-foot operation and three area locations) and the newest entry, Total Wine & More (a 21,000-square-foot wine superstore with 7,000 wines which opened recently in Matthews), are poised to do battle in Charlotte. Total Wine plans four more locations.

Is this competition good for the consumer? North Carolina alcohol laws were not written in the interest of free trade. If they were, those of legal age could call or email a winery direct and order wines to be shipped directly to their homes. Direct shipment of wine to an individual consumer is currently unlawful in North Carolina. Senate Bill 994, enacted in 1997, states, "It is unlawful for any person who is an out-of-state retail or wholesale dealer in the business of selling alcoholic beverages to ship directly or cause to be shipped any alcoholic beverage directly to any North Carolina resident who does not hold a valid wholesaler's permit." Bill 994 was introduced by Senator Tony Rand and supported by House Representative Majority Leader Leo Daughtry, who is also co-owner of North Carolina's largest beer and wine distributor, Mutual Distributing Co.

Do wine lovers have wines shipped directly to their homes anyway? Check out the wines at the next wine auction and see how many of those wines do not have local distributors.

For other industries, Senate Bill 994 might be considered in violation of free trade. The notable difference is that the alcohol industry has two constitutional amendments dedicated to it and states have the jurisdiction to regulate the sales and consumption of alcohol. In the 1930s, regulation was easier. In fact, one of the reasons frequently cited for developing the three tier system was to prevent mob muscle in liquor stores.

Ironically, and perhaps hypocritically, the only exception to the three tier system is any North Carolina winery may ship its products to individual purchasers inside and outside this state. In other words, Shelton Vineyards or the Biltmore Winery can ship to me or someone in California, but it is unlawful for a California winery to ship directly to an individual buyer residing in NC.

The three tier system basically means that the system is highly regulated. According to the Alcohol Beverage Control website, "In North Carolina a licensed manufacturer, importer, bottler, or nonresident vendor (first tier) may sell and ship only to licensed wholesalers (second tier). The wholesaler may sell only to licensed retailers (third tier) or other wholesalers."

In other words, a winery comes to the state and says, "I want Wine Distributor X to sell my line in Mecklenburg County and Wine Distributor Y to sell my line in Buncombe County." Or if the wine distributor is active throughout the state, then the winery may ask that Distributor Z sell his line across the state (except dry counties). Each deal is worked out separately. This is why the consumer may find some wines or beers in Raleigh that he may or may not be able to buy here, and vice versa.

What does this have to do with the big boxes coming to town? Wine is bottled in finite numbers. Although wineries develop new vineyards, some wineries have no room left to grow. Many of these wineries are buying land in other regions or countries and developing vineyards there in order to increase their business. The direction many wineries have taken is trying to address a variety of consumer price points. These wineries, such as Francis Ford Coppola's Neibaum-Coppola Estate Winery, produce four tiers of wine ranging from one of America's finest wines Meritage Red Napa Valley Rubicon to their inexpensive ones.

Some wineries are part of large corporations, and large corporations like the concept of big boxes since they have the ability and clout to compete for the best prices and product availability.

Nationally, North Carolina is considered a secondary market. States such as New York and California are primary markets. While large wine producers have enough product to distribute nationally, small wineries must be more selective. Some bouquet California wineries, for example, do not even sell outside of California or sell exclusively through a mailing list. Some Charlotte area wine distributors have found a niche market by only representing these small, but highly sought, wineries. Wineries decide where and how much wine to send to a particular market. This system is affectionately known as allocation.

Where do big boxes come in? Let's say Big Wine and Beer Conglomerate has in its line a beer product hyped in a popular rap song. Sales of this product skyrocket, particularly in the Big Box Store. In return Big Box Store calls Big Wine and Beer Conglomerate and says, "We would really like to have a couple of cases of your OhSoTrendy Premium wine for the opening of our new store in Charlotte, NC." So Big Wine and Beer Conglomerate calls his Mecklenburg County wine distributor and says, "I want two cases of our OhSoTrendy cab to go into the Big Box Store for their opening." The wine distributor, which only had an allotment of four cases of OhSoTrendy Premium wine to sell, sends two cases to the new Big Box Store. Now the wine distributor has only two cases to sell to other retailers and restaurants in Charlotte.

Not all big boxes negotiate directly with wineries and wine parent companies. Lisa Winkleplec, one of Costco's wine buyers for their southeast region, said Costco typically goes through local distributors to develop their inventory. She did concede, "We will have wineries themselves come to us and then contact their distributors." Costco has 350 warehouses located throughout the world and the buying power that number of stores represents.

Will the influx of the big boxes benefit the wine consumer in Charlotte? Or can these same big boxes use their North Carolina allotments to sell in other states? Will wine only be reshuffled to the big boxes, hurting the locally owned wine shops? It's hard to predict the impact these new wine outlets will have.

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