August 26, 2007

Dear CABC Type 17/20 license holders:

My name is John Olney, founder of The Wine Country Club ( www.thewinecntryclub.blogspot.com/ ), a division of Wine Country Marketing & Promotions (Web site: http://www.twccwcmp.blogspot.com/ )

I am writing to you to seek your support in changing the California legislative acts that limit the marketing and sales opportunities of CABC Type 17/20 licenses holders to access the consumer by Internet only, while allowing CABC Type 2 licenses holder’s almost unlimited access to the consumer.

I am also asking you to consider joining with us in forming a trade association (TA) which will hopefully include all CABC Type 17/20 wine producers, customer crush houses and the general wine consumers. This trade association would advocate for a change to the existing legislation, and rules & regulations.

The TA will also represent a collective platform by which to market all CABC Type 17/20 license holders’ members in a fashion similar to other existing wine-related trade associations featuring the CABC Type 2 license holders.

Presented below is a summary overview of the issues and findings that support a call for a change to the laws and rules and regulations. If you would like to read a complete report on our extensive analysis of the CABC licensing differences please feel free to access Internet Web site postings listed at the conclusion of the following overview.

Please let me know your thoughts. Communications channels to me are shown below. Thanks for your time and I hope that I will hear from you.

John M. Olney, Founder and Chairman
E-Mail: jjolneytwcc1@aol.com or thewinecntryclb2@aol.com
1325 Imola West, #409, Napa CA 94559 Phone: 707-299-9548

A CALL TO CHANGE CALIFORNIA ALCOHOLIC BEVERAGE CONTROL
RULES & REGULATIONS FOR CABC TYPE 17/20 WINE PRODUCERS

The Wine Country Club has been designing plans to sell wine under its own label to its wine club members (in development) and the wine consumer in general. These plans have been under development during the period that the California legislative bodies and the California Department of Alcohol Beverage Control (hereafter referred to as “CABC”) have been re-examining the issue of wine producers who DO NOT own their own grape-into-wine processing equipment and how they can donate to charity events and when they can pour tastings directly to the consumer.

Wine Country Marketing & Promotions (WCM&P) has been watching these re-examinations with great interest. Since WCM&P will not own processing facilities, it will be using custom crush facilities to produce the wines for TWCC under our strict processing and blending instructions, and style guidelines. Wine producers of this category are granted CABC Type 17/20 licenses.

Current state legislative acts will restrict our direct wine marketing and sales to the consumer to use of the Internet ONLY! In other words, we will not be allowed to make direct (face-to-face) contact with, nor pour tasting directly to, the consumer, including our own wine club members! We will only be allowed to tell them about our wines on our Web site and sell the wine to them ONLY via the Internet. This means that the consumer will be buying the wine with no personal knowledge of whether or not they will like our individualistic wine style!

WCM&P has discussed this dilemma using the TWCC existing blog site: www.thewinecntryclub.blogspot.com/ . We were asked by some of the mailing list consumers why they could not taste any of the wines produced by these CABC Type 17/20 License holders. We referred them to the existing CABC Rules & Regulations governing wine production & sales. They responded with more questions suggesting that the manner of wine production and its ownership does not mean anything to them as consumers. In their mind, no matter how it is manufactured, and who owns the equipment, does not change the fact that the end product available to be tasted and sold to them – the consumer – is grapes-to-wine, with the only difference being stylistic nuances per varietal.

These consumers asked WCM&P to look into their issue as a matter of unfair restriction from them knowing about the products created by the Type 17/20 license holder. We undertook their request. The first thing we did was look at the purpose of the Department of Alcoholic Beverage Control to exist. We quote selected portions from their Website at http://www.abc.ca.gov/mission.html (Highlighting by WCM&P. If you would like to read the entire CABC quote, please go to the Internet Web site postings listed at the conclusion of the following overview.)

“The mission of the Department of Alcoholic Beverage Control ….. in a manner that fosters and protects the health, safety, welfare, and economic well
being of the people of the State.

OUR BASIC PRINCIPLE …… we will meet our licensing, enforcement and regulatory mandates with honesty, impartiality, and the highest degree of concern for the people of the State.....".

We reviewed the California Business and Professions Code (http://www.abc.ca.gov/cbnpc.html) of which the following paragraph is pertinent about the CABC:

"23001. This division is an exercise of the police powers of the State for the protection of the safety, welfare, health, peace, and morals of the people of the State, to eliminate the evils of unlicensed and unlawful manufacture, selling, and disposing of alcoholic beverages, and to promote temperance in the use and consumption of alcoholic beverages. It is hereby declared that the subject matter of this division involves in the highest degree the economic, social, and moral well-being and the safety of the State and of all its people. All provisions of this division shall be liberally construed for the accomplishment of these purposes.”

It should be noted that the above stipulations should really address the full issue of the consumer in general and not just the people of California as the California wine products are distributed across state lines as well as on an international basis.

Finally, we looked at the statement by the 2006 ABC Director which is published on their Web site as quoted below:

“The Department of Alcoholic Beverage Control is pleased to do our part to promote small business growth, expansion and productivity within the State. …..….. We hope the following information will be helpful in developing a productive and profitable relationship with the ABC.”

With the above quotations in mind, WCM&P then looked at the licensing restrictions on the alcoholic beverage manufacturing of beer and distilled spirits. We did not find any evidence of restrictions being placed on how these beverage producers are allowed to market and sell their products based on the type of ownership of the beverage production facilities.

So, Why Only Wine?

The concept of the governmental agencies performing with honesty, impartiality, and the highest degree of concern for the people of the State, looking after the economic, social, moral well-being and of the people and doing their part to promote small business growth, expansion and productivity and maintaining a profitable relationship with the ABC, do not appear to be realistic statements in light of all of the above.

All wine producers are, regardless of the type of ownership of the processing equipment, part of the “people of the state.”

To deny the “people of the state”- - who, all along with all other wine drinkers on a national and international basis, are consumers of California wines -- the right to have knowledge of and access to all legally produced commercial wines is unfair business practices.

The state legislature/CABC has restricted the CABC Type 17/20 license holders from access to the consumer in what should otherwise be an “levell playing field basis” market as it is in all other alcoholic beverage sales.

The marketing and sales restrictions placed on CABC Type 17/20 license holders in no way resemble the ABC Director’s statement that CABC “…is pleased to do our part to promote small business growth, expansion and productivity within the State...." Therefore, it is difficult to accept that“impartiality” is being practiced.

It is therefore contended that the state legislators may have, either knowingly or unknowingly, created a restraint of trade on wine sales by the CABC type 17/20 license holders. It has also been suggested by some of our mailing list recipients that special interest groups and individuals businesses within the wine industry may have collectively conspired to influence state legislation to limit the rights of one wine producer category from selling their wine on an “level playing field basis” with those producers who own or share owned production facilities and are allowed to offer tasting and sell their wines directly, face-to-face, to the consumer.

Based on our findings to date, WCM&P recommends that the CABC Type 17/20 license holders, the custom crush houses who do business with these license holders, and wine consumers in general form their own trade association to advocate for a change in the California legislative acts and CABC rules and regulations.

The Value of Trade Associations (TA’s) is Two-fold

First, the TA represents a “collective” organization of entities with a common product and/or service for which the TA represents a formidable marketing resource of the mutual interests of its members.

Second, the TA represents the collective voice of its members to advocate for fair and reasonable governmental legislative acts and rules & regulations that could possibly impact their business. TA’s are also frequently referred to as “special interest groups,” lobbyists, and other similar branding. An excellent paper on how effective TA’s can be is presented at this Web site: http://www.wcfia.harvard.edu/seminars/pegroup/WisemanElligND.pdf. The title of the paper is, “The Politics of Wine: Trade Barriers, Interest Groups and the Consumer Clause.” It was prepared by Alan E. Wiseman and Jerry Ellig, circa 2005.

The wine producers of Napa County, as an example, have a number of large and small TA Web sites to support their particular needs and/or interests: There are:

1. STATEWIDE RESOURCES
2. NAPA COUNTY RESOURCES
A. Representing the
county wineries on the whole
B. The AVA sub regions of Napa County that
have
established a Web site
C. Specialty TA’s representing a travel
corridor or a
market niche
3. VARIETAL/STYLE TA’S

For the members of the above individual TA’s, their individual Web sites are linked to that of the TA thus enabling not only each member to contact each other in a rapid and centralized way, but also for the wine consumer to find wineries and wines that he/she might not other search for on the Internet looking for individual winery Web sites. The collective listing provides each member’s Web site much greater exposure opportunity to the consumer market.

For the majority of the above TA’s, their memberships primarily consist of California ABC License type 02 which permit’s the winery to make direct, person-to-person contact with the wine buying consumer (including its own wine club) both on and off site (under specific guidelines) as well as through all the other normal and regular marketing methods. These are wine producers who own, lease or rent wine production facilities.

But all is not being conducted on a “level playing field.” An obvious missing segment of the wine producers from the larger of the aforementioned TA’s is the wine producer that does not own his/her own wine production facilities. They purchase grapes or juice and have it processed into wine by contracting with a winery operation often called “Custom Crush Houses. “

These wine producers are only allowed CABC license types 17 & 20, which limit their opportunities to market their wines directly to the buying consumer to use of the Internet only. They cannot directly offer tastings to, nor sell their wine directly to the wine buying consumer, including those who might join their own wine club. They can only offer direct, person-to-person tasting and sales to those who are “in the trade” (brokers, wholesalers, distributors and media, etc).

There is no existing TA representing these CABC license types. Unless one or more of these wine producers elect to research CABC records to identify all the other CABC Type 17/20 licenses holders and contact each of them to develop a Trade Association unique to their situation, the CABC Type 17/20 license will continue to have no collective voice to advocate for their rights and interests, nor will they enjoy the significantly enhanced benefits of marketing their individual Web sites through a mutual umbrella - the Web site of the TA!

If you would like to read a complete report on our extensive analysis of the CABC licensing differences please feel free to access the following Internet URLs:
http://winecntryselect.blogspot.com/ - Our Web-site containing the following postings:

http://winecntryselect.blogspot.com/2007/08/dear-cabc-type-1720-license-holders-my_15.html - Contains this letter on our above Internet Web site

http://winecntryselect.blogspot.com/2007/08/comparing-california-alcoholic-beverage.html - COMPARING CALIFORNIA ALCOHOLIC BEVERAGE CONTROL RULES & REGULATIONS FOR WINE PRODUCER OPERATIONS

http://winecntryselect.blogspot.com/2008/01/wine-country-select-wineriesproposed.html - The Design of a Possible Trade Association

http://winecntryselect.blogspot.com/2007/01/marketing-and-selling-of-concept-napa.html - Proposed Initial Funding Events