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June 2014 Issue of Wines & Vines

Changing Wine Laws in the East

by Hudson Cattell
Tennessee wine laws
Tennessee state Rep. Jon Lundberg and Sen. Bill Ketron announce their support of a bill to let state residents vote on whether to allow the sale of wine in retail food stores.

How easy is it to change wine laws in the East? Much easier than it used to be in some states, and as difficult as ever in others. A look at a few of the wine laws that were passed or considered by legislative bodies this March shows that some states are now more receptive to changing the law to benefit their wine industries.

With the passage of time, direct shipping issues have been resolved to the point where only nine states completely prohibit the direct shipment of wine to consumers. Two of the remaining states—South Dakota and Rhode Island—had such legislation on their agendas this legislative session.

A bill in South Dakota that would have allowed a licensed winery to ship up to 12 cases per year to an individual consumer passed the state Senate in mid-February and was sent to the House, where it faced a tight deadline. the House session ended March 13, and any bill had to be passed by March 11 to be enacted this year. Even though the governor had said he would sign the bill, it did not get through the House in time. In Rhode Island, a bill that would have permitted wineries and wine retailers to ship up to 24 cases of wine annually to any resident over age 21 continued to meet strong opposition and failed to get anywhere.

A law was passed in New York state to allow roadside farm markets to buy and sell wines sourced up to 20 miles from the market. Under the leadership of Jim Tre­zise, the New York Wine & Grape Foundation has argued for many bills that have freed up farm wineries sufficiently that new bills with less impact are less likely to be questioned. On the grounds that a St. Lawrence County Wine Trail would attract tourists, boost local business and create jobs, the state Senate included a measure in its budget to establish the trail.

Change in Tennessee
Located in the heart of the Bible Belt, Tennessee has a long history of failure to get favorable legislation passed for the benefit of the state’s wineries.

When asked by Wines & Vines how the recently passed wine in grocery stores bill became law, Fay Wheeler of Stonehaus Winery in Crossville, Tenn., replied: “It’s been on the table for a long time, with a lot of lobbying going on, and with the liquor interests and retailers generally opposed to it. But we’re living in an age where wine is being sold virtually everywhere, and the majority of the people were in favor of having wine sold in grocery stores. The voters leaned on the legislators and told them, ‘Get real: Listen to the people.’”

Ed Cooke, a partner in Beachaven Vineyards and Winery in Clarksville, Tenn., told Wines & Vines that it was great to have the wine in grocery stores bill passed. He added that one of the restrictions delaying the bill’s starting date to 2016 would probably be eliminated as a result of new legislation that has a good chance of being passed quickly. Less than a week after Tennessee Gov. Bill Haslam signed the bill, voters began to pressure legislators to allow wine purchases in grocery stores now—not in a year and a half.

Other bills that would benefit Tennessee wineries also have been making their way through the legislature with less controversy than the grocery store bill. One of them would permit wineries without a distributor to sell up to 3,000 cases of wine directly to hotels and restaurants. While this would allow some flexibility within the entrenched three-tier system, Fay Wheeler is convinced that sales by wineries to retailers will not happen in his lifetime.

Pennsylvania’s battle for privatization
Pennsylvania’s long-running battle with the privatization of the state store system shows no sign of resolution in the near future. On March 4, Pennsylvania Gov. Tom Corbett, who favors privatization, held a news conference in which he said that a lot of discussion about privatization was going on behind the scenes. He released no details, but in an election year with some legislators talking about ways to modify the state store system to raise more sales—and profits to the state—the outlook for privatization is dim.

The controversy regarding privatization hasn’t slowed the improvement of other Pennsylvania wine laws. The Pennsylvania Liquor Control Board has now permitted the state’s limited wineries to sell wine on their own premises for less money than the prices posted in the state stores. Until now the wineries could not undersell the state, which meant that they had to allow for the PLCB’s 30% markup and the state’s 18% tax in their pricing. Although the PLCB stated that the change was made to increase sales to the state store system by Pennsylvania’s wineries, there is speculation that it had more to do with keeping the wineries from taking a stand on privatization.

The state of wine legislation
As evidenced by these wine laws being considered by various eastern states in March, it is clearly getting easier to pass laws favorable to the wine industry. Gone are the days when stiff opposition on multiple fronts stymied those who simply wanted a better environment in which to make and sell wine. There are still obstacles out there, but the increasing willingness of legislators to listen to the voices of change has been an ongoing development. In Pennsylvania, activism by state store unions has contributed to the arguments against privatization.

Nine years have passed since the Supreme Court handed down its ruling on direct shipment. There is still opposition from wholesalers and distributors, but it has become less aggressive. The passage of time has obviously been an important factor in improving the climate for wine legislation, but Fay Wheeler’s observation that wine is now virtually everywhere is likely to be the predominant reason why wine laws beneficial to the industry are being changed for the better.

What can individual wineries do to help? The most effective scenario would be for state wineries to work together on specific legislation before a bill is introduced, then tell their legislators why the bill is needed and ask them to sponsor or co-sponsor it. Once the bill is introduced, wineries should conta ct their legislators again—in person if possible—and ask for their support. Organizations such as Free the Grapes! and WineAmerica should also be kept informed about the legislation and its progress.

Wholesalers and distributors are the principal roadblocks to direct shipping. These laws are relics of the past and, while they may have had a role after the repeal of Prohibition, they have no place in today’s commerce. Keep in mind that the wholesalers and distributors have what amounts to a monopoly, and this is a line of reasoning that can be used in addition to countering the same old arguments they bring up year after year. Wineries can rally support by pointing out that consumers are not getting the choice of wines they could otherwise have.

Hudson Cattell has been covering the wine industry east of the Rocky Mountains since 1976. In 2012 the Eastern Winery Exposition awarded him its inaugural Lifetime Achievement Award. Cattell is a former editor of Wine East magazine. His book, Wines of Eastern North America: From Prohibition to the Present, was published in 2013.

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