With little fanfare, the California Department of Alcoholic Beverage Control clarified its position on third party marketing programs as they pertain to California’s wine industry. While the advisory issued in 2009 attempted to clarify the market situation at the time, it was clumsy and subject to multiple interpretations. Since then, there have been a proliferation of marketing companies hoping to cash in on inventory overstock while awaiting further clarification from the California ABC. Today, many may have to reconsider their business models.
We have to applaud the California ABC for their efforts to clarify their position, which they have done in clear, concise language. You can find the advisory here: Industry Advisory, but the short of it is quite simple.
In order for a winery to legally be represented by a third party marketer, three general conditions need to be met.
1. The winery must control the entire process from pricing through order fulfillment.
2. Revenue from each consumer purchase must flow either directly to the license holder or through an escrow account held specifically for the producer or supplier of that specific product.
3. There must a holding period during which the winery can review each order with the option of accepting or rejecting it prior to the start of the fulfillment process.
How will this change the industry? That is yet to be seen, though one can expect a shakeout in the proliferation of flash sale sites as well as third party marketers. Those companies with a true understanding of the wine industry should be well positioned to move forward after the full effect of this morning’s advisory release sets in. Wineries will be able to work with third party marketers knowing exactly how they must proceed to remain in compliance with the ABC. This should come as a welcome relief for wineries, importers and third party marketers alike.
Lot18 has released a press release regarding the ruling, which can be found here:Lot18 Praises Advisory