Ask Eno: When the Price Is – Not Right?

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Dear Eno,

Why does the same wine cost something different online or in another state?  Whenever I travel to New York or Connecticut I notice they charge sometimes more and sometimes less than what I usually pay for my favorite wines in Rhode Island.

-Giles

Dear Giles,

The variation in pricing of the same bottle of wine from state to state (and from retailer to retailer) is largely due to America’s legalities with alcohol retail sales, the famous Three Tier System.

Restaurants and shops are not allowed to buy wine (nor beer or spirits) directly from the producer and then re-sell it.  Instead they must buy it from a distributor and/or importer who then sells them the product at a price that has been marked up (in order to make any money off the deal). 

The more hands (exporters, importers, docks, distributors) that a bottle of wine must pass through before getting to you, the more cost added.  This especially goes for imported items which go through a lot of taxes and fees simply to arrive to the USA and/or distributor before being able to be sold.  

The Three Tier System has its pros and cons:

One of the pros is that it allows us to be able to buy products that come from all over the world and from very small producers much more easily (or at all).  It also makes it possible for producers to sell their products in places they might otherwise not be able to reach.  Another benefit (and original intention) of this system is to prevent large producers monopolizing markets.

The cons lay in the effect on prices for the retailer/restaurant and the consumer, namely that retailers and consumers are both somewhat at the mercy of the pricing structures decided by distribution…

Which brings us back to your question:

 

Why does the same bottle cost more here or there?  

1. Distributor or Importer Pricing:  while there is some wiggle room with some items, depending on your relationship with the distributor, their prices are what they are in the state that you do business in (i.e. retailers cannot price-shop in other states for better deals).  A distributor in New York charges retailers a different price for Grey Goose than the distributor in Massachusetts or Rhode Island – hence different shelf prices at the store.  State taxes, import fees, etc all play into pricing as well, of course.  

  

2. Buying Power:  Costco rules – buying more of an item makes it all around cheaper to you.  Because big shops and multi-retailers (Whole Foods, Bevmo, etc) buy in huge quantities compared to single/small businesses, they pay much less per bottle.  Smaller retailers/buyers cannot purchase hundreds of cases of that wine you like at a time – which means a higher price to smaller buyers/retailers and that higher price is passed on to you. Online “stores” work in a similar way (think Amazon.com versus a small bookshop).  

Aubrie Talarico is part of Eno’s team that answers your toughest questions or curiosities about wine, beer, spirits, sake, and cider. Email questions to info@enofinewines.com and read the answers in Eno’s E-newsletter!

To sign up for Eno’s newsletter visit www.enofinewines.com and enter your email OR text “ENOFINEWINES” to 22828.  

aubrie-bio

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