CAROLINA ON MY MIND: COURT KEEPS 3-TIER

Circuit Court to Ban Direct Shipping

A three-judge panel of the 4th U.S. Circuit Court of Appeals affirmed a federal district judge’s ruling that the double standard of in-state wineries being allowed to direct ship while out-of-state wineries can’t, violates the Commerce Clause. No big deal there.

HOWEVER, the panel set aside the judge’s previous solution of striking down North Carolina ‘s entire alcoholic-beverage regulations (see BBD 02-03-03 ) and allow flagrant direct shipping by everybody and their underage cousins.

A MODEST PROPOSAL. Instead, North Carolina can simply start treating its winemakers the same as those in other states by preventing everybody from selling and shipping wine directly to consumers. In essence, the 4th Circuit Court said that North Carolina’s post-Prohibition alcohol regulations are protected by the 21st Amendment and are good laws to boot (as they promote temperance, protect the underage, allow for orderly tax collection, etc), and should be kept, while direct shipping by in-state wineries should be stopped to make that law flush with the Commerce Clause. As a result, this court reversed the lower court’s ruling to throw out the direct shipping ban and decided that a more logical remedy is to throw out the local preference for in-state wineries.

VIRGINIA STILL IN PLAY. The 4th Circuit still has before it a case in which U.S. District Judge Richard Williams of Richmond said the former Virginia ban on wine shipments from other states to residents violated the Commerce Clause, also because it favored Virginia wineries. The issue is likely headed to the US Supreme Court eventually.

A WIN FOR THREE-TIER. This is most definitely a victory for three tier advocates. NBWA V.P. Craig Purser told Beer Business Daily yesterday afternoon that the previous ruling in North Carolina “threw the baby out with the bathwater. This new ruling brings the baby back in.”

NBWA’S QUIET ROLE. Indeed, the NBWA worked behind the scenes in this case and others helping the state AGs defend their statutes. This ruling provides a roadmap for other states who have problems with in-state exemptions to direct shipping threatening the entire three tier system.

TAX UPDATE. MEANWHILE, a California bill to tax alcohol to raise money for youth recovery centers was defeated yesterday. However, it and other California state excise tax measures on beer and other alcohol beverages have now been moved out of the normal legislative channels and been placed in debate over the state budget. What does this mean? It means the traditional committee hearing process will be bypassed and the bills will go to the Rules Committee and voted on as part of the budget negotiations. This is not great. It places alcohol in the cross hairs of strained budget negotiators instead of in the more manageable committee process.

MORE ON SABMILLER / 7-ELEVEN DEAL. As reported yesterday, SABMiller’s brewery in El Salvador will brew a brand called Santiago exclusively for 7-Eleven that will compete with Corona . However, there has been some confusion over whether this is a joint venture between 7-Eleven and SABMiller (as was reported in the Milwaukee Journal-Sentinel) or if SABMiller is simply just providing the liquid for the c-store chain under contract.

A call to both corporations shed little light, although I believe the 7-Eleven spokeswoman misspoke about this being a “joint-venture,” which to me and everybody else implies another hyphenated term: “tied-house.” Last I checked, the 21st Amendment to the United States Constitution frowns on that sort of thing. I believe she is not a beer pro and what she meant to say was yet another hyphenated phrase: “contract-brewed.”

DISTRIBUTION ALSO UP IN AIR. Miller assures Beer Business Daily that the brand will be handled exclusively by Miller distributors. 7-Eleven says the brand will be handled by Miller distribs in some areas, and by 7-Eleven’s “strategic proprietary distribution network which delivers fresh product daily to each store,” (in other words, McClane). That sounds ominous, to say the least. Every day? Strategic proprietary? You can see what’s coming: A demand to service the c-stores every freaking day including weekends.

No need to panic yet as again I believe this is a misunderstanding. As industry consultant Mark Rodman said to my voicemail yesterday, the devil will be in the details. Beer Business Daily will get to the bottom of it.Blatant Self Advertisement: When was the last time you recommended this newsletter to associates? If there is somebody who you think would benefit from reading Beer Business Daily, I would greatly appreciate it if you would point them to our website at www.beernet.com. Perhaps a supplier rep or a retailer. Just don’t recommend it to your competitors as we wouldn’t want them to have a leg up on the latest information. Subscriptions are imminently affordable at $340/year and we take all credit cards. End of ad.

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