|
Supreme Court: Let those wine sales flow
By Theresa Howard and Jerry Shriver, USA TODAY
The New York wine fan who saw the movie Sideways and has been dying to order a case of that California pinot noir direct from Foxen Vineyards moved a step closer to the opportunity, thanks to the U.S. Supreme Court.
Edison Voong picks up wines to be shipped from Wine.com.
By Eric Risberg, AP
Such small wineries with a taste for bigger sales — and the consumers in other states who want their wines — stand to be the major beneficiaries of the decision by the court on Monday. (Related: Court OKs interstate wine shipments)
The court said states cannot ban out-of-state wineries from shipping directly to their residents if they allow in-state vintners to make such sales. Paired cases decided Monday challenged laws in New York and Michigan that allow only in-state vintners to ship directly to residents. Six other states have similar laws, and 15 more have some form of out-of-state limits, so the decision has the potential to open up direct access to out-of-state wineries for residents of 24 states. The District of Columbia and 27 states already allow out-of-state direct sales, according to the Wine Institute.
LAWS ON SHIPPING WINE VIA WINERIES
Allow in-state shipping, ban out-of-state
Michigan (overturned Monday)
New York (overturned Monday)
Connecticut
Florida
Indiana
Massachusetts
Ohio
Vermont
Allow shipping in and out of state
Alaska
Arizona
California
Colorado
Georgia
Hawaii
Idaho
Illinois
Iowa
Louisiana
Minnesota
Missouri
Nebraska
Nevada
New Hampshire
New Mexico
North Carolina
North Dakota
Oregon
Rhode Island
South Carolina
Texas
Virginia
Washington D.C.
Washington
West Virginia
Wisconsin
Wyoming
Don't allow shipping
Alabama
Arkansas
Delaware
Kansas
Kentucky
Maine
Maryland
Mississippi
Montana
New Jersey
Oklahoma
Pennsylvania
South Dakota
Tennessee
Utah
Sources: Wine Institute
"It means consumers are going to have more choices," says Steve Gross, director of state relations for the Wine Institute, a lobbying group for 821 California wineries.
Consumers would have more access particularly to the small wineries that account for 96% of the nation's estimated 6,500 wine brands and about 14% of the industry's annual production of 260 million cases, according to tracker Impact's 2005 Annual Wine Study.
The small operations depend on direct sales — on-site, telephone and Internet — because they have limited, if any, access to wholesale and retail distribution. That is the arena in which the goliath wine brands rule. Just 26 brands, including No. 1 Franzia, account for 50% of the industry's output.
The added consumer choices won't include foreign wines, available through some U.S. Internet retailers but unavailable directly from wineries because of import regulations.
And distilled-liquor makers say they have little interest in direct sales because their brands already are available nationwide.
That's not true for most of the thousands of brands of wine, but it may be awhile before it is clear how much this ruling will change that situation for them and their potential customers in restricted states. The state legislatures in those states must review their laws to make sure in-state and out-of-state wineries are treated equally.
They could choose to allow all wineries to sell to consumers directly.
They also could comply with the court's ruling by banning all direct sales.
"This is a major positive step ... but it's not the final step," says Jim Trezise, president of the New York Wine and Grape Foundation, which represents growers in the No. 3 wine-producing state. The members favor opening the state to out-of-state sales.
"The New York Legislature will have to correct the law," Trezise says. "The question is whether they will level up by opening it up, or level down. We hope they will level up."
So do consumers, such as Therese Lodewick and Coke Roth.
Lodewick, 36, recently moved to Massachusetts after living in San Francisco for seven years. There she had access to hundreds of wineries, and now she's cut off from them. Massachusetts is one of the states that currently allows direct wine shipments from in-state wineries only.
"I would be excited to be able to order my favorite California wines," says the vice president of account services for Integrated Marketing Technology. "There are a lot of good wines that I can't always find in the wine stores here."
Roth, of Kennewick, Wash., is a former wine wholesaler who is now an attorney and blending consultant to several dozen wineries in the state, the No. 2 wine producer after California. He's been waiting for the opportunity to order two cases of a prize-winning Riesling he loves from Dr. Frank's Vinifera Wine Cellars in the Finger Lakes region of New York.
"Any decision that allows me to buy wines from New York and other areas of the U.S. will benefit me and the entire economy of the U.S.," Roth says.
A taste for variety
Most wine lovers would agree. The nation's 6,254 small wineries, defined by Impact as those with production of 100,000 cases or less, average just 5,300 cases each, while the giant brands produce over 2 million. But, while they account for just a slice of total production, they provide a major share of the variety and surprise.
"People like to experiment with wine," says Frank Walters, Impact's director of research. "People love to find different wines, and there are so many to choose from."
And that "oenophile" market is where small wine makers can thrive.
Jim Ballard, co-owner and wine maker at James Arthur Vineyards of Raymond, Neb., says, "This (ruling) is just the tip of the iceberg."
Now the state's largest producer, at about 8,000 cases a year, it was founded just eight years ago. "But during the holidays we have to turn down a large number of orders from people, because we can't ship to their state," says Ballard. "Now, maybe we can."
State by state
Before Ballard can, however, there will be months, or maybe years, of battles state by state over how to fit state law with the court decision. Some may look for ways to avoid both throwing trade open or shutting it down altogether. That could lead to more challenges.
Big producers
In the first 11 months of 2004, U.S. wineries produced 531 million gallons of wine, led by those in California, Washington and New York. Gallons produced by major contributors in November 2004*:
Arkansas
48,350
California
67,177,414
Colorado
20,950
Connecticut
600
Florida
231,874
Georgia
14,354
Idaho
197,802
Illinois
5,028
Indiana
22,510
Iowa
3,987
Kentucky
79,942
Maine
2,790
Maryland
12,199
Massachusetts
3,571
Michigan
177,385
Missouri
93,851
New Jersey
117,348
New Mexico
9,850
New York
1,736,918
North Carolina
51,907
Ohio
28,151
Oregon
393,533
Pennsylvania
53,962
Rhode Island
3,476
Tennessee
13,670
Texas
201,049
Vermont
86,654
Virginia
142,835
Washington
6,307,175
West Virginia
694
Wisconsin
26,324
All others
21,600
Total
77,287,753
* The most recent month reported
Source: Alcohol and Tobacco Tax and Trade Bureau
Wine makers and wine industry advocates say that most states would be unlikely to shut down all direct shipments, because wineries are having a growing impact as tourist attractions, in addition to being an agricultural industry for wine-producing states.
For example, wineries are a $100 million industry for the state of Virginia and $3 billion business for the state of Washington, says David Sloane, president of WineAmerica, a trade association that represents 800 wineries across the nation.
"States have an interest in cultivating the wine industry," Sloane says. "It brings tourism-related businesses, capital and jobs. It's a form of agriculture that is very successful."
In Ohio, where direct sales are currently limited to in-state, decision-making for state legislators in the wake of the court decision will start next week.
"Ohio is going to be meeting all next week with legal counsel to assess our possibilities and probabilities," says Donniella Winchell, executive director, Ohio Wine Producers.
The biggest concern, she says, will be to maintain in-state shipping for the state's 94 wineries, up from 37 just eight years ago.
"It is going to be critical that we keep our opportunity for intrastate," Winchell says. "There has been an explosion, and these wineries live and die by tourism. It will be very important to keep the opportunity open to ship to those tourists."
Texas is the most recent state to liberalize its laws. On May 9 legislation was signed that allows consumers to buy wines directly from wineries within the state and from outside the state.
"For small family wineries this is very important," says Tim Dodd, director of the Texas Wine Marketing Research Institute at Texas Tech, in Lubbock.
"They don't make enough product to be a force and to get distribution, so they're looking for any method that allows them to sell directly to consumers, such as a wine club."
Wholesale or direct
A big obstacle for direct sales of wine has been the "three-tier" system of alcoholic beverage distribution: manufacturers sell to wholesalers and distributors who then in turn sell to retailers.
Wholesalers and distributors have lobbied hard against direct selling, which they see as a threat to their business.
"Wineries are one of the few businesses that are denied access to interstate commerce," says WineAmerica's Sloane. "Wholesalers would be advocates of taking it away."
But winery lobbyists say direct selling will only add to sales, not put wholesalers and distributors out of business.
"About 97% of all volume is still moving through wholesalers. This augments the system that is out there," says the Wine Institute's Gross.
He doesn't see a seismic shift in consumer buying patterns — just more access to niche brands.
"If a product is already available in a local market, they will continue to buy in local markets," Gross says.
Related advertising links What's this?
TimingCube: Up 900% Since 2000 - 4 Trades a Year
Join thousands of Trend Timers who have taken control of their financial future. If you are a long-term investor, TimingCube can help you achieve your goals and dreams. Try it risk-free for 30 days.
www.timingcube.com
Fredhager: Newsletter Performance Leader
According to Hulbert Financial Digest, Fredhager.com newsletter was up 154% in 2004. Hager was up 119% in 2003. Long term investing since 1986.
www.fredhager.com
Free Annuity and Insurance Quotes
Annuities offer a guaranteed income and many tax advantages. Let our great local advisors help you get great rates at no extra charge. Annuities, insurance, mortgage loans, and more!
www.mostchoice.com
Subscribe Today: Home Delivery of USA TODAY - Save 35%
USATODAY.com partners: USA Weekend Sports Weekly Education Space.com
Home Travel News Money Sports Life Tech Weather
Resources: Mobile News Site Map FAQ Contact Us
Email News Jobs with Us Terms of service Privacy Policy Media Kit Press Room
Add USATODAY.com RSS feeds Add USATODAY.com RSS feeds
Add USATODAY.com headlines to your Web site
© Copyright 2005 USA TODAY, a division of Gannett Co. Inc.
|