What Erica Gilmore can learn from the Soviets

Nashville Councilwoman Erica Gilmore has resurrected a bill banning single-bottle sales of beer in a misguided attempt to curb drinking and littering. To understand the unintended consequences of hair-trigger paternalism, we turn to the Soviets.

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To curb alcohol and vagrancy, the Soviet Union tried everything from burning some of the oldest grape vines in Europe (fine wine is often the alcoholic's cheap fix) to banning sales of vodka in containers smaller than one liter. Since Ms. Gilmore has not yet suggested a torching of wine stocks, it is the latter experience that is instructive.

Vagrants of the social-drinker ilk would certainly consider a liter excessive, as three is the optimal number of people for splitting such a volume (really!). A simple social convention was born. The first thirsty citizen arriving at the store would stand outside with three extended fingers held against his chest. The symbol conveys an attempt to create a troika, or group of three held by the common interest of securing the appropriate measure of the beverage. A second would arrive and assume a similar loitering stance. Upon a third compatriot's arrival, a bottle would be purchased and shared.

Result: more loitering, more nuisance, more litter, and a slight uptick in violence, partly resolved by bringing a 1/3 liter measure.

Burning the grapes didn't do much, either, except hinder the economic growth of modern Moldova and Georgia.

Hat tip thinktrain, though one who asks "who really needs just one beer" has probably never heard of Trappist ales, imperial stouts, doppelbocks, barley wine, and, well, beer.

State senator enjoys wines, as I do

Some time ago, I emailed my state representatives asking for their positions on interstate wine sales. I received a letter from State Senator Douglas Henry in response. I wasn't expecting much, since the Senator receives substantial contributions from the liquor wholesalers cabal. As anticipated, with his donations, the Senator also apparently received the industry's standard talking points, which are easily dismissed.

That, however, was not the disturbing part of the letter.

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The last line of the letter reads:

The presumption, of course, is that no one would advocate legislation unless he or she has a direct, personal stake in it. My letter to the senator identified me only as an economist and a voter. I also have opinions about the death penalty, our inaction in Sudan, and policy governing media mergers, but expect none of them to impact me directly.

I am curious how the last sentence of Senator Henry's position letter on gay marriage would read.

Terroir through a straw

Unfermented grape juice:	Fermented grape juice:

And with a name like Cordier (historical negociant and marketer of some of the best names in Bordeaux), it's got to be good.

(With apologies to Smuckers).

UPDATE: Apparently, the straw is not a simple hollow cylinder, but a technological wonder which, through strategically-placed holes at the top, is capable of "recreating the sensation of drinking from a glass." This differs from traditional straws which deliver liquids to the mouth in willy-nilly fashion.

No word yet on whether Riedel will offer hand-blown versions, with the holes customized for Oregon Pinot Noir. For now, Riedel employee Sylvie Laly suggests carting your own custom glassware when visiting friends:

I have a case for it and I bring it with me in my purse

Followers of this advice may want to acquire a matching case for their imaginary friend, since dinner invitations from actual people will probably become less frequent.

Bootleggers, Baptists, and political connections

Over 20 years ago, economist and FTC director Bruce Yandle wrote an influential column on the origins of social regulation. The theory of "Bootleggers and Baptists" contends that legislative regulation of "sin" (e.g., alcohol, tobacco) requires both a vocal "moral" voice (the Baptists) and a quiet though politically powerful lobby that profits from the regulation:

"Baptists" point to the moral high ground and give vital and vocal endorsement of laudable public benefits promised by a desired regulation. Baptists flourish when their moral message forms a visible foundation for political action. "Bootleggers" are much less visible but no less vital. Bootleggers, who expect to profit from the very regulatory restrictions desired by Baptists, grease the political machinery with some of their expected proceeds. They are simply in it for the money.

Here in Tennessee we have some of the most draconian laws protecting the liquor wholesalers. We also have no shortage of legislators who speak in moral absolutes. Of course, the "Baptist" is the protagonist in this story, since he purports to represent moral ideology and social welfare, rather than cynical greed.

Or does he?

Of the 32 members currently serving in the Tennessee State Senate, seven find their religious affiliation with Baptism sufficiently important to list on their short State Senate biography. While Baptist conventions continue their internal debate on the merits of total abstinence from alcohol, there is apparently no debate on whether one ought to practice, legislatively, what one preaches.

A quick perusal of campaign finance records indicates that all seven members have received political donations from the beer and spirits lobby since 2000. Particularly:

• Jerry Cooper (D-14) received $8,000 in the last two election cycles.
• Steve Southerland (R-1) received $4250 in 2006
• Lowe Finney (D-27) received $4000 in 2006
• Jamie Woodson (R-6) received $4000 in her last election
• Tommy Kilby (D-12) received $1000
• Dewayne Bunch (R-9) in 2004
• Mike Williams(I-4) in 2000

The "Baptist" in Yandle's theory is not meant to be literal, but merely a proxy for the voice of morality. However, other self-professed voices of moderation would likely yield similar results.

Anyone want to guess how many of these names also profited from tobacco lobbyists' efforts?

Restaurant wine prices: some examples

Following up on the table of wine price markups at restaurants, here are a few current examples:

1. If you must have Beringer White Zin, have it at Sperry's ($30) rather than at Jim Kelly's ($42, 40% higher)
2. Jim Kelly's is also not the place for Pinot Grigio. The 2005 Foley at $91 is 52% higher than at Park Café, and the 2005 Santa Margherita is 66% higher than at Mafiaoza's.
3. Why the non-vintage Veueve Clicquot is so popular I don't know, but if you must, have it at P.M. for $80 rather than Park Café for $140 (75% higher)
4. To really celebrate, have the 1996 Veuve Clicquot. You could spend $400 at Midtown Cafe, or $250 at the Bound'ry (and have $150 left over for dinner).
5. J. Alexander's has a bottle of Conundrum for $40. Saffire has a half bottle for $36.
6. Mollydooker Maitre d' is $36 at Watermark, but 81% more at Radius10.
   
   And the most remarkable difference:
7. Bonny Doon 2003 Le Cigare Volant is $45 at Watermark. You can have two bottles for less than the price of one ($100 !!) at Sunset Grill.

Over all, for wines that appear on many of Nashville's lists, J. Alexander's, Watermark, and Mafiaoza's tend to have the lowest prices, while Sunset Grill, Jimmy Kelly's, and Acorn often charge fifty to one hundred percent more.

Restaurant wine prices

We all know that a bottle of wine at a restaurant is substantially more expensive than at a retail store. I use the example of a restaurant wine list in my pricing class to motivate varied concepts, from extremeness aversion to product-line pricing to price discrimination. But just how expensive are the wines at Nashville restaurants? The following attempts to answer this question. Sleep-inducing methodological details are provided for the overly-curious at the bottom.

I selected restaurants with online wine menus. From each menu, an average of 20 bottles were randomly selected, representing reds, whites, and sparkling wines at a range of prices. Additionally, some common wines were used as controls (a majority of restaurants have Conundrum and Veuve Clicquot Yellow Label, for example). Prices are relative to national median retail prices.

In short, Café Margot is the best deal in town and Acorn has the dubious distinction of being worst, by a comfortable margin.

See the table

This is not intended to be a ranking of a wine list's or restaurant's quality or its service. It is the adjusted ratio of the price of several random bottles of wine to their national retail averages. No more. Also, restaurant wine prices in Nashville include 9.25% sales tax and 15% liquor tax, and retail wine prices in Nashville are quite high (curious why?). Therefore, while a ratio of 200 implies twice the national median prices, it will be a substantially lower markup over local retail wine prices. Markups in the table below refer to markups over national retail prices, not the restaurant's markup over its cost.

Nashville Restaurant Wine Prices
Restaurant Notes, link to wine list	bottles (by the glass)	Price Ratio (lower is better)
Café Margot	116 (16)	186
Great bargains throughout the list, but the best are in the higher-end reds, which rival retail prices. [list (pdf) found here  $28-$135]
J. Alexander's	78 (27)	193
Cheapest Conundrum of any list at $40. Lowest-priced wines have high markups, but the $40+ range is great. [list (pdf) found here  $26-$65]
Tin Angel	78 (27)	204
Large variance, with some great bargains mixed in with less favorable markups. [list (pdf) found here  $26-$75]
Flyte	103 (90)	209
Fairly consistent pricing. The $50-$60 range has the lowest markups. Upper-end sparklers have the highest. [list  $24-$110]
Valentino's	145 (15)	216
Very large variance in markups, ranging from about 20% to nearly 300%. [list (pdf) found here  $27-$230]
P.M.	22 (12)	220
Best Veuve Clicquot price at $80. Very reasonable given that lower-priced wines are usually the most marked up. [list  $27-$30]
Mirror	23 (17)	222
Small, unpretentious list with reasonable prices on lower-priced wines. [list  $25-$42]
Old Hickory Steakhouse (Opryland)	160 (20)	225
Highly variable pricing, ranging from 50% over retail to well over 300%. [list (pdf) found here  $34-$200]
Old Hickory Steakhouse (Gaylord Orlando)	114 (25)	228
NOT IN NASHVILLE [list (pdf) found here  $47-$490]
Ombi	45 (24)	228
Strangely, the better deals are on several under-$40 wines. [list  $32-$80]
Watermark	380 (33)	232
Some of the lowest Nashville prices on several $30-$60 wine-list staples. [list (pdf) found here  $32-$300]
Tayst	78 (24)	237
Fairly consistent markups across the list, and lowest prices on several champagnes. [list  $32-$135]
Bound'ry	222 (44)	239
Eclectic pricing with some of the best deals alongside some of the worst markups in Nashville. A few very good bargains at the high end. [list  $26-$250]
Carraba's (Nashville & Cool Springs)	37 (30)	241
Highly variable markups. [list (pdf) found here  $20-$42]
Yellow Porch	54 (36)	243
Fairly consistent pricing. Mostly common wines, all priced in the middle of Nashville range. [list  $26-$64]
Rumours	75 (74)	247
A couple of bargains in the $60 range offset some 200% markups n the under-$40 range. [list (pdf) found here  $26-$60]
Amerigo	53 (29)	247
No real bargains under $80, but a couple of high-end wines rival retail prices. [list  $26-$65]
New Orleans Manor	37 (21)	250
Damning a nation with faint praise, the list featuress Blue Nun as "Germany's most famous wine, Soft and mellow with a natural sweetness." [list  $22-$49]
F. Scott's	270 (40)	251
Very deep list, but what it has in common with other Nashville restaurants is usually priced higher than the competition. [list  $30-$475]
Mafiaoza's	129 (62)	251
Reasonable prices. No real bargains, but nothing outrageaous, either. [list  $22-$135]
Caffe Nonna	34 (23)	251
Top half of the list is pretty reasonable, while on the bottom half of the price range, 200% markups are the norm. [list  $29-$57]
Sunset Sam's (Gaylord Orlando)	42 (29)	254
NOT IN NASHVILLE [list (pdf) found here  $31-$52]
Saffire	101 (16)	254
750 ml of Conundrum will run $72, worse than any other restaurant. Several other wines also have highest prices in Nashville. [list  $28-$100]
Cabana	75 (35)	255
[list  $20-$42]
Buca di Beppo	46 (24)	256
[list  $24-$39]
Sperry's Belle Meade	144 (32)	258
Highest prices on Opus One, Roederer Brut, Moet White Star, etc. [list (pdf) found here  $24-$280]
Sperry's Cool Springs	250 (54)	258
The same Nashville-leading markups as its sister location, though with a few extra markups. Cavit Pinot Grigio is $30, highest in Nashville. Strangely, the other Sperry's location has it at $22. [list (pdf) found here  $32-$310]
Zola	108 (32)	260
No bargains to be found. [list  $24-$120]
Park Café	62 (24)	260
Veuve Clicquot Posardin NV for $140? That's more than a case of Brut Rose (which is a better wine). [list  $31-$115]
Midtown Café	130 (50)	261
Very consistent (high) markups, top to bottom. [list (pdf) found here  $26-$199]
Eastland	50 (23)	264
[list  $29-$90]
Radius10	67 (25)	273
Cheapest bubbly, an $8-$9 Barefoot for $38??? [list (pdf) found here  $35-$130]
Anatolia	16 (16)	278
Low-price wine lists have a disadvantage since the markups are usually higher, but Yellow Tail for $25? [list (pdf) found here  $23-$37]
Sunset Grill	241 (68)	279
Seasonal 50% off wine sales suggest regular prices are not too great. Several wines over four times retail. [list (pdf) found here  $25-$400]
Merchants	133 (48)	279
[list  $25-$215]
Sambucca	95 (23)	283
Come on! You can't offer a bottle of Lafite Rothschild ($400) without listing a vintage! [list (pdf) found here  $28-$150]
Jimmy Kelly's	61 (25)	291
Several wines have highest prices in Nashville. [list]
Acorn	69 (46)	316
If you search long enough, you may find a wine price that is merely insulting. $70+ reds have some of the highest markups on the menu. [list  $26-$120]

Am I missing your favorite restaurant? Post it in the comments, preferably with a link. Disagree strongly? Dissent meekly? Have a thought or experience to share? Let me know that, too.

METHODOLOGY (very rough sketch)

From each wine list, between 10 and 36 bottles were randomly selected, depending on size of list, with stratification: (among three least expensive, among three most expensive, but under $500, and among three closest to $60) X (a white, red, and sparkling). Prices were compared to median retail prices among retailers indexed by winezap.com and wine-searcher.com. Additionally, several common wines, each listed on at least one-third of the wine lists, were recorded. If too few selected wines have substantial retail representation (and thus higher confidence in the median), additional wines were randomly drawn. The composite score weighs whites, reds, and sparkling wines equally (33% each), weighs individual wines with greater median confidence (lower standard deviation) more, and places additional weight on the basket of common wines.

First -- changes in the weighing formula do not have a huge impact on scores, with a few exceptions. However, a different random selection of wine from a large list, if markups are highly variable, can make a significant difference. Greater selection and bootstrapping could solve this, in part. Instead, I offer a caveat (don't take this too seriously) and suggest that one not make much of differences in scores when scores are close. Average standard deviation of the ratio on a wine list is 60.

I wonder if the higher markups are associated with higher corkage fees?

UPDATED: More restaurants added (25 September 2007)

UPDATE 2:Today, this table was reprinted in the Nashville City Paper (pdf). Thanks to Hoyt Hill of Village Wines, I am probably no longer welcome at half of Nashville's restaurants. On the other hand, if Margot would like to invite me for dinner, I accept. (2 October 2007)

UPDATED: Corrected Gaylord properties (4 October 2007)

A final toast

The Beer Hunter, notable author, connoisseur, and advocate of fine malt, passed away August 30.

Michael Jackson's writings on the beers of Belgium, a country he termed "The Disneyland of beer," set me on a mission to try them all. I'm about 400 in, and there are plenty to go.

The Brewers Association has tributes from Charlie Papazian and others.

A three-tier system for Amazon

What would cost Tennessee more revenue: half of all wine purchases being smuggled from out of the state, or people eschewing the local Borders in favor of Amazon.com?

The most common defense of the three tier system forwarded by the liquor distributor cabal is that it ensures the collection and distribution of sales and excise taxes, without which Tennessee roads may no longer be the State's pride, and Tennessee schools might fall out of the top 49 in graduation rates.

Since interstate shipments would not be directly taxable, it is a valid point. But how valid, in dollar terms? Consider a comparison.

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In 2004, Amazon.com had sales of nearly seven billion dollars. While they do not break this out by state, the Bureau of Economic Analysis reports that in 2004, Tennessee accounted for 1.8% of National Income. If book demand is roughly in proportion (avoiding the easy jabs linking demand for books and graduation rates), $125 million worth of Amazon merchandise was shipped into Tennessee. Of course, while the law-abiding citizen would declare this purchase and remit taxes to the State, lets assume that this does not happen often. This suggests about eleven million dollars in taxes foregone due to a single online retailer.

But what about wine? Collections from the wine excise tax amounted to less than eight million dollars in fiscal 2004 (TN Dept. of Revenue). Figures from industry lobbyists (pdf) put the total collections at about seventeen million, including licensing fees, fines, and confiscation income.

In short, even if we take the higher industry figure, and assume that 70% of all wine sales will be lost to out-of-state sales (a ridiculous idea when shipping costs are factored in), then the state still loses more from a single online retailer than the entire wine industry.

Following up on a previous post, and slightly paraphrasing Lipman's dishonest defense of the monopolization of alcohol, we have (original in italics):

Requiring Amazon.com to sell through our local Borders Books promotes a safe marketplace and environment for citizens by limiting the authorized channels through which books enter our state. The system also helps ensure that minors are not given access to immoral, objectionable smut and that the state can collect taxes on alcohol sales. It also allows for a level playing field for retailers of all sizes, increasing competition and supporting small business. By having exclusive rights to distribution, Borders has a vested interest in helping build brands over a long period of time, affording better growth for the brand within the market.

Senators, please pass the Book Distribution Act now to stop the madness. Think of the children.

Competition policy after several martinis

A brief two-question quiz on industrial organization:

QUESTION 1: A manufacturer sells his goods to a retailer. A law is passed that forbids the manufacturer from selling to the retailer. Instead, the manufacturer is required to sell to a middleman, who may then sell to a retailer. This helps:

• A.   The middleman
• B.   The retailer
• C.   The manufacturer
• D.   ALL OF THE ABOVE! and Children. And small businesses.

QUESTION 2: A new law would forbid manufacturers from talking to more than one middleman, so that each middleman is, by law, given the exclusive ability to connect a specific manufacturer to the retailers. Who would benefit from this law?

• A.   The middleman
• B.   The retailer
• C.   The manufacturer
• D.   ALL OF THE ABOVE!

If you answered D for both questions, you're right, according to the oldest member of the liquor distributors' cabal:

The three-tier system promotes a safe marketplace and environment for citizens by limiting the authorized channels through which alcohol enters our state ... It also allows for a level playing field for retailers of all sizes, increasing competition and supporting small business.

Tennessee is known as a franchise state, meaning that wholesalers have exclusive relationships with suppliers' brands. By having exclusive rights to distribution, wholesalers have a vested interest in helping build brands over a long period of time, affording better growth for the brand within the market.

The second paragraph is beguiling, containing a gram of truth. Downstream monopolization does imply greater brand-specific investment, but only because it leads to a greater capture of surplus. It is certainly not a net positive for anyone but the monopolist. The first paragraph is so deceitful as to be laughable, if not for venal state politicians who regularly parrot it.

UPDATE (11 October 2007): Fun with Google.

Presumably because of the above link, a search for the phrase liquor distributors' cabal now yields as the first result Lipman's somewhat questionable justification of the three-tier system. I wonder if unscrupulous cretins can catch on...

A premature celebration

The press has been quite jubilant about yesterday's Supreme Court ruling on direct shipment of wine ("Let those wine sales flow" claims USA Today) but we shouldn't pop the cork on that last bottle of bubbly since it may not get easier to acquire more.

All that the Court requires in its decision is that states adopt comparable winery-to-consumer shipping laws for out-of-state wineries as they do for in-state wineries. I applaud the decision on legal grounds, asserting that fair interstate commerce applies to alcohol sales, but expect it will make wine even harder to acquire.

We can classify states into three catgeories:

1. States that allow shipment from all wineries
2. States that allow shipment only from in-state wineries
3. States that allow no shipments at all (like Tennessee)

The case has no impact on the first and third category, since the decision requires only that policies for in-state and out-of-state wineries correspond. Additionally, it seems to apply to wineries only, not retailers, thus having no impact on Internet sales from cheaper retailers out of state.

But certainly there is good news for consumers in the few states with discriminatory policies? Perhaps not. What will states in the second category do when forced to set identical policies for out of state wineries. They either allow out of state wineries to ship or prohibit in-state wineries from doing so. Since the latter option is preferred by the well-funded distributor lobby, I'm guessing this is more likely

So, the Supreme Court decision is a victory for the principle of competition, but likely to reduce than create more competition, in practice.

Ever wish you were a toilet?

It seems that a favorite restaurant of mine from grad school, Old Bay, is joining in the anti-French hysteria, pouring French wines into the toilet and vowing never to serve them again.

It is unclear whether owner Anthony Tola is sincere in his xenophobic fervor, or just enjoying the cheap publicity ($1100 of wine total? Really?) that comes with such stunts, but it is sad to see this at the very place I celebrated my dissertation defense.

UPDATE: From the Rutgers Targum, Old Bay is now being boycotted because it is "reinforcing the fear non-Americans have that Americans have absolutely no tolerance for people who don't think exactly how we think." What comes around ...

UPDATE: Old Bay's wine list (term used loosely) now has several champagnes from, err, Champagne. That's in France. Never say never, again. Come to think of it, in my many visits to Old Bay in the late 90's, I never had a bottle of wine. We came for the beer and the beer garden. We certainly did not come for the cheesy "we're just like New Orleans because we have beads" thing, though.

UPDATE (11 October 2007): Old Bay apparently agrees with me that the New Orleans gimmick is poorly executed, as their wine list now features this heading:

Infamous New Orleans cuisine? In the words of Inigo Montoya, I do not think that word means what you think it means.

Drink the booze in your trunk before you drive

Rank these alcohol-related activities by the level of criminal offense in Tennessee:

• Obtaining a third DUI conviction
• Piloting a commercial cruise line up the Mississippi while intoxicated
• After a couple of beers, shooting that dog that's been scaring your cow
• Driving from nearby St. Louis with six bottles of wine
• Purchasing alcohol for a child
• Member of the Alcohol Beverage Commission accepting a bribe

See the answers

After navigating the many blue laws of my new environs, I discovered at a Sunday morning brunch that my Bloody Mary will not be arriving until after noon, because, well, Sunday mornings are for sober reflections and, for the Lord. Talmudic debate about the appropriate day to celebrate the Sabbath aside, there is an exception: Titans stadium. Football! Hallelujah!

Here is the ranking, from lowest to highest offense, and the cite to the relevant section in the Tennessee Code:

• Not a crime:
• After a couple of beers, shooting that dog that's been scaring your cow
  Dogs shouldn't be scaring livestock anyway (44-17-203). Now, if the dog was minding its own business, then it rises to the level of a ...
• Misdemeanor:
• Member of the Alcohol Beverage Commission accepting a bribe
  A Class C Misdemeanor (57-1-109), the lowest punishment for alcohol-related offenses is reserved for the corruptible officials who oversee them.
• Purchasing alcohol for a child
  It is a class A misdemeanor, unless the child tells you he's 21, in which case you could be okay (39-15-404).
• Piloting a commercial cruise line up the Mississippi while intoxicated
  Having hundreds of passengers endangered is, in the view of Tennessee law, the same as buying an 18 year old a beer. And, they might take away your boating license (69-9-219).
• Obtaining a third DUI conviction
  Only your third DUI? (55-10-403) After all, people make mistakes, right? And mistakes. And mistakes. Now if you get convicted a fourth time of driving under the influence, only then have you committed a ...
• Felony:
• Driving from nearby St. Louis with six bottles of wine
  Yup, its a felony (57-3-401).

I think I finally made sense of this ordering. Buying booze for kids and driving or boating while intoxicated all require the purchase of alcohol. Only bringing a few wines from out of state bypasses the Tennessee wholesalers. Isn't taking money from their pockets the worst crime of all? Probably not. But that's why we have to keep the penalties for bribing public officials so low.

And if you have several bottles of out-of-state beer in your car, drink them before continuing on your way. The penalty is lower.