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India-like Policy of Wine Marketing in the US

Posted: Saturday, 26 February 2011 12:17

India-like Policy of Wine Marketing in the US

USA might be proud to have exported wines last year worth $1.14 billion, the same number as India’s population, but due to its Federal Constitution there are States like New York where grocery stores still cannot sell wine and Pennsylvania where the government sells through monopoly, with a continued debate and active lobbying on all fronts for and against a change, unlike India where one remains at the mercy of the ruling state governments.

Pennsylvania still maintains the post-Prohibition laws where wine and liquor are sold through about 620 government-owned stores although beer is allowed to be sold through private wholesalers and retailers. Despite their support to privatization for many years the Republican governments have been unable to get the law passed.

The Democrats controlled state government is resisting the push to privatize wine and liquor sales in Pennsylvania- even on Thursday there was an open hearing in which the supporters of the existing policy contended that the public monopoly ensured good jobs and responsible alcohol sales while one Republican supporting the privatization concept argued that this was a way to help close a projected multibillion-dollar budget shortfall

The arguments are similar to what one hears in India from the two sides. The  Commonwealth Foundation in the USA says that selling the state liquor stores will give consumers better choices, more convenience and lower prices and would give higher potential revenue from private licenses which could range from $1.2 billion to $2.5 billion- certainly a strategy supported by Indian wine consumers, marketers and producers alike.

Supporters of status quo maintain that privatization will hurt the state financially in the long run and create more social ills. Some even worry about the misuse by the liquor stores with a profit motive to sell to minors.

The state's new GOP governor, Tom Corbett reportedly supports the idea as a way of helping to balance the budget and has said the state's dire financial condition might help Republicans who also control the Legislature, get it passed this time.

Underlying the ongoing debates are the familiar arguments and conflicting studies about whether binge drinking, underage drinking and increased drunken driving fatalities under a private system, and whether privatization would reduce trips to liquor stores in neighbouring states. In Indian states like Gujarat with a prohibition policy, the denizens frequent the bars and stores across the dry state whereas Gurgaon and the nearby towns in Haryana are thriving on the high-excise policy of Delhi resulting in higher revenues.

New York is the only state where a new push is under way to legalize the sale of wine in grocery stores and supermarkets, whereas it is now sold only through the specialty wine and liquor stores-like it was till about a year ago in Delhi.

The New York Governor has been pursuing allowing the sale of wine and liquor through grocery stores but has failed to do so since it has not been able to counter the strong lobby support garnered by the wine and liquor shop owners A study released last week by New Yorkers for Economic Growth and Open Markets found that not only would this proposed step create a revenue stream for the state, it would also create thousands of jobs across New York.

The study found that if wine sale in grocery stores is permitted, it would create an estimated 6,400 new jobs in the first year alone and increase thereafter with a majority of the new jobs created in the retail outlets

Reportedly, out of the top ten wine producing states in the US, New York is the only state not permitting sale of wine through the grocery stores. A recent college poll released in December found 59 percent of New Yorkers supportive of allowing wine to be sold in grocery stores and supermarkets, whereas 57% had supported the idea earlier last March.

The detractors say allowing wine to be sold in grocery stores would be harmful for small businesses and the local liquor stores. A working paper published by the American Association of Wine Economists said revenues at liquor stores would decrease between 17 and 32 % if wine sale in grocery stores is permitted. The argument is similar to the kirana styled mom-and pop stores in India, who fear a loss of sales if the foreign retail stores are allowed to enter through the FDI route.

India with a neo-prohibition political mindset, paradoxically, promotes the production of wine and liquor but the states have their own laws, policies and taxes according to the Constitution. They may be similar to those in Pennsylvania and New York but intrigue the Europeans and several other wine producing or consuming nations.

Incidentally, US retail giants like Wal-Mart which are keen to enter the retails sector and are lobbying with the Indian government actively to allow FDI, claim that they can sort out the inflation if food costs in India due to poor distribution system. They might get the sympathy and support of the Indian wine sector if they plan to sell wines from the retail stores but they might not be in a position to influence the law makers in these two states in the USA.

Despite, a majority in New York state agreeing that selling through grocery stores  would be beneficial for the consumers, it’s the mom-and pop type small liquor shops which would be hurt the most and the lawmakers have their immediate interest at heart. A similar apprehension is keeping the logical decision of allowing FDI in the Indian Retail at bay so far. It would be interesting to see how long the wine and liquor store lobby in New York will be able to hold on to the existing policy just as the kirana lobby will keep the pressure up through various opposition political parties.

Meanwhile, Government monopoly marketing states like Tamil Nadu or UP where the whole of liquor trade is indirectly controlled by one individual, can boast of their policy mirroring those similar to Pennsylvania – the American state where the Constitution of  the Federal nation was framed.

Comments:

 

Subhash Arora Says:

I think we need to compliment the karnataka government. They are very positive about wine promotion. They are ways ahead of Delhi and I believe Mumbai. I hope the trend continues. Subhash

Posted @ February 28, 2011 15:40

 

kskarnicSays:

The situation in United States and India are similar when it comes to wine marketting. However Government of karnataka is slowly opening to the idea of privitization through permitting individuals to open wine taverns in malls and very recently the permitted the Horticulture Produce co-operative marketing society to sell wines in one of its major branches during Annual Grapes Mela. Apart from this several wine taverns have come up in Bangalore city and in all probability taverns will come up in cities like Belgaum and Mangalore as well. Trust this trend will continue otherwise wine makers may have to close their wineries after strugling to find market for their produce.

Posted @ February 28, 2011 15:30

 
       

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