Teamsters, if Gallo then why not Beam
The California Teamsters Public Affairs Council and the big wholesalers are celebrating a soon to be revealed amendment to the California Direct Shipping Bill, which would limit spirits direct shipping to those distilleries producing less than 150,000 gallons. The limitation is portrayed as a way of keeping large out-of-state liquor producers from monopolizing the market and threatening 10,000 jobs and putting small retailer stores out of business. Now keep in mind these consequences and the Teamsters’ numbers provided, are mere speculation and no hard evidence backs up these claims.
But I have two questions I want to pose to the Teamsters, are they being forthright in their arguments, and how did the explosion of wine DTC shipping impact their members’ employment numbers and the small mom and pop retail stores?
If the Teamsters had data on how the explosion of wine DTC shipping created negative economic effects on the local California economy, they would have provided these stats to bolster their case. However, negative evidence on wine DTC shipping is lacking, because it probably does not even exist. Mainly, this is because the data related to the growth of wine DTC shipping is actually positive. Since Granholm the number of small wineries has exploded. This leads to the growth of consumer choice, ancillary businesses, and growth in hospitality and agricultural businesses. To illustrate in 2009 (4 years after Granholm), there were 6,357 wineries in America, in 2021 there were 11,053 wineries, nearly a 74% rise in wineries. These new businesses provide jobs and economic growth.
During the wine DTC shipping explosion, Gallo and Constellation were also in the DTC shipping space. They did not hoard the market and box out small producers. The market grew exponentially for small producers, even with the large producers participating in the market.
Now also keep in mind that while Gallo and Constellation were in the DTC space, their products were selling at retail and going through the three-tier system. The rise of DTC shipping did not take Gallo out the stores, it merely acted as a compliment for their business. Gallo being involved in the DTC market did not lead to the destruction of the small retail tier or cause the mass loss of union jobs.
Similarly, if Jim Beam is able to direct ship, it will not take them out of the stores. The DTC space will act as a compliment to their business, but their main business will be at retail, which would require them to go through the three-tier system. Beam will sell most of their products through the three-tier system, because it is generally cheaper to buy products at retail than DTC because of the added shipping cost. DTC works for small out-of-state producers, because it is the only way to access the market. Beam already has access to the market through mass distribution and great exposure at the retail chain. There is no great incentive for a large producer to go full on DTC.
So, if Beam can DTC ship, what are the Teamsters afraid of, because history shows that the Teamsters fears are unfounded!
In the end, DTC shipping without production limits in the wine industry worked and has been a major success. The spirits world will follow this pattern, as long as legislation does not put restrictions and limitations on the spirits industry.
As I said in the beginning, the Teamsters need to be more forthright, and political compromise should be based on legitimate policy concerns versus naked political power, or maybe I am being too idealistic here!
And finally I ask one question, if it’s good Gallo then why isn’t it good for Beam!