Bookmark and Share

Copyright 2009 @ davemcevers.com.  All Rights Reserved.

-

New York

Chicago

Denver

Los Angeles

Wednesday, September 30, 2009

October  2009

How to Make Homemade Bread

Follow this basic bread recipe.  Watch Videos.

A PRESENTATION BY DAVE McEVERS

February 15, 2009

The Barometer:  Freight Rail and The Economy

Freight Rail Statistics Slump.  Bad Moon Rising

BY DAVE McEVERS

February 12, 2009

The Bacon Explosion Project

Bacon barbecue recipe that will blow your mind and arteries.

BY DAVE McEVERS

February 2, 2009

Oregon vs. Burgundy

I take a look at the best Pinot Noir in the world.

“Wine is for the people!” Me shouting at a wine brand marketing meeting.

Dave McEvers—Wine Guy… and some other stuff.
Bookmark and Share

Video Demonstrations

I like most people. Most people like wine. I like most wine.

Lincoln, Illinois (The TBP)
Text Box: Hands in the Cookie Jar: Illinois Strikes Again Posted 9/30/2009 It’s October again, and I will avoid any cliché about how rapidly the summer went fleeting. (woops). October marks the beginning of what is affectionately known in the trade as “OND” (October – November –December). About 40% of all wine business is done in these three months. With the wineries in the heart of harvest, the distributors chasing sales numbers, and an increase in consumer traffic in retail outlets, restaurants, and bars, there is a sense of “let’s get to work” industry wide during OND. This year, though, OND is starting off a little strange in Illinois. Because of the economic situation and a Governor that could be the second in a row to go to prison, our state is flat broke. In order to generate revenue, our State Legislature passed a sin tax on alcohol. This tax is over $1 per bottle on spirits, about $.50 per bottle on wine, and $.55 per case on beer. That means that a bottle of Jack Daniels should cost you a dollar more. It makes sense, right? But this is Illinois, and this is the booze business, a happy marriage of hands in the cookie jar. Price increases at the retail level have increased far more than just a dollar a bottle. Some brands have gone up as much as $4 per bottle. These additional increases can only come from three places: the suppliers (wineries, importers, distilleries, or brewers), the distributors, or the retailers. The cynic in me says the politicians knew this would happen and just didn’t care, but the semi-cynic in me thinks that they just didn’t think through the consequences of such a tax. Julian Burzynski, senior vice president with Wirtz Beverage, a large Illinois Distributor, says it’s not his fault. "All our increases are pass-throughs from a supplier," Burzynski said in a Chicago Tribune article. Wirtz has a massive portfolio, and for Burzynski to say that ALL of the increases are the faults of suppliers is at best premature, and at worst, downright wrong. In speaking to Wirtz suppliers, some say they are taking the profit margin hits, in order to remain at targeted price points and stay competitive the market. One distributor owner I spoke to mentioned, “I was due for a price increase anyway. Now I can do it and blame the government.” “That's pretty consistent with what typically happens," said David Vite, head of the Illinois Retail Merchants Association in the Chicago Tribune article. "The last time liquor taxes went up, distributors took the opportunity to increase their prices while all the time wailing about the government." My guess is that it’s somewhere in the middle. Some of the larger suppliers have indeed implemented some hefty price increases. But some are feeling squeezed by the increasing power of the mega distributors. In the end, the consumer gets another kick in the pants in yet another market sector, and the small and medium wineries get left in the cold. Everybody Makes Money One of the sayings industry pros often use is “Everybody makes money,” when expressing delight about our industry. This is very true regarding this tax increase. Some retailers bought massive amounts of pretax inventories; some have even taken bank loans approaching millions. They wanted to get while the getting was good. . “Our retailers are packed to the gills with product,” says one distributor wine manager. It would stand to reason, then, that the consumer would not feel the heat of the tax increase until these large pre-tax inventories have cycled through the system. But this is Illinois, and this is the booze business, and everyone makes money. The tax went into effect Sept 1st and on that day, retail prices went up across the board, allowing retailers to take an increased profit margin on their pre-tax inventories. “That’s just good business,” says a buyer for a large retailer in Downstate Illinois. He may be right. His bottom line is going to look pretty nice at the end of the year. But the wallets of my clients in the secondary markets are not faring so well. Supply Chain Mess In the second tier (distributors) of the supply chain, sales goals are straight forward. Each month, sales managers need to have an increase in sales over the same month the year before. With the glut of pre-tax inventories, distributors are having a hard time getting their products to market in September and October. Retailers are upside down in debt, and are not doing the volume purchasing that typically happens in OND. Distributors and retailers alike are hoping for a big “sell through” month in October so that they can make large bulk purchases before the end of the year. In other words, they are trying to find ways to get these products out of their inventories now, so that they can re-load for the holiday season and exceed last year’s sales numbers for November and December. The weight of this falls on the consumer. There are many ways to market products to a consumer to increase sales, and retailers and distributors will be pulling out all the stops, except for one: Discounts. Even though it would be feasible for these stores to lower their prices on their pre-tax inventories, this will not happen. They have already calculated the increased margins into their year-end projected balance sheets. This creates a disproportionate selection of products, as the big brands will have more emphasis and small brands will get lost in the shuffle of supply chain madness and inventory chaos from distributors that are too big for their own good. ————- The State of Illinois, the large suppliers, the distributors, and the retailers will all benefit from this tax. They will benefit, of course, on the tired backs of consumers, who are already getting killed on insurance, gas, food, and many other commodities. They will benefit by squeezing small and medium wineries who have taken a margin hit in order to compete in the market, and just get noticed by a distributor whose portfolio may contain hundreds of wine brands. In order to circumnavigate the oligopoly of the second tier and the “good business” of the third, isn’t it time to implement better rules for Direct to Consumer Shipping? If there was ever a time for change for small and medium wineries and government regulators, the time is now. Email Comments