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Why is an out-of-state retailer treated any differently than an out-of-state winery that is selling wine into a particular state?  The nature of the purchase transaction is exactly the same.

Return of the Stone Age in Illinois

Yet that is exactly what is happening in Illinois.  After over a decade of out-of-state retailers being permitted to ship to Illinois consumers, a new law is set to take effect June 1, 2008 which bans such purchases while continuing to allow out-of-state wineries to ship into Illinois (read Illinois opens to direct shipping - i.e. for wineries only). 

When the world is moving to purchase more and more goods online, why is Illinois going back to the Stone Age?   Answer: political contributions/influence and in-state self-interests trump free market competition.

I found it particularly ironic that the above linked article ends with a quote from a representative of the Illinois Department of Revenue trying to justify the state's position when the state is losing tax revenues from such sales that it could capture if it permitted sales by out-of-state retailers to occur.

California at risk too

As Tom Wark over at Fermentation points out in his appropriately titled post, Fixing Stupid Laws, California is at risk of making the same mistake as Illinois.  Why would some major California winery trade associations and even groups claiming support of free trade principles like Free the Grapes support such a ban of out-of-state retailers selling to California consumers when even in-state retailers welcome it?

The best solution

It's time for a federal law setting standards for regulating wine shipping by any licensed party (wineries, retailers, and even wholesalers).  Anything short of that will continue the patchwork of 50 sets of state laws that change constantly based on acts of economic protectionism and local political self-interest.

The risk of shipping wine in warm weather just got eliminated with what may be a perfect wine shipper solution.  Here are my three tests for defining "perfect" for a wine shipper:

1. Does it keep wine at optimal temperatures during shipping (even for an extended period of time such as when shipping ground)?
2. Is it cost-effective?
3. Is it eco-friendly?
   

WineAssure from New Vine Logistics

The product which scores "yes" answers on all questions is called WineAssure, which was developed at the initiative of New Vine Logistics (NVL), the leading company in fulfillment of direct-to-consumer wine shipments.  I spoke to NVL's CEO today, Katie Hoertkorn, to ask her a few questions about the product which was announced in a press release last week.

How it works

1. Wine is packed in a regular wine shipper including pulp insert and box.
2. This regular shipper is then placed inside a larger box and is surrounded on all sides by frozen WineAssure packs and a layer of further insulation (see photo above).
   

The WineAssure web site states:

"WineAssure guarantees that the wine does not exceed 70 degrees Fahrenheit or fall below refrigeration level (35 degrees Fahrenheit) over a five day period, regardless of exterior temperatures." 

The chart below illustrates the relationship between external temperature and bottle temperature (note the initial decline in temperature is due to the frozen packs).  External temperatures vary because of the typical handling of a case of wine by common carriers as it is moved through their logistics system and different geographies.

NVL spent several years trying various solutions and this is the first to meet their design specification. This particular effort has been in the works for 9 months.  NVL's desire for a solution was stimulated by the growing volume of NVL's wine shipments for wineries that have to be put on weather hold in the summer months (36,756 orders in 2007 alone).  NVL will launch the use of the product (initially a 2-bottle shipper only) on March 1, 2008 and is introducing 4, 6, 12, and magnum-bottle packages within another few months.

Costs and the larger picture

The cost of WineAssure packs for a two-bottle box is currently $15.  To this, one must add the cost of the shipper with pulp insert.  However, pricing for 12-bottle packs is not expected to be significantly higher.  Moreover, prices are expected to come down as volume ramps. There's also the possibility of lower average costs because the WineAssure packs are reusable.  According to NVL's CEO, the WineAssure packs should last at least 5-6 shipments.  That's why NVL is offering to pay for the return shipping.

But evaluating WineAssure solely on the packaging costs would be a mistake.  Consider your savings by shipping ground versus overnight A.M. delivery for a case of wine from San Francisco to the Northeast.  The difference is almost $75 using our highly discounted Fedex rate schedule (although this spread would be marginally lower given the greater weight added by the WineAssure packs).  From the consumer point of view, you also protect the value of what may be an expensive wine purchase and obtain your purchase without delay.

Eco-Friendly

As the WineAssure site states:

"The packs contain a water and salt-based solution that is completely non-toxic, non-caustic, and degradable.  The insulation is mineral-based and breaks down to is original materials within hours of being composted or buried." 

It sure beats Styrofoam! 

Availability and implications for wine collectors

Initially, NVL is offering the WineAssure packaging only to its own winery customers.  No doubt it will help NVL gain market share in the winery fulfillment business.  But my selfish reason for being excited is that we've been exploring such a solution ourselves at Vinfolio for our retail wine shipments.  NVL's CEO indicated that making this packaging solution available to retailers was under discussion but their clear priority is ramping up their own use first.  I suspect many retailers will be interested but others may find it cumbersome to deal with freezing packs and the extra labor costs involved in packing shipments.

Still a skeptic?

As this has been a difficult problem to solve and has frustrated many wine collectors for years, many of you will want more proof in the form of additional test shipment data such as the chart above.  For example, what if the external temperature were at a sustained high level for 5 days?  I'm sure more such data will be made available as more of NVL's customers evaluate using WineAssure.

Bottom line:  WineAssure may be the Holy Grail of wine shipper solutions for wine collectors.  Kudos to New Vine Logistics for pioneering this solution.

Alder Yarrow of the #1 wine blog, Vinography, seems to have kicked off a firestorm with his post of today entitled Wine.com Gives Retailers (and Consumers) the Finger.  This was then picked up on the equally popular Mark Squires Bulletin Board on eRobertParker.com in a post titled Shipping-Related Outrage: Wine.com Goes Ballistic.  At the time of this post, there are over 100 comments between the two threads.  What's going on?

Direct shipping laws are the real problem -- Again!

Once again the central issue revolves around this country's perverted direct shipping laws for wine.  The outrage being expressed stems from the tactics Wine.com employed in its attempt to create "a level playing field for all wine sellers" (in itself, a laudable goal).  However, those tactics were not aimed at changing the laws directly, but instead at encouraging regulators to more rigorously enforce those perverted laws.  In a comment posted to the Vinography thread, Wine.com's CEO states "if we can use our legal standing in a state to get their attention to the issue, maybe we can bring about changes [re: shipping laws] that will benefit the online wine business."  Maybe.  But based on the wine-consuming public's comments on the posts noted above, they seem to disagree vociferously.

What will it take to change wine shipping laws?

The wine retailing community finally started getting organized in late 2005 when it became clearer that the Granholm Supreme Court decision was not going to translate into equal treatment for all wine sellers.  This is when the Specialty Wine Retailers Association (SWRA) was born.

Retailers' self interest ensures they are making an effort with serious time and money to pursue litigation to remedy the current discriminatory situation in most states.

As Tom Wark, Executive Director of the SWRA, points out in his comment (#75) in the Squires thread, the other largely-missing-but-necessary ingredient for success in this effort is consumer involvement.

What sort of consumer involvement is needed?

• Speak up to your state legislators.  If enough people become active, they will listen as you keep them in office.
• Donate directly to the SWRA.  Litigation is expensive and it must be pursued on a state-by-state basis.  Each state's effort typically costs a minimum of six figures and can easily reach $500,000 or more in a protracted legal battle versus better funded wholesalers.  If only 100,000 wine consumers donated $25 each (the cost of one modestly priced bottle of wine), it would make a huge difference to SWRA's resources.  Donate now.
  
• Use your buying power to influence retailers to join the SWRA.  If you buy from out-of-state retailers, find out if they are SWRA members.  If not, buy elsewhere or encourage them to join.
• Stay informed on the issues.  Sign up for the free SWRA newsletter via email.  The SWRA is the only trade association seeking to protect your rights to buy wine from out-of-state retailers.  Keep in mind that the laws have evolved to treat wineries separately from retailers (in my opinion, because wineries were politically organized at a time when retailers were not so retailers were "thrown under the bus").

Bottom line: The wine retailing community needs to act together to right the wrong of the current state of wine shipping laws.  The SWRA is the vehicle to organize the fight and can provide the leadership and a meaningful component of the necessary resources to win.  But, you, the consumer, have a vital role to play.  Make yourself heard!

If you could save $50 in shipping costs or $50 on wine purchases but not both, would you instinctively prefer one form of savings over the other? 

Shipping costs are a "hot button" for consumers -- they hate paying them.  Despite saving gas, parking fees, and their time by shopping online for what is typically a much broader selection at cheaper prices, it seems that consumers perceive any shipping charge as a complete waste of money.

But, someone has to pay for shipping.  Fedex and UPS never give it away, even to high volume retailer customers.  The problem with shipping wine is that it's heavy -- 40 lbs a case and more for high-end heavy cabernet bottles or champagne.  While many wine retailers already provide shipping at cost and concentrate their volume with one shipper to negotiate the best discounts on behalf of their customers, it's hard to ship a case of wine cross-country by ground for less than $35-$40.

If the retailer is paying for shipping, then you are probably paying for that benefit in some other way.  There is no "free lunch" in a profit-oriented economy.

The online shopping study summarized in an excellent post titled "New Industry Standard this Holiday Season?" on the Rethink Wine Blog seems to conclude that online retailers believe that they stimulate more sales with shipping-related promotions than a straightforward sale. My own experience in using Amazon's Prime shipping service confirms this as my Amazon spending soared once I signed up (even though it cost $79/year).

Bottom line:  Which option would you prefer, free shipping or wine discounts?  Can the economics of a service like Amazon Prime work in the wine industry given relatively low gross margins, high shipping weights, and nightmarish interstate shipping laws?

While shipping wine between states has its problems, shipping internationally can range from simpler than many U.S. states (e.g. Japan) to much harder (e.g., mainland China where a local importer is required to clear the wine through Customs).  Here are some general tips if you find yourself wanting to ship wine internationally:

Tip #1 - Use wine retailers and storage providers who offer international shipping

Generally, to ship wine internationally from the U.S. (and even domestically), you need to be licensed.  Therefore, the easiest way to ship is to buy from wine retailers who offer this capability (most don't because it's complicated and always somewhat manual of a process) or store your wine at storage facilities who are willing to make the shipping arrangements.

Tip #2 - Use DHL

We've researched the options at Vinfolio and for international wine shipments, DHL is more organized than the other primary carriers at navigating the various rules and duties in each country around the world and has greater coverage.  Service is usually door-to-door by air freight. 

In certain high volume shipping markets like Japan, however, there are sometimes national carriers who may be far more cost effective than DHL.  See the example international shipping rates on the upper right of Vinfolio's shipping and delivery page.  Japan's freight rate is about the same as air freighting a case of wine to the East Coast via Fedex because we use a Japanese carrier for shipments to Japan.

Tip #3 - Ship complete and multiple cases

Shipping wine internationally is expensive.  It can easily cost $25-30 a bottle even when a case is shipped.  Due to the fixed effort required in processing any item through foreign customs, there's a fixed cost for any shipment which can be amortized over more volume.  Therefore, shipping less than a case almost never makes sense and some savings (up to 20% on per bottle shipping cost) may be realized by sending at least 5 cases at once.

Tip #4 - Investigate duties, taxes, and surcharges in advance to avoid surprises

Most countries charge duties and taxes for importing wine.  The parameters which drive their formulae vary widely (and change periodically) so cannot be easily summarized (even for a single country much less across multiple countries).  Generally, the value of the wine is a factor and carriers like DHL require a purchase invoice (or other statement of value).  These duties and taxes will need to be paid by you separately to the carrier before your wine is released and are in addition to the freight charges.

For a further discussion of wine import duties, see an earlier post titled "Global factors affecting trend for higher fine wine prices." 

Tip #5 - Protect your shipment

• Time your shipments to match favorable weather conditions in the destination country because you never know whether your wine will get held up in customs and sit in an non-climate-controlled warehouse for days.
• Insure your wine.  While I don't have specific statistics to back up my intuition here, I believe there's greater inherent risk of theft or wine just "disappearing" along the way when it is goes to remote locations.  Note that all Vinfolio shipments (whether domestic or international) automatically carry $250,000 in insurance coverage at no charge to our customers.

The propaganda campaign of the Wine & Spirit Wholesalers Association (WSWA) to try to throw up any roadblock to wine direct shipping to protect their economic turf continues.

Craig Wolf, the CEO of the WSWA, was recently quoted in Wine & Spirits Daily saying that "There are scores of thousands of retailers, and if the state allows retailers in addition to wineries to ship, how is it possible that they will ever be able to regulate those sales?"

Some facts:

• "Score" (in the context used) is defined in the dictionary as a group of 20 items.  Mr. Wolf is therefore claiming that 40,000+ wine retailers will rush to gain wine direct shipping permits (if available) and overwhelm the state regulatory agencies.
• Even if 40,000+ wine retail outlets do exist (which I highly doubt even counting 7-11s, supermarkets and convenience stores), most retailers in this broadly defined category are not shipping wine today.
• According to Winesearcher.com, considered to be the leader in wine price comparison engines, their comprehensive site offers price listings (as of today) from a total of 908 U.S. wine retailers.  Presumably, this is the relevant universe of wine retailers interested in shipping to other states as they are promoting their wines online.
• In contrast, there are currently 4,712 wineries in 50 states according to WineAmerica, the national association of American wineries.
• According to a recent press release from the Specialty Wine Retailers Association (which is what prompted this post), retailers represent only 15-20% of permits issued in states where wineries and retailers can both apply (which is about the ratio of the above numbers).
  

Bottom line: The answer to Craig Wolf's rhetorical question on how states can regulate wine retailers if they are permitted to ship directly to consumer is simple -- "easily."

The folks over at Good Grape: A Wine Manifesto did a poll of wine consumers where a single question was asked: "What's the most important issue facing the wine industry?"

Answer: Wine shipping (with 56% of all replies).

Had I taken the poll, that would have been my answer too (my profile in the upper left corner of my blog lists Interstate shipping laws as my least favorite aspect of the wine industry).

We're trying to do something about it by being an active supporter of the Specialty Wine Retailers Association and you can do something too.  Join the SWRA's Consumer Outreach Email List.  Also see my prior post on this topic: Winning the wine direct shipping war.

Retailers should take a page from the playbook of the wine wholesalers in terms of how to succeed in the wine direct shipping wars.

Consider the following remarks extracted from a speech made on May 1, 2007 by Craig Wolf, the President and CEO of the Wine and Spirits Wholesalers of America at their 64th (!) annual convention:

• "We are unstoppable when we are united."
• "One of the easiest ways you [wholesaler members of the WSWA] can become more involved is to contribute to the PAC [political action committee].  WSWA's PAC is and needs to remain one of the industry's largest.  It is an essential tool to advancing our Government Affairs agenda."
  

Why retailers need to unite and join the Speciality Wine Retailers Association

1. Unfortunately, the best interests of consumers and Constitutional principles do not always prevail without a defense.   Until the creation of the SWRA in 2005, there was no defense against wholesalers buying political access to accomplish their "agenda".
2. The wine retail industry is inherently more fragmented than the wine wholesaling business which makes the task of acting together more difficult.
3. Financing the battle against "one of the industry's largest" PACs, which mostly means paying legal bills and lobbyists, is extemely expensive and requires the broad participation of wine retailers to share the financial burden against well-financed wholesalers. 

Your role as a consumer

As Tom Wark, the SWRA's Executive Director, points out in a Fermentation post yesterday called "A 'force of voices'", "consumers and wine retailers are natural allies in this strange battle."

The best things you can do to support a national market for wine are:

1. Encourage your favorite retailers to join the SWRA and patronize retailers who are SWRA members to help them finance the campaign.
2. Stay informed about wine direct shipping developments in your state and be prepared to contact your state representatives on short notice to make your opinions known on pending legislation.  This is why the SWRA created their Consumer Outreach E-mail List.  Click on the link now and sign up.  There is nothing more powerful than a constituent registering his or her  opinion.

Click here to review my prior posts on shipping-related matters.

Disclosure: Vinfolio was one of the SWRA's founding members and I continue to serve on the Board of Directors.

A purchase is a purchase, however it's made.  The term "purchase" is so common that it hardly needs explanation but let me provide the primary dictionary definition any way: "to acquire by the payment of money or its equivalent; buy." 

So what's different about a wine purchase?  Many of your state regulators that write or vote on wine shipping legislation think purchases made from wineries are somehow different from purchases made from retailers.  Hmmm....

Tom Wark over at Fermentation addresses this issue in his post titled Winery vs. Retailer: What's the difference?  Please read it and while you're at it, subscribe to his RSS feed.  Tom generates a steady stream of insightful posts in an entertaining and clearly communicated manner that anyone interested in wine should stay plugged into.

Your eyes probably glaze over every time you read an article about the direct shipping wars pitting in-state wholesaler interests against those of wineries, retailers, and consumers who naturally want to do business with each other as efficiently as possible.

Why you should care

If you want the freedom to buy wine from licensed parties in any state, with the associated convenience, greater selection and competitive pricing, then you need to pay attention. State-specific battles of one form or another (read Tom Wark’s Fermentation blog post titled “The Big Lie” about Virginia Wine) are occurring in many states including Texas, Illinois, and now Oregon. You are likely to be directly affected.

What you can do

Become vocal with your state legislators or let the battle be fought for you by supporting national efforts like the non-profit Specialty Wine Retailers Association (SWRA) whose goal is to create a national marketplace for direct-to-consumer wine sales.

For example, would you be prepared to make a small financial contribution to the SWRA (collected by your retailer) as part of the shipping charge for each case of wine shipped to you? I’d love to hear your thoughts in a comment.

Between changing weather conditions, occasional mishaps by Fedex/UPS, and deliveries being attempted when no adult is there to sign for them, there are plenty of factors for a retailer to consider when defining a comprehensive wine shipping policy. I believe Vinfolio’s shipping policy sets the “gold standard” in protecting our customers’ wine during shipping. Read it and tell me if you agree. Or, if you have suggestions for improvement, post a comment or email me.

A few further observations on our policy:

1. Our policy is not mandatory. It’s a “policy” consisting of a set of related recommendations. You can override the policy at your own risk. After all, it’s your wine when it’s shipped, not ours.
2. Fedex tracking numbers are emailed automatically when a shipment is picked up (we use Fedex exclusively). Any Fedex problem making a delivery automatically generates an “exception” email to both our customer and Vinfolio’s Customer Service department. We investigate each one by calling or emailing our customer and/or Fedex.
3. Free shipment insurance – Wine in transit (via Fedex, our delivery van, or a freight forwarder) is fully insured for up to $250,000 when arranged by us.

Do you know how the wine bought at your favorite retailer was stored and transported on its way to them? My last two posts on shipping wine from retailers to you assume the wine was in good condition when purchased. What if it wasn’t? There’s no way to know for certain unless you ask your retailer. Even then, they may not know the storage and transportation practices of every commercial supplier.

It seems incredible that members of the wine trade wouldn’t take all reasonable steps to protect wine from being damaged while in the supply chain. I suspect most are diligent but James Suckling wrote a post in his Uncorked blog called “Reefer Madness” last month referencing an example where a wine importer shipped 250 cases of 2001 Pio Cesare Barolo from Italy to Canada in a steel sea container (like the one in the photo) without temperature control. The wine probably spent 20-30 days on the water and, not surprisingly, retailers supplied by the shipment have reported leakage in about 20 cases. But who knows whether the rest of the wine is as pristine to drink as it could have been if shipped properly?

Bottom line: Savvy consumers and wine collectors should question their favorite retailers on this topic. Or, just observe how your retailer cares for its own wine inventory. No doubt this is closely correlated with how much scrutiny they have applied to their supply chain.

Shipping wine long distances by Fedex or UPS ground at certain times of the year can be a risky proposition due to hot or cold weather extremes along the way (even with a styrofoam shipper). Nevertheless, wine collectors trying to avoid the higher costs of shipping 3-day or better often try to make some assessment of the delivery route taken by the carrier to decide which service level to choose.

A recent thread on the Mark Squires Wine Bulletin Board on eRobertParker.com titled "Some way to figure out UPS ground route?" contains a user post referencing a very cool universal package tracking tool for major carriers (Fedex, UPS, USPS, and DHL/Airborne) that combines Google maps with RSS technology. Every time the package moves and is scanned, you get an instant update to your RSS "reader" or "aggregator" and a new segment is added to a map charting the package's progress towards its destination. While this is unfortunately not a predictive tool, a few experiments during safe times of the year will illustrate the common delivery path taken from your favorite out-of-state online retailers to your door.

P.S. If you don't know what RSS is yet, it's time to find out. Click here for a non-technical explanation and also visit Vinfolio's RSS feeds page to see how we use it to provide instant updates of new wine inventory.

Today's post on Dr. Vino's wine blog, titled "Developing: the next shipping battle?" is worth reading. He spotlights an issue that many state legislators trying to implement last year's Granholm Supreme Court ruling, and most wine consumers and collectors, don't fully understand which is that while the case pertained by wineries, its outcome should be applied equally to any licensed party who sells wine. As one CA retailer pointed out in a comment on the post, the Supreme Court decision did "not refer exclusively" to wineries and clearly has broader implications.

From a consumer point of view, why should there be any legal distinction made between whether you are permitted to buy wine from an in-state retailer, an out-of-state retailer, a small winery, or a large winery? You should be able to buy the wine you want, from the sources you choose, to maximize your choices and to save money. Why is this so complicated?

Because the "battle" is really about who has the right to sell wine and where. On one side are the wholesalers, who are fighting to preserve a form of economic protectionism implemented at the state level. On the other side are wineries and retailers who wish to compete nationally as if we were a single country, not 50, like every other industry.

Vinfolio is a member of the Speciality Wine Retailers Association which was formed early this year to create a "borderless wine market so that consumers can purchase and receive wine directly from any retailer in the United States." Here is a one-page fact sheet (pdf) which explains the mission. As this is an industry trade group, if you are a wine consumer and wish to get involved in supporting the cause, please visit Free the Grapes which shares a similar objective.