Question for consumers about a 2% DTC assesment

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Question for consumers about a 2% DTC assesment

#1 Post by Stephen Pepe » February 22nd, 2020, 11:02 am

The Santa Barbara Vintners is proposing to create the first Business Investment District(BID) in the wine industry. BIDS were used initially to build parking lots. The hospitality industry started using BIDs decades ago to finance their marketing. The SB Vintners is proposing a 2% assessment on all Direct to Consumer(DTC) sales. It would include wine club sales in California and tasting room DTC sales. The BID would also apply to tasting room non-wine purchases like glasses, hats, shirts etc. as well as to winery events such as wine maker dinners and weddings. Wholesale wine sales to restaurants, hotels, grocery stores and wine shops would be excluded. The BID would raise about $1.6M and be used for marketing, promotions, operating expenses and advocacy. The wineries supporting the BID contend consumers are used to paying BIDs for their hotel stays and won't object or the consumer won't notice or care about the 2%
What do consumers on the board think?
Those in the biz can reply as well.
Thank you.
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Re: Question for consumers about a 2% DTC assesment

#2 Post by Matthew King » February 22nd, 2020, 11:24 am

I’m not a fan of this idea. Why should I have to pay a surcharge to help a group of winemakers further market a product I’m already buying?

Let them do it through cooperative association fees rather than on the backs of consumers.

Marketing is a standard expense for any business. Why not ask me to help pay for electricity to run the store?

It reminds me of being asked to pay supplements on a restaurant bill to subsidize health care costs for owners of dining establishments.

Ultimately the business can just bake in added cost ... be it marketing or health care coverage .. into the price of the final product if they like. But it irks me to be nickel and dimed on what should just be a normal business expense.
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Re: Question for consumers about a 2% DTC assesment

#3 Post by Brian G r a f s t r o m » February 22nd, 2020, 11:38 am

A $50 bottle becomes a $51 bottle --- doubt you're going to lose many customers over that. I would, however, let it just be a price increase without revealing exactly what it's designed to fund. Even though customers are *already paying* for advertising, and electricity, and every other expense, customers prefer the idea of paying for the product over the idea of paying for any given operational expense. Revealing to the customers what the 2% increase is for is likely to turn off more customers than if you don't reveal what it's for.
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Re: Question for consumers about a 2% DTC assesment

#4 Post by GregT » February 22nd, 2020, 11:56 am

I agree. Itemizing prices isn't necessarily a good thing. I'd rather pay an airline for a ticket that includes everything than pay for the ticket and then pay line by line for a carry-on, seat selection, checked baggage, etc. Somehow you feel like you're being nickel and dimed to death everywhere these days, and telling people that they have to pay another buck to advertise an area and a product that I'm already consuming isn't a great marketing plan.

And I love that "it's only two percent". That's just two percent. It's so little and they'll be able to do so much with it. Hey! Maybe they should make the big wineries pay for it since they screwed everyone otherwise they wouldn't be big.

BIDs are used all over these days. In New York, business pays a lot of taxes. They help finance the Dept of Sanitation. But the City couldn't clean up it's garbage so they created BIDs to have guys sweep the streets.
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Re: Question for consumers about a 2% DTC assesment

#5 Post by Faryan Amir-Ghassem¡ » February 22nd, 2020, 1:22 pm

The most successful tax is the latent tax.

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Re: Question for consumers about a 2% DTC assesment

#6 Post by Howard Cooper » February 22nd, 2020, 1:47 pm

Matthew King wrote:
February 22nd, 2020, 11:24 am
I’m not a fan of this idea. Why should I have to pay a surcharge to help a group of winemakers further market a product I’m already buying?

Let them do it through cooperative association fees rather than on the backs of consumers.

Marketing is a standard expense for any business. Why not ask me to help pay for electricity to run the store?

It reminds me of being asked to pay supplements on a restaurant bill to subsidize health care costs for owners of dining establishments.

Ultimately the business can just bake in added cost ... be it marketing or health care coverage .. into the price of the final product if they like. But it irks me to be nickel and dimed on what should just be a normal business expense.
Agreed. The vintners already have customers paying health care for their workers via "auctions." Now they want consumers to pay for marketing? Frankly, I don't buy any wines from this region so I don't really care, but this seems like a way for producers to raise their prices and then blame the government.
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Re: Question for consumers about a 2% DTC assesment

#7 Post by Arv R » February 22nd, 2020, 6:43 pm

I'll be the contrary cat here and suggest that stuff like this actively turns me off. If I know a restaurant wants to do the surcharge game for their staff benefits, I'd avoid it if I can. Why not just charge all the association members 50k (or however its fair to apportion it) without showing the end customer the additional cost? All that nickel and diming is kind of degrading for both parties. How can people sell high end wine....while offering the full Ryan Air experience....
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Re: Question for consumers about a 2% DTC assesment

#8 Post by saul_cooperstein » February 22nd, 2020, 7:04 pm

This doesn’t bother me at all. Only thing I would add is that any addition such as this needs to be prominently displayed in advance so that first time its seen isn’t on the check/receipt. Same for restaurants. Charge me however you want, just disclose it all prominently on your website, menu and at entry to your establishment. Same as an auction buyers premium. As long as I know going in, don’t care. Also, many restaurants that add these charges for BOH, health care, etc (outside of maybe those in San Francisco) will remove it without issue if you just ask...it doesn’t go to sever anyway so they don’t really care.

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Re: Question for consumers about a 2% DTC assesment

#9 Post by Chuck Miller » February 22nd, 2020, 10:37 pm

Unless you are only DTC, you are selling a $50 retail wine to a wholesaler for let’s say $25. Let’s assume you are making a profit at that price. Now you want to charge your high margin DTC client a surcharge instead of eating that cost. Sorry, you just lost me as a customer.
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Re: Question for consumers about a 2% DTC assesment

#10 Post by BobMilton » February 23rd, 2020, 9:05 am

Chuck Miller wrote:
February 22nd, 2020, 10:37 pm
Unless you are only DTC, you are selling a $50 retail wine to a wholesaler for let’s say $25. Let’s assume you are making a profit at that price. Now you want to charge your high margin DTC client a surcharge instead of eating that cost. Sorry, you just lost me as a customer.
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Re: Question for consumers about a 2% DTC assesment

#11 Post by Al Osterheld » February 23rd, 2020, 9:55 am

The point of the BID is to move away from voluntary support towards mandatory collections to increase revenue for marketing and avoid any free-rider effects.

It would apply to sales in tasting rooms and also items shipped to CA customers (any sales subject to CA sales tax), but not to shipments out of state.

Depending on mix of wholesale vs CA DTC sales and also how well a winery has an established brand recognition, the monetary impact and the benefits will vary by winery. A larger winery that sells a lot through wholesale will have a lower fraction of sales impacted than a smaller winery that is nearly all DTC. A well-established brand (SQN would be an extreme example) doesn't need the extra marketing.

Whether it's taxation without representation depends whether it's viewed from the winery or consumer perspective. Note it's also not one winery, one vote. Each winery's vote is weighted by the sales that would be subject to the assessment.

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Re: Question for consumers about a 2% DTC assesment

#12 Post by larry schaffer » February 23rd, 2020, 11:23 am

There is so much more to this then what was presented. And there are something potential changes to this that will be announced shortly.

The bottom line is that the Santa Barbara County wine community has been and continues to be very very splintered. It is incredibly difficult to get consensus on anything, and besides that, most wineries have no idea of the concept of rising tides.

As a region as a whole, we remain pretty unknown to the majority of the wine world, including consumers right in our own backyard.

Are positive impact on the economics of Santa Barbara County have pretty much gone unnoticed by our local government, and therefore, decisions made at the county level most often times do not take our industry into account. This is mainly our fault but changes are afoot along these lines as well.

if one looks at the infrastructure of most wine region associations, there is an entire staff of folks working on behalf of their industry, most of the time with at least five or six full-time employees. At present, our local Association only has two full-time employees trying to do the jobs of many many more.

The idea behind the BID will be to help to preserve our local wine industry in the face of a lot of changes coming our way. A lot of the money will be used for advocacy, bringing on a full-time staff member to deal with government relations.

It will also allow us to better communicate with consumers both near and far as well as with folks in the trade.

there has been talk of doing a grape Commission as they do in Sonoma County. This is a great idea and will be looked at seriously hopefully soon after the bid process. There are serious limitations, though, as to how you can use the proceeds from the grape Commission. From what I understand, they can only be used for marketing purposes.

As far as hiding this fee, I totally disagree. I think that visitors need to understand why we would be doing this and what exactly it would be used for. We truly honestly believe it will benefit not only our industry but those who enjoy our local industry as well.

I will certainly keep all of you posted and please feel free to reach out to me if you haven't any particular questions as I remain actively involved in this process as an ongoing owner and winemaker in this region.

Cheers
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Re: Question for consumers about a 2% DTC assesment

#13 Post by Al Osterheld » February 23rd, 2020, 1:13 pm

Maybe Stephen is asking how consumers would react if they saw an explicit BID surcharge on their bill.

There have been numerous threads about shipping that make it clear that many consumers hate paying for shipping and are happier if the winery charges a bit more per bottle and subsidizes some or all of the shipping costs. They want to pay for the product they bought, not add-on costs.

Another example is provided by the San Francisco law mandating SF restaurants provide a minimum level of sick leave and health care spending for staff. Some restaurants responded by adding SF Mandates surcharges to their bills (nothing about the law requires funds to be collected this way). Those surcharges were/are extremely unpopular with customers even though the spending was mandated by the county and there is an obvious cusomer interest/benefit from better sick leave and health care spending for restaurant staff. Those are viewed as business costs that restaurants should build into their revenue and cost model

In contrast to the SF healthy mandate, the SBC BID assessment (if successful) would be mandated by the winery owners and they would be among the most direct beneficiaries. What are the goals of successful marketing? To be able to make and sell more wine, and/or to raise prices.

I'd say it's pretty clear many or most consumers will resent the BID surcharge to cover regional marketing costs. It's more difficult to estimate the degree to which it would influence consumer behavior. But, if I were an SBC winery and this passes, I'd try to cover it through the wine (merchandise) prices rather than through a surcharge.

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Re: Question for consumers about a 2% DTC assesment

#14 Post by larry schaffer » February 23rd, 2020, 1:23 pm

As I mentioned, this goes well beyond 'marketing events' - please see above.

And I feel it would be disingenuous to not explicitly state this fee - and better to explain the true meeting of why we are doing it.

Cheers.
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Re: Question for consumers about a 2% DTC assesment

#15 Post by jason stein » February 23rd, 2020, 2:13 pm

larry schaffer wrote:
February 23rd, 2020, 1:23 pm
As I mentioned, this goes well beyond 'marketing events' - please see above.

And I feel it would be disingenuous to not explicitly state this fee - and better to explain the true meeting of why we are doing it.

Cheers.
I think it is better to state that a portion of your revenue is being paid towards it than have this be an additional fee on the price. Even though they accomplish the same thing, only one of them feels punitive as a consumer.

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Re: Question for consumers about a 2% DTC assesment

#16 Post by John Morris » February 23rd, 2020, 2:35 pm

Three thoughts:

1. Two percent is quite a steep surcharge.
2. Don't talk this on like sales tax. That's irking to consumers, not least because they may make a buying decision based on the state price only to find an add-on they didn't expect. Build it into the price. That way consumers can more easily compare Santa Barbara prices with those from other areas, and it will be clearer to producers that it's a tax they are paying.
3. Who's getting the money and do producers trust them? This sounds like it could have the potential for some empire building.
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Re: Question for consumers about a 2% DTC assesment

#17 Post by Al Osterheld » February 23rd, 2020, 2:51 pm

There is a lot of information about the proposed SBC wine BID at the following link:

https://www.sbcountywines.com/winebidinfo.html

Money would go to the Vintners Association, typically has officers from the industry, some number of employees (apparently two at present in SBC), and has voting procedures by member wineries about actions (those votes would be one winery, one vote).
Build it into the price. That way consumers can more easily compare Santa Barbara prices with those from other areas, and it will be clearer to producers that it's a tax they are paying.
The only advantage I can see to tacking on a surcharge is that it allows the proponents to state to the wineries who will vote on the proposal that it's the consumers who are paying. As you know, it's somewhat in the eye of the beholder, which is most correct really depends on the degree to which behaviors are influenced by the apparent optics.

As far as transparency, wineries don't reveal the degree to which prices reflect other fees and costs, eg, the example of subsidized shipping. As far as that example, some wineries claim they are just covering those costs out of their revenue/margin, the same would be true in this case.

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Re: Question for consumers about a 2% DTC assesment

#18 Post by larry schaffer » February 23rd, 2020, 9:05 pm

John Morris wrote:
February 23rd, 2020, 2:35 pm
Three thoughts:

1. Two percent is quite a steep surcharge.
2. Don't talk this on like sales tax. That's irking to consumers, not least because they may make a buying decision based on the state price only to find an add-on they didn't expect. Build it into the price. That way consumers can more easily compare Santa Barbara prices with those from other areas, and it will be clearer to producers that it's a tax they are paying.
3. Who's getting the money and do producers trust them? This sounds like it could have the potential for some empire building.
John,

To answer your questions:

1) It may not end up being 2% but if it turns out it is, that's the number that gets us to the budget that we feel we need to accomplish what we feel is necessary

2) It may legally need to be stated as an additional fee and it may be possible to 'hide it' - I'll get back to you on that with certainty

3) A new, larger Vintner's Association will be created and the money will go back to it - with a budget that has already be created and one that needs to be kept to legally with a few small exceptions. No empire building here

Hope that helps.

Cheers
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Re: Question for consumers about a 2% DTC assesment

#19 Post by larry schaffer » February 23rd, 2020, 9:08 pm

Al Osterheld wrote:
February 23rd, 2020, 2:51 pm
There is a lot of information about the proposed SBC wine BID at the following link:

https://www.sbcountywines.com/winebidinfo.html

Money would go to the Vintners Association, typically has officers from the industry, some number of employees (apparently two at present in SBC), and has voting procedures by member wineries about actions (those votes would be one winery, one vote).
Build it into the price. That way consumers can more easily compare Santa Barbara prices with those from other areas, and it will be clearer to producers that it's a tax they are paying.
The only advantage I can see to tacking on a surcharge is that it allows the proponents to state to the wineries who will vote on the proposal that it's the consumers who are paying. As you know, it's somewhat in the eye of the beholder, which is most correct really depends on the degree to which behaviors are influenced by the apparent optics.

As far as transparency, wineries don't reveal the degree to which prices reflect other fees and costs, eg, the example of subsidized shipping. As far as that example, some wineries claim they are just covering those costs out of their revenue/margin, the same would be true in this case.

-Al
Al,

See my latest post - we may need to spell out this separate fee, just as a hotel that is part of a BID legally needs to as well.

There is no doubt that consumers will be picking up the tab for this fee at present - with the hope that the BID will be reduced and will eventually go away as other funding sources are developed as our region and its association matures.

Again, reach out if you have any further questions - I'm more than happy play 'point person' on this and be as objective as possible.

Cheers
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Re: Question for consumers about a 2% DTC assesment

#20 Post by Jim Anderson » February 23rd, 2020, 9:34 pm

The state of Oregon just instituted a Corporate Activity Tax. This is a .57% tax on all GROSS revenue a business does in the state of Oregon over $1 million. There’s a small discount for wages paid. I see no viable way to directly pass this along. We simply cannot tell folks that we’re adding 1% (or whatever, it would have to be greater than the .57% as a certain percent of sales are to other businesses that we couldn’t possibly pass the tax to) to their bill. We’ll eat it. Maybe raise the price of one wine $1. Maybe not. I haven’t fully considered it. Just found out about it recently. This is one that comes from on high. Would not be excited about one that we were self-implementing for marketing purposes.
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Re: Question for consumers about a 2% DTC assesment

#21 Post by Arv R » February 23rd, 2020, 9:54 pm

People seem to act like there were zero consequences for hotels implementing a BID assessment....one of the small reasons for the rise of AirBnB, VRBO, and all that other comparable platforms is that consumers are tired of the nickel & diming from resort fees, BID fees, occupancy fees and so on.

All those 'its only 2%' keep adding up and eventually people find other options.
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Re: Question for consumers about a 2% DTC assesment

#22 Post by PeterH » February 23rd, 2020, 10:03 pm

No matter how you explain it, it looks like you will charge me 2% extra, and use that 2% to increase the demand for the wine (further raising the price).
Marketing cost should be included in the quoted price. End of subject.
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Re: Question for consumers about a 2% DTC assesment

#23 Post by Ian Dorin » February 24th, 2020, 4:49 am

Not that Santa Barbara is Napa Valley, but if you were to get the most significant DTC producers together and do the SB equivalent of Auction Napa Valley, I bet you would get your funding (and then some).
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Re: Question for consumers about a 2% DTC assesment

#24 Post by Howard Cooper » February 24th, 2020, 5:03 am

larry schaffer wrote:
February 23rd, 2020, 11:23 am


As far as hiding this fee, I totally disagree. I think that visitors need to understand why we would be doing this and what exactly it would be used for. We truly honestly believe it will benefit not only our industry but those who enjoy our local industry as well.
It is beneficial to consumers to be charged more money for your wines?????? [scratch.gif]
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Re: Question for consumers about a 2% DTC assesment

#25 Post by D@vid Bu3ker » February 24th, 2020, 5:16 am

Chuck Miller wrote:
February 22nd, 2020, 10:37 pm
Unless you are only DTC, you are selling a $50 retail wine to a wholesaler for let’s say $25. Let’s assume you are making a profit at that price. Now you want to charge your high margin DTC client a surcharge instead of eating that cost. Sorry, you just lost me as a customer.
This. I buy direct from producers because I like those producers, not because I am looking to help market the region. Add the DTC assessment, and I walk away from every SB region producer.
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Re: Question for consumers about a 2% DTC assesment

#26 Post by Jeff_M. » February 24th, 2020, 6:07 am

Paying more taxes when we are already beyond highly taxed in CA is not a good idea.
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Re: Question for consumers about a 2% DTC assesment

#27 Post by Al Osterheld » February 24th, 2020, 6:36 am

It's not really a tax because it would be assessed by for profit entities and the money would go to their vintners association. But, if it appears on the bill like an add-on tax, many will consider it a tax.

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Re: Question for consumers about a 2% DTC assesment

#28 Post by Dennis Borczon » February 24th, 2020, 6:55 am

In other words, instead of getting together as a vintners association and having wineries voluntarily contribute a portion of profits to promote and improve sales for everyone, the consumer is charged to do the communal activity and "everyone" who sells wine has to collect it from consumers. For the common good. To benefit businesses. Sounds like a tax to me. Why is the answer to every problem in California another tax?

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Re: Question for consumers about a 2% DTC assesment

#29 Post by Stephen Pepe » February 24th, 2020, 8:50 am

Napa, Sonoma and the Willamette Valley all provide funding for their associations with auctions. The SB Vintners have rejected using an auction. Auctions are voluntarily, collegial and team building. The proposed Wine BID is coercive and unfair because wholesale sales are excluded. The SB Vintners has about 110 members-there are 300+/- wineries in SB County.
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Re: Question for consumers about a 2% DTC assesment

#30 Post by larry schaffer » February 24th, 2020, 9:06 am

Stephen Pepe wrote:
February 24th, 2020, 8:50 am
Napa, Sonoma and the Willamette Valley all provide funding for their associations with auctions. The SB Vintners have rejected using an auction. Auctions are voluntarily, collegial and team building. The proposed Wine BID is coercive and unfair because wholesale sales are excluded. The SB Vintners has about 110 members-there are 300+/- wineries in SB County.
Stephen,

This is simply not true. The Vintner's have never 'rejected' the idea of using an auction whatsoever. That said, a futures event was held last year with the hope that that might bring in proceeds to assist a few organizations, including the Vintner's Association. As with every other effort in our area, it was met with mixed and apathetic responses from the winery community in our region, not openly embraced as we all hoped it would be. But that is no surprise - and you are quite familiar with it. And I've said to you before, Stephen - if you want to spearhead the concept of this auction for the betterment of all, I am all ears and will get in the trenches with you to try to make it happen . . .

For those outside of our area and are unaware of this, we probably have the most 'splintered' wine region in the US. It is nearly impossible to get our industry on the same page - I've only seen it occur once in the past 15 years when there was a chance that our Winery Ordinance would be detrimentally changed.

This is not really the 'forum' to address this issue but I am glad that those outside of our area can get a glimpse of what a 'challenge' it is to try to get folks to do things in a cooperative manner in our area. I love SB County and making wine here - I just wish the 'perception' of our area with the general wine consumer matched the quality of the products we were putting out . . .

Cheers.
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Re: Question for consumers about a 2% DTC assesment

#31 Post by Carole Meredith » February 24th, 2020, 9:24 am

I think this is a bad idea. Marketing is an inherent cost of doing business, whether that marketing is in support of a single brand or a regional identity. If I were a consumer, I would be pissed off by this tacked on charge.

The trade association I am most familiar with is the Napa Valley Vintners Association. The organization is supported by member dues and by the trade-only Premiere Napa Valley Auction (which happened this past Friday). (The larger consumer-attended Auction Napa Valley that takes place in June supports local health and education non-profits, not the vintners association.) The NVVA dues are based on annual gross revenue (from all wine sales, not just DTC. Thus the cost to winery members is a normal business expense.
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Re: Question for consumers about a 2% DTC assesment

#32 Post by Al Osterheld » February 24th, 2020, 9:26 am

I think this is a fine forum to discuss a surcharge that consumers might be asked to pay. And one person's apathy is another person's choice. Well, until those who know better take that choice away.

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Re: Question for consumers about a 2% DTC assesment

#33 Post by JDavisRoby » February 24th, 2020, 9:34 am

As a consumer I dislike the “nickel and dime” aspect of multiple fees but as a community advocate that has worked on putting a BID in place I recognize how impactful to a community’s development (or redevelopment) an assessment such as a BID can be.

Has your group considered (assuming is is legal in CA) placing a size cutoff on the BID? i.e. the BID is only charged on producers that sell X amount of cases or produce X barrels? I have seen BID’s set up to where only the larger, full-service hotels charge the assessment since they are generally the largest beneficiary of convention and tourism marketing staff and sales efforts. The smaller properties (or even larger properties outside the defined assessment area) can voluntarily add the assessment but they aren’t required. The trade-off is only those hotels that participate are featured in the marketing. Just a thought for you.
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Re: Question for consumers about a 2% DTC assesment

#34 Post by Mike Cohen » February 24th, 2020, 9:34 am

What if every industry in every area of the country did the same thing? My hometown has the downtown corporation that all businesses pay into and then the downtown corporation markets the town and local businesses. The costs of this are picked up by the businesses. Now I'm sure that the businesses somehow pass along as much of this cost as possible to their customers, but it's not stated on a receipt. In today's world, where customer loyalty is a thing of the past and people are thrilled to shop online in order to save a buck (guilty as charged), you have to be very careful how you go about these things as there are unintended consequences.

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Re: Question for consumers about a 2% DTC assesment

#35 Post by larry schaffer » February 24th, 2020, 9:48 am

Stephen,

One of the other things you've advocated is a Grape Commission similar to what they have in Somoma. Would the buyer of your grapes be in favor of this after the fact? Would they be willing to pay this fee in order to help 'market' SB County? Would your contract with them allow for this?

Cheers.
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Re: Question for consumers about a 2% DTC assesment

#36 Post by Gabe Berk » February 24th, 2020, 9:49 am

On the surface, 2% increase in cost for wine doesn't sound like much to complain about. It is. Consumers as ironic as it sounds are very sensitive to minuscule cost increase, even on luxury items. Even a $1 increase per bottle on a say $200 bottle gets consumers to raise an eyebrow and complain. [swearing.gif]

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Re: Question for consumers about a 2% DTC assesment

#37 Post by larry schaffer » February 24th, 2020, 9:52 am

JDavisRoby wrote:
February 24th, 2020, 9:34 am
As a consumer I dislike the “nickel and dime” aspect of multiple fees but as a community advocate that has worked on putting a BID in place I recognize how impactful to a community’s development (or redevelopment) an assessment such as a BID can be.

Has your group considered (assuming is is legal in CA) placing a size cutoff on the BID? i.e. the BID is only charged on producers that sell X amount of cases or produce X barrels? I have seen BID’s set up to where only the larger, full-service hotels charge the assessment since they are generally the largest beneficiary of convention and tourism marketing staff and sales efforts. The smaller properties (or even larger properties outside the defined assessment area) can voluntarily add the assessment but they aren’t required. The trade-off is only those hotels that participate are featured in the marketing. Just a thought for you.
Joshua,

Thanks for the input. As far as I know, it would not be legal to charge only certain producers - I could be wrong, but from what has been explained to me, this could not take place.

So just to reiterate, most would be 'fine' if this 'fee' would be 'hidden' in the cost rather than explicitedly stated? And just so you know, it will most likely only be assessed on sales at the tasting room - does that change opinions? This is not an 'easy solution' as it evidenced here, but I wish I could sit down with as many of you as possible and 'explain' our SB County wine situation - you would most likely be quite amazed . . .

Cheers.
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Re: Question for consumers about a 2% DTC assesment

#38 Post by D@vid Bu3ker » February 24th, 2020, 9:55 am

Unfortunately Larry, the potential of the fee has now been "outed", and so any increase will be viewed quite skeptically.

Had this been hidden, and just resulted in a dollar or two increase in bottle price (not a separate tag on fee - that was DOA) nobody would have noticed. Stephen gave up the game when he decided to ask the question.
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Re: Question for consumers about a 2% DTC assesment

#39 Post by larry schaffer » February 24th, 2020, 10:03 am

David,

As I said from the beginning, I would rather not hide it. The fact is that this fee would truly help to 'preserve' our industry and allow it to continue to survive in our area - which is a real challenge. Our industry is not given the same 'heft' politically as say Napa or Somona or most other major wine regions enjoy. If the Napa County wants to do anything politically, its affects on the vintners is seriously considered because of how important that group is. Same in most other wine regions.

Not here - not at all. We are an 'afterthought' even though we contribute over $1 Billion to the coffers of the country directly and indirectly. Things are short term housing bans, which have had a devastating affect on certain parts of our wine region - our 'concerns' were not taken into account. And the Cannabis Ordinance - which has allowed for the two largest outdoor grows in North America to potentially be located directly next to vineyards in the Sta Rita Hills - was put forth without input from our region.

The proceeds from this fee will enable our region to be better preserved and protected - we are not talking about this $$$ being used simply to market our wines. A grape commission would provide that if that's all we wanted to do. We need to do much more.

So much more to say but I understand the trepidation so many have about this concept - there is just more to it than what Stephen put out there . . .

Cheers.
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Re: Question for consumers about a 2% DTC assesment

#40 Post by Pat K » February 24th, 2020, 10:09 am

Interesting topic. As a geek and consumer who has visited the area multiple times and purchased at tasting rooms and purchased DTC via shipping here are my thoughts.

My purchase decision is and will be based on total costs to my door. So DTC via shipping: I will get an example invoice that lists the wine prices, all taxes, and ground shipping. Then I can calculate the fully-loaded price per bottle I will be paying. In some situations, a 6-bottle or case purchase means free shipping. That's a plus but not a given. Any additional charges, such as the 2% assessment if applicable, will have the impact of reducing the probability that I'll buy the wine.

If it's from a reliable producer where I perceive very good QPR despite a 2% assessment, it's likely I'll get the wine. New producer? $30-$40 per bottle before adding on any other costs? Not likely.

Smaller/microwineries may have a tough time if the charge applies DTC and they have no tasting room and no distributor. That's sad IMHO.

Just one opinion.

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Re: Question for consumers about a 2% DTC assesment

#41 Post by Howard Cooper » February 24th, 2020, 12:15 pm

larry schaffer wrote:
February 24th, 2020, 9:52 am
JDavisRoby wrote:
February 24th, 2020, 9:34 am


So just to reiterate, most would be 'fine' if this 'fee' would be 'hidden' in the cost rather than explicitedly stated? And just so you know, it will most likely only be assessed on sales at the tasting room - does that change opinions? This is not an 'easy solution' as it evidenced here, but I wish I could sit down with as many of you as possible and 'explain' our SB County wine situation - you would most likely be quite amazed . . .

Cheers.
It isn't a question of being "hidden" or not hidden. It really is a question of whether the price you advertise is the price we pay. People resent airlines for charging one price and then adding on fees for luggage, aisle seats, etc. People resent hotels for advertising one price for hotels and then finding there is an added resort fee (resort??? In the middle of Manhattan???). There is only so much one can do to avoid airlines (although I do take Southwest when I can) and hotels if you want to or need to travel. But, there are wines made all over the world. So, your customers could switch. I know you are going to say that it is only 2%, but if that is true, why add it to the price of the wine as advertised. If I came to your winery and asked how much a bottle of X would be, would I be quoted the price with the fee or without by your salesman. If it is the price without, and I only learned about the fee after you ring up the wine, I would feel used, no matter what the additional price is.

You can argue all day that it should not matter, but we really are only trying to help you not hurt you by giving honest views. If I can walk into a winery in Napa or Sonoma and be quoted a price that includes all charges, why wouldn't I resent having a extra fee thrown in at the end by you. I would feel like it was dishonest. You can spin it however you want, but unless you can tell me that the prices on your price lists at the winery would include the charge, you are agreeing with me.
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Re: Question for consumers about a 2% DTC assesment

#42 Post by larry schaffer » February 24th, 2020, 12:33 pm

Howard,

Our goal is NOT to be dishonest but to display these charges and explain to consumers in our tasting room why they are being charged. I agree that is it disingenuous not to do so and we are in complete agreement. Therefore, one would know what they are paying when they walk out the door and will not be surprised by the surcharge - period.

Cheers.
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Re: Question for consumers about a 2% DTC assesment

#43 Post by D@vid Bu3ker » February 24th, 2020, 12:39 pm

Larry - when you see how ticked off people get about shipping charges, why would you ever think that people would accept a surcharge so that you can advertise?

Oops, sorry, the $40 wine is actually a little bit more...

Will the surcharge also get CA state tax?
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Re: Question for consumers about a 2% DTC assesment

#44 Post by larry schaffer » February 24th, 2020, 1:01 pm

D@vid Bu3ker wrote:
February 24th, 2020, 12:39 pm
Larry - when you see how ticked off people get about shipping charges, why would you ever think that people would accept a surcharge so that you can advertise?

Oops, sorry, the $40 wine is actually a little bit more...

Will the surcharge also get CA state tax?
David,

I know how Steven framed this in his very first post, but this goes well beyond advertising our region. This has to do as much about preserving I reaching for wine grapes as anything else. I know folks are quick to say that that's all the money is going to be used for, but if you follow the link that AL posted above you'll see that is going to be used for a lot of things.

And in all honesty, I'm not sure that the group on this board is the main target audience. This will most likely only affect those folks coming into the taste room in purchasing at the time of that visit. That's totally different then affecting folks like you across the country. It's no different then being assessed a fee at a hotel you stay at. You are not assessed that be unless you stay at that hotel.

And I understand why a lot of folks may not be in favor of something like this. I truly do. And I'm trying to keep an open mind as possible. But if I had a few minutes to sit down with you and explain the situation in Santa Barbara County better, you might understand where I'm coming from.

Cheers
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Re: Question for consumers about a 2% DTC assesment

#45 Post by lleichtman » February 24th, 2020, 1:41 pm

Arv R wrote:
February 22nd, 2020, 6:43 pm
I'll be the contrary cat here and suggest that stuff like this actively turns me off. If I know a restaurant wants to do the surcharge game for their staff benefits, I'd avoid it if I can. Why not just charge all the association members 50k (or however its fair to apportion it) without showing the end customer the additional cost? All that nickel and diming is kind of degrading for both parties. How can people sell high end wine....while offering the full Ryan Air experience....
Well, you can't in some places like Portland that charges a surtax to cover health insurance for their employees.
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Re: Question for consumers about a 2% DTC assesment

#46 Post by J e s s e C » February 24th, 2020, 2:18 pm

Why only DTC and not all sales or restaurant/distribution? In any case, I feel that if the region wants to collect 2% to further the businesses, it should be a cost borne by the business and not passed on to the consumer. So the $50 bottle remains $50 but $1 of the sale goes to fund this BID or marketing entity. In theory, the if the expenditure is worth it, the businesses should benefit through increased sales / representation more than the $1 lost. If it is not worth it then there should be no fee at all. I also say this is all in theory because there is no practical way to ensure the cost is not passed on to the consumer, except to say that i will be less inclined to buy bottles that if their price goes up, whatever the reason may be.

I would also add that additional marketing about the region generally (vs specific to producer or at least a vineyard) is unlikely to sway my purchasing decisions. That is true as much for burgundy as it is for santa barbara.
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Re: Question for consumers about a 2% DTC assesment

#47 Post by David Wright » February 24th, 2020, 3:53 pm

Apparently the SB Vintners association has not convinced enough local vintners that its mission is worthy of financial support. So the association wants to create a BID to compel consumers to fund its work by having wineries collect a mandatory “fee” on DTC sales of SB wine in CA.

How much would administration of the BID itself cost per year? (Is that the 20% “operations” figure in the pie chart [in Al's link]?)

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Re: Question for consumers about a 2% DTC assesment

#48 Post by larry schaffer » February 24th, 2020, 4:05 pm

There really is no cost to 'administer' the BID at all - the admin costs are for the Association as a whole.

And your other assumptions are, unfortunately, dead on . . .

Cheers.
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Re: Question for consumers about a 2% DTC assesment

#49 Post by David Wright » February 24th, 2020, 4:40 pm

There have to be costs associated with oversight -- verifying/auditing compliance, etc.

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Re: Question for consumers about a 2% DTC assesment

#50 Post by Stephen Pepe » February 25th, 2020, 2:16 pm

Hi Larry. At the recent Lompoc Wineries meeting re the Wine BID, which you did not attend, the SB Vintners put on a full court press with five officers and board members- all outside of Lompoc. The one SB County Vintners board member from Lompoc had resigned over the Wine BID. During this meeting the President of the Vintners' Board said there was "no silver bullet" to solve the Vintners' financial problems. When I noted that wine auctions were used in Napa, Sonoma and the Willamette Valley to fund their associations, the Vintners' board president said no a wine auction would not work because last year the Vintners tried a futures auction and could only raise $30K. The Lompoc wineries are opposed to the Wine BID by 70-80%. During this meeting, Brian Loring raised the option of using a grape commission which Sonoma uses. The Vintners' board president said the Vintners had looked at this but it was: "too complicated and would take too long."
The 2% assessment will be paid on all wine club sales to CA folks, not just at the tasting room.
From the Vintners' web site, here is how the Vintners propose to spend the $1.6M from the 2% assessment:
Marketing $572K -35%
Operations $327K -20%
Advocacy $245K - 15%
Contingency $163K -10%
Festivals $81K -5%
AVA support $81K-5%
Winery community Engagement $81K-5%
Member Education $81K-5%

Steve.
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