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DtC at the State Level

Wine Institute official reviews progress in 2012, looks to year ahead

by Kate Lavin
direct to consumer wine symposium
Direct-to-consumer wine shipping is permitted in states showed in blue (above) and prohibited in red states. States with both colors are awaiting legislative solution due to court ruling. Source: Wine Institute
South San Francisco, Calif.—The push to open states to direct shipping and simplify laws in areas where DtC shipping exists yielded mixed results in 2012, according to Steve Gross, director of state relations for the Wine Institute in California. Speaking Jan. 24 at the Direct to Consumer Wine Symposium held in South San Francisco, Gross outlined the accomplishments made in the DtC arena during 2012 and gave audience members a glimpse at what is in store for 2013.

“2012 wasn’t a bear year with a lot of states opening and changing” their DtC laws, Gross told the audience Thursday. “We need to go back and tweak some of those state laws.”

Connecticut was one of the biggest successes stories of the year, Gross said, with the state now allowing direct shipping to wineries that use national marketing companies. “It took us 10 years and the retirement of an ABC official,” to rid the state of bad legislation that hampered some wineries’ access direct shipping, Gross added. “If you find things that are prohibiting you from direct shipping, call and tell us, and we will try to fix them.”

This year Maine adopted a policy to collect taxes from direct shippers annually rather than requiring quarterly reports and filings. “We’re trying to sell this to the states as, ‘Why do you want to deal with 12 little tiny checks a year instead of one big one?’” Gross said. “We have had some success with states moving to a longer filing period” such as states changing monthly requirements to quarterly.

New York extended its annual licensing fee to three years. Three-year direct-shipping licenses are $375. In the coming year New York legislators will consider “at-rest” requirements, which state that wine must sit in a wholesale facility within the state for 48 hours before being made available for sale. The regulation’s intent would be to crack down on New Jersey wholesalers bringing wine into New York and selling it.

New Jersey opened to direct shipping in June, but the Department of Revenue introduced problems specific to that state. For one thing, wineries producing more than 250,000 gallons per year aren’t eligible to ship wine directly to consumers, which is frustrating since New Jersey is a big-ticket state for wineries.

According to Gross, “We have never had a bill pass as-drafted, exactly as it was introduced. Every place we’ve ever introduced a bill, somebody has had some input and put in wacky provisions that are usually unique to that state.” For this reason, many states have capacity caps in place, and the Wine Institute is working to have them eliminated. Arizona, for example, permits direct shipping only from wineries producing less than 20,000 cases per year, while other states such as Florida have attempted to adopt capacity caps but been unsuccessful.

In Texas, wineries are no longer required to post a bond unless they have outstanding tax liens.

Pennsachusetts, as Gross called it, was a struggle in 2012. Direct-to-consumer wine shipping legislation failed to pass in Pennsylvania, but the situation looks more promising in 2013. “It’s very good news,” Gross said. “The governor’s office seems to have bought in and we’re negotiating the price. There are already bills with the state’s version of taxation.”

A judge in 2010 ruled Massachusetts’ direct-to-consumer wine shipping law to be unconstitutional, and the wine trade has been waiting for replacement legislation ever since. A bill was introduced to a joint committee that reviews alcohol-related legislation in 2012, but a feud between officials caused the item to founder.
“Our bill sat for eight months after we got it introduced, and were really optimistic about moving it,” Gross recounted. “We got caught up in a political issue that has nothing to do with us.” On the bright side: Wine Institute already has a co-chair for legislation to be introduced in 2013.

Brian Baker, VP of sales and marketing at Chateau Montalena and chair of the Direct to Consumer Wine Symposium, said, “Everybody in the room should be targeting Massachusetts customers when they come in and reminding them how backward their state is when it comes to this.”

Gross encouraged the audience to connect with their customers in Massachusetts and ask them to contact their legislators. “There is nothing like having consumers reach out to legislators instead of the California carpet baggers we are sometimes viewed as,” he said.

No wine as a prize
As of Jan. 1, California wineries holding sweepstakes and contests cannot give away wine as a prize. State senate bill 778 (which imposes regulations on wineries, breweries and distilleries) also states that wineries must keep records from such contests for three years and cannot lawfully require a fee or purchase in exchange for contest entry

Consuming wine cannot be a requisite for sweepstakes participation, and such contests cannot be held in satellite tasting rooms (though principal license locations are OK).

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Wine Industry Metrics
Off-Premise Sales
IRI Channels »
Month   12 Months  
October 2015 $604 million
$8,267 million
October 2014 $572 million $7,790 million
Direct-to-Consumer Shipments » Month   12 Months  
October 2015 $288 million
$1,919 million
October 2014 $284 million $1,751 million
Winery Job Index » Month   12 Months  
October 2015 179
October 2014 139 226
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