On June 24, 2023
A retailer built a program around your wine and you’d like to create some wine marketing buzz around it. They’ve worked closely with your sales team to create a program highlighting your products and featuring them in tastings and promotions. Can your winery generate buzz around this campaign and support the retailer that’s worked so hard with you? The answer depends on which state you’re operating in and whether or not they enforce tied house laws.
Tied house laws make up an important piece of the three-tier system in the United States. When Prohibition ended in the 1930s, the government repealed the 18th Amendment, determined not to allow the excesses of the previous era to return. That meant preventing tied-house systems – or partnerships between alcohol producers and retailers. Often brewers or other producers would purchase their own pubs and feature only their products, pushing the competition out of the way. Larger producers gained quite a bit of influence over retailers while smaller producers struggled.
So the federal government outlawed tied-house systems with laws that block suppliers from persuading retailers to carry their products and excluding the competition. If a supplier influences a retailer to stock their products, intentionally or not, and it results in the exclusion of other suppliers, it’s a violation of the law.
On top of the federal regulations, states like California designed tied-house laws that extended beyond the above. Under these state laws, suppliers cannot own or operate retailers nor can they pay them or give them anything of value.
By enacting tied-house laws, many states prevent producers, including wineries, from promoting retailers in an unfair or unequal way. The law intends to put all producers, small and large, on equal footing. After all, if no one can influence retailers, then the big guys can’t monopolize that channel.
Updates to the law over the years have given wineries a bit more ability to sell directly to consumers And a recent bill extended wineries’ ability to promote events at retailers as well. But it’s still a very confusing set of regulations to navigate.
If you have more questions about tied-house laws, we’ve broken down the most frequently asked below.
What Are Tied-House Laws?
The purpose of tied-house laws is to prevent alcohol producers from artificially engineering their own market by running its own retailer. It’s a system designed by the British long before states across the U.S. adopted similar rules. However, in post-Prohibition America, state governments adopted their own versions of these parameters to regulate the sale of alcohol.
When the 18th Amendment was repealed, the federal government left the regulation of alcohol to each individual state. That’s why the pattern of tied-house laws – and other alcohol regulations – across the country changes slightly (sometimes drastically) whenever you cross a border.
Tied-house rules take many forms. The common thread is that alcohol producers – and wineries – are restricted in their ability to support retailers. In almost all cases, suppliers cannot pay to have their products featured over other competitors (a practice often known as pay-to-play). Often, producers are restricted in how they run tasting rooms or tap rooms as well.
What Do Tied-House Rules Mean for Wine Marketers and Advertisers?
In California (and many other states with similar laws), tied-house restrictions stipulate that producers may not “furnish, give, or lend any money or other thing of value” to retailers. This particular line tends to impact producers’ marketing teams the most as the marketing itself could be considered a “thing of value.”
Judges have extended the meaning of this particular phrase to everything from free merch for retailer staff to social media posts. The loose wording can make supporting your retailers very tricky – even if you are following all of the rules.
What Do California’s Tied-House Laws Say About Social Media Marketing for Wineries?
Remember back in the early days of social media when it was a bit of a wild west for marketers? All of that ended in California in 2014. That’s when California’s ABC deemed that a winery had broken the law by Tweeting: “Two days till @SaveMart Grape Escape in Downtown #Sacramento!”
From there on out, wineries and all alcoholic beverage producers had to watch what they Tweeted, Facebook-ed, Instagrammed or posted anywhere on social media. They could no longer promote simple events at local retailers without incurring the wrath of the ABC.
However, like all things, there are exceptions. California wineries and other spirits and beverage producers have the ability to promote events at retailers when they have an educational or instructional element. Advertisements or social posts that do promote these types of events cannot mention the price of products nor can they include praise or compliments of the retailer.
As of 2019, wineries in particular gained a bit more ability to promote events when AB 2452 passed. It allowed those wineries the ability to share details about upcoming events on social media. That said, promotion needs to end once the event begins and nothing more can be shared around the event – even after it’s ended.
Tied-house laws in other states, such as Oregon, also allow producers to publish lists of retailers that carry their products but they cannot single out or highlight an individual retailer.
What Other States Have Tied-House Laws?
California is certainly not the only state with tied-house regulations. States such as Oregon, Ohio, Massachusetts and several others. Each state has different regulations and rules around tied-house systems.
It’s important to understand not only your own state’s laws but those of any state you plan to distribute to as well. Once you start distributing over state lines, you are beholden to those rules as well.
If you need a hand navigating wine branding around all the tied-house laws – and all the other regulations you need to comply with – it’s important to have an experienced partner who you can trust. We know our way around tied-house laws and how to market your products without tripping over the rules. Team up with us and we’ll walk you through all of it.