Bootleggers & Baptists – The Politics of Wine

Recently I came across a book by the name of “Bootleggers and Baptists” that attracted my attention in its unusual title and controversial subject matter.  This catchy phrase was created by Bruce Yandle, an academician and a regulatory economist about 30 years ago.   In a simplified way this theory holds that in order for a regulation to emerge and endure it has to be supported by the “Baptists” who seek to serve the “public interest” and the “Bootleggers” who derive economic benefit out of the regulation.  A book by that name and authored by Adam Smith and Bruce Yandle was published in 2014.

You may ask, what does “Bootleggers and Baptists” have to do with wine?  Plenty!  Just listen:

With the exception of a couple of states, most states of the union regulate the sales of wine.  These regulations have been supported by the “Baptists,” some for their moral or religious convictions while for others it may strictly be for greed.   “Bootleggers,” on the other hand do it just to create a commercial monopoly and thus eliminate competition.

This practice works in different ways in different states.   Most of the states have a three tier rule, which means that the winery cannot sell directly to retailers but must first sell their wines to a distributor who in turn sells it to the retailer.    This additional tier, among other things, has a significant impact on small wineries who find it very difficult to engage the services of a distributor thus becoming excluded from interstate commerce.

Several other states have franchise laws under which they grant exclusive licenses to distributors.  Georgia is such a typical franchise state in which a winery cannot terminate their relationship with a distributor regardless of performance.  Several years ago we had a distributor in Georgia that was not paying us our bills.  It took us a whole year of legal maneuvering before we got them to agree to release us from the “franchise.”

No less than 18 states have a Liquor Control Board that retains control of the distribution and sales of wine through state owned liquor stores.  Two of these states are Pennsylvania and Utah.   These states purchase the wines directly from the wineries.

The Supreme Court decisions proclaiming unconstitutional the restrictions imposed by states on shipment of wine “direct to the consumer” has opened the door to wineries, even small ones, to sell their wines to consumers all over the country.  Indiana is somewhat of an exception.  A winery can only ship wine to an individual in Indiana if there was a personal visit to the winery.  The justification is that “this would prevent sales of wine to minors.”

You would expect to have this kind of practices in countries like China or Russia, not in the United States that espouse free market principals.  The Wine and Spirits Wholesale Association which is politically a very powerful association flexes their muscles through their lobbying and contributing millions during elections to individual politicians on both sides of the alley.

In conclusion, I must say that this month’s Winemaker’s Corner has not been the most positive one that I have written.  To counter my negative feelings, this afternoon I will be taking home a bottle of Sivan.  Sivan is my daughter and also the name of a wine that I created that is being released to the club this month.  I will have this wine with Elisheva, my wife, who will do the cooking like she does every night.  We have a postnuptial agreement: I don’t meddle in her cooking and she doesn’t in my winemaking.            Cheers!