This topic is really interesting because a) I like wine and b) it illustrates how reality is often very different from the way we like to view ourselves.
In the USA, we love to tell everyone about our "free market" and how the "free" market will improve everyone's lives and how every other country should be just like us and our "free" market. The reality however is that our markets are far from free - there are government restrictions as well as government favoritism, like farm subsidies for corn and no-bid contracts for Iraq.
Two years ago, I learned a bit about this Costco issue and how Byzantine the laws are for wine sales. These stories are a good reminder that our free market is not as free as we like to believe. I hope Costco wins their battle.
Wine Sales Thrive As Old Barriers Start to Crumble
August 25, 2006
Wall Street Journal
The business of wine is breaking free of one of the world's most archaic and tangled retail systems. The result: a rise in sales, and an explosion of new ways to buy wine.
The market is in upheaval because its many barriers are starting to crumble. Recently, a Seattle federal court struck down state rules forcing retailers to buy through wholesalers at pre-established prices. Several states are lifting rules that prevent consumers from buying wine directly from out-of-state producers and retailers.
At the same time, giant players like Costco Wholesale Corp. -- today the biggest wine seller in the country -- are pressing for reforms that would largely eliminate the industry's powerful middlemen.
The changing landscape is helping wine move into new mainstream markets. At 7-Eleven Stores Inc., shoppers can buy Chardonnays and Pinot Noirs. Roughly 500 Target Corp. stores carry wine, compared to 280 last year. Growth in U.S. dollar sales of wine is outpacing that of beer and liquor, according to research firm ACNielsen. Americans spent $7 billion on table wine at food, drug and liquor stores over the past year, 9% more than they spent the previous year.
For decades, wine and liquor marketers have been restrained by the 21st Amendment, which ended Prohibition in 1933 and granted the states broad power to control sales of alcoholic beverages. Fearful that a single player might dominate alcohol sales as gangsters had in the 1920s, the states set up a three-tier marketing system.
