On its journey from vineyard to dinner table, a bottle of wine will trickle through the state's three tier system, facing price hikes at each stage along the way.
Some in the industry say the system — which takes the product from winery to distributor to retailer — gives too much control and profit to the distributors or wholesalers in the middle. But Oklahoma wineries can choose to self-distribute, bypassing the second tier entirely.
Public perception is that the distributors' markup on wine and liquor is high, said John Maisch, an attorney for the Alcoholic Beverage Laws Enforcement Commission. Every two months, distributors anonymously file their intended markup with the ABLE Commission and are given an opportunity to see the others' posted percentages and amend theirs, if desired.
Maisch said the markup has fluctuated in recent years. In April 2010, domestic wine was at 22 percent markup from what the distributors paid for it, then it dipped to 15 percent until January of this year.
Currently, it ranges from 16.75 percent to 17.75 percent on domestic wines, depending on the distributor.
Of the 62 Oklahoma wine producers, about 25 percent self-distribute. A constitutional amendment granted in 2008 allowed winemakers who produce 10,000 gallons or less to sell directly to liquor stores and restaurants.
“That was absolutely the best thing to happen to us in recent years,” said Andrew Snyder, president of the Oklahoma Grape Growers and Wine Makers Association.
However, Snyder said, the self-distributor license fee of $750 is cost prohibitive to some mom-and-pop operations and there have been proposals to reduce the fee.
Before the change, many wineries were having difficulty getting their products on store shelves. Distributors choose which products they carry and will often forgo stocking products with low sales volume.
Whether it's self-distributed or not, consumers often won't notice a difference at the cash register, explains Snyder. For example, a bottle of wine that costs $11.25 at his winery is sold to a liquor store for $8.25 — then marked up about 30 percent and sold to the consumer for the same price of $11.25.
Winemakers who use a distributor will sell them products at 50 percent of the retail price, allowing the distributor and liquor store to each mark up by 25 percent.
Don Beedle, co-owner of Cosmopolitan Wines in Moore, said his “nano winery,” which produces one red and one white variety, has struggled with and without a distributor. He and his business partner work full time and make wine on the side, so self-distributing was too time-intensive — especially when an order would come in from outside of the Oklahoma City metro area. (Oklahoma law doesn't allow winemakers to ship products through the mail.)
But just one distributor has picked up their products and they've found that the liquor stores will only carry three or four bottles at a time, then wait several weeks to restock.
“Distributors don't promote the wine at all. They'd much rather push liquor,” he said. “By far the distributor makes the most amount of money. They do the least amount of work and make the most amount of money.”
Using a distributor
Central Liquor, one of the state's largest distributors, gives its customers access to 12,000 wine items, said partner Brad Naifeh. Those include domestic and international wines in every size imaginable.
They pay freight charges ($5 a case on wines from out of state) and operating costs, including for a fleet of trucks, warehouse expenses and personnel, all of which eat into the dollars made through product markup, he said.
At the liquor store, the bottle of wine once again faces a price increase. Michael Bogan, assistant manager of Moore Liquor, says for wine, it's a flat 22 percent. The store buys from multiple distributors and receives shipments from two or three every day.
Oklahoma law says manufacturers must offer their product to all state distributors for the same price and on the same terms.
Then, the distributors must do the same — offer the products they choose to carry to all 650 liquor stores and all 2,000 restaurants and bars for the same price. They aren't allowed to give volume discounts and producers can't have an exclusive distributor, as they do in other states, Maisch said.
Snyder, the Oklahoma Grape Growers and Wine Makers Association president, says the current system is very good. Naifeh couldn't think of any suggested improvements either.
But Beedle, the small winery owner, could think of one change he'd make.
“If I had it to do over again, I'd be a distributor,” he said.