Dear Client:
WineAmerica is a grassroots organization that represents large and small wineries in approximately 48 states. It started in 1978 as an eastern regional wineries association, and ultimately transitioned to a national organization in the mid-1990s. They represent both their paying membership and more than 60 state winery associations around the country at both the state and federal level. “If you take into account both our membership and the affiliation that we have with state winery associations, we end up representing most of the nation’s wineries on Capitol Hill,” Cary Greene, WineAmerica’s chief operating officer and general counsel, recently told WSD. “We also work a lot with our industry partners, including the Wine Institute, in state legislatures and work closely with the state associations to try and make sure that wineries have the best policy possible to get their products to market.” And it’s no easy task as the wine industry is still relatively young, and has grown “from fewer than 600 wineries 30 years ago to more than 7,000 now.” So what are some of the biggest issues they are facing right now? It all boils down to wineries having the ability to remain profitable. Here’s what Cary had to say as you, dear reader, are a fly on the wall:
WINE & SPIRITS DAILY: What are some of the biggest issues WineAmerica is dealing with right now?
CARY GREENE: Well obviously everyone is familiar with the CARE Bill. Ultimately we don’t see any reason why states should be permitted to openly enact discriminatory and protectionist laws against out-of-state beverages, whether it’s done through taxation, whether it’s onerous registration of labeling requirements, or other anti-competitive barriers. States have enormous authority to regulate alcohol beverages, to collect taxes, to promote temperance, and we see no reason why they should be immune from free market principals that are entwined in the constitution.
We’re a new industry in many ways. There are a lot of new wineries on the market and the legal system really hasn’t adapted to the thousands of small brands that are out there. The legal system was set up, more or less, before a lot of these businesses existed. In our view, the legal system should safely adapt. States should regulate in a careful fashion, but they should also regulate in a way that allows businesses to get their product to market. The way we usually put it is that it should be consumers in the market that decide whether a product makes it or doesn’t make it. It shouldn’t be the distribution system.
WSD: Is the best way of opening up distribution to allow direct-to-consumer shipping without gallonage caps or face-to-face requirements?
CARY: Well rational open shipping laws are certainly a component of that, but we don’t necessarily have a particular perspective on what the distribution system ought to look like. We want to work with wholesalers, retailers and our other producer partners to figure out the best system to employ here. Part of the issue is that the CARE Bill has proven to be an incredible distraction to that. We haven’t been able to have that conversation. We think it could be a productive conversation – to really making sure that all these businesses are profitable and productive for many years. I don’t necessarily want to weigh in on what would be the best method because I think there are lots of ways that distribution could be accomplished. Obviously there are many wineries that have success in the existing system and we certainly don’t want to undermine their success. At the same time, we want to make sure that whatever barriers are there are removed and that there are more opportunities to get products to market.
Another hot issue we’re dealing with is ensuring that we have a legal labor force in the wine business. Immigration has been a hot topic for many years. We have been concerned by some of the proposals that have been put out that really wouldn’t leave room for our grape growers and our wine makers to be able to find the labor that they need to ensure the continued success of their businesses. There has been a proposal for years called AGJobs that we would really like to see put in place, and we believe would allow us to have a legal labor force that would work for the government, work for us and work for workers.
WSD: What about the situation in New Jersey?
CARY: [Editor’s note: you can read background here]. That was a lawsuit that sort of morphed into a direction it didn’t begin. It is sort of the law of unintended consequences. There are usually a couple of different ways that litigation can go wrong. Either bad facts, bad law or bad lawyering. I think unfortunately in this case bad lawyering really led to a bad result. The Third Circuit had its hands more or less tied in terms of the decision, and it came away with a bad decision. Whoever is at fault for this, it has certainly left New Jersey wineries in a tough spot. They have been at risk for quite some time of losing their tasting room and self-distribution privileges in New Jersey, and we would like to see the legislature solve this problem. Right now the case has been put on hold pending legislation. At this point if the legislature doesn’t act, the court is going to be left with two really bad options. Option one would be taking away the privileges of local wineries to operate profitably and put a lot of people out of business. Option two would be complete court mandated disruption of the distribution system in New Jersey. Neither one of those is a good option, and we urge the legislature to do the right thing here.
Shipping has been a key component of this in New Jersey and we’re really not sure why anybody is objecting to it at this point. Last year the Maryland Comptroller wrote a report dealing with direct-to-consumer shipping and analyzed direct shipping throughout the country. Not only did they come to the conclusion that this is less than 1% of the marketplace, so it is a ripple of sales on an ocean of product, but they also came to the conclusion that the regulations that were being put in place by many states were able to control and contain shipping within a legal framework. With that being the case and it already being legal in most of the country, we really don’t know what the objection is at this point to shipping in New Jersey or anywhere else for that matter. Obviously we would like to see it be as free and open as possible. We also want the wineries in New Jersey to continue to be in business and to be able to operate. So it is definitely a difficult situation.
WSD: The Alcohol and Tobacco Tax and Trade Bureau (TTB) is taking longer to approve labels after budget cuts by the federal government forced them to reduce staff. What are your thoughts on that?
CARY: That is definitely something that we have been working on. We’ve been meeting with the TTB and trying to suggest ways that we might be able to get this moved along faster. To the TTB’s credit, they have been really focused on this. They recognize that there is a major problem here and really want to see it resolved. We think that a number of the ideas that they have come up with and a number of the suggestions that we have made could make a difference. Part of the issue here, ultimately, is the TTB operates with about a $100 million budget, but they are bringing in more than $20 billion a year in taxes. So in my view, this is an agency that you want to make sure has the funding it needs to run the programs that it is required to by law. So I would certainly like to see better funding for the TTB. But I think that they have some strong ideas that could help alleviate the problem at least to some degree. Some of it is streamlining, some of it is just finding better ways to get the data into TTB.
WSD: Any other big issues?
CARY: Another one is the chain restaurant menu labeling issue with the Food & Drug Administration. We want to make sure that the rules the FDA puts in place don’t conflict with any TTB requirements. So far FDA has been very much inclined to make sure that their rules comply with what TTB might be doing.
Another issue that is always kind of out there and which we always keep our eyes open for is excise tax increases. We think there are lots of reasons for why excise tax increases are a bad idea. Unfortunately people see us as an easy target where I don’t think we should be. In my view excise tax increases on alcohol are bad for a number of reasons. It just doesn’t work from a policy perspective because what you want to target when you target alcohol consumption is abusive consumption. But when you raise excise taxes, the people who reduce consumption are moderate consumers. The abusive consumers just trade down. Second, the last time they did this on a federal level, they ended up losing revenue for five years. That is a funny way to try to increase revenues. And third, with wine, it’s expensive to make. You have two choices when excise taxes go up. You can either raise the price of your product to consumers, which changes the price point, or you can eat the tax increase, and possibly lose your profit, and neither is a good option. So we’ve been trying to make sure that states and the federal government know these issues and know why excise tax increases are not a particularly good idea.
WSD: Speaking of labeling, what would you like the eventual TTB ruling on serving facts and allergens to look like?
CARY: We want to make sure that they are not overly onerous for our members. If they required individual testing of every single product, then wine would suffer the most because our products change every year and obviously most wineries are producing more than one or two wines. Many are producing ten to fifteen wines and that would extremely onerous if it was a requirement of every label to list the exact calorie count. Consumers, I think, would benefit from having general, standard information about the calories in wine. More or less it could say something like ‘5 ounces of red wine equals 110 calories.’ Something like that we would be supportive of.
WSD: Thank you for your time.
WSD BRIEFS:
TTB SPEEDS CUSTOM LABELS. Speaking of the Alcohol and Tobacco Tax and Trade Bureau, the agency has reportedly agreed to immediately begin approving template labels for custom winemakers, according to New York Senator Charles Schumer. You may recall that a number of wineries have complained that they need approval each time they made small changes to artwork or names on labels designed for special events like weddings or birthdays, which ultimately creates a logjam in the system. The TTB is also struggling to meet high demand from wineries under a smaller staff.
TREASURY WINE ESTATES is launching a new red wine blend, “Eight,” which is comprised of Petite Sirah, Grenache, Merlot, Mourvedre, Syrah, Zinfandel, Cabernet Sauvignon and Sangiovese. It joins the existing lineup of Cellar No. 8 wines, which includes Cabernet Sauvignon, Merlot, Zinfandel, Chardonnay, Pinot Noir and Pinot Grigio, from California, all line-priced at $10. Eight hits shelves this month. It is made at the Asti Winery in northern Sonoma County and was sourced predominantly from the Lodi AVA.
FOURSIGHT WINES HAS BECOME the first Anderson Valley winery to list ingredients, grapes and sulfur dioxide, on their wine labels, and among the first in the United States to include a statement for vegetarian and vegan wine drinkers that reads: “This wine is suitable for vegetarians and vegans.” Co-owner Kristy Charles said they have “been working to get this label approved by the TTB for months.” The hold up? “Agency representatives had never seen an ingredients statement with only grapes and sulfur dioxide and kept insisting that we were missing at least yeast or tartaric acid,” she said. The 2010 Charles Vineyard Semillon, complete with ingredients statement, will be released in 2012. Plans are underway to label additional wines with ingredients and a vegetarian/vegan statement next year.
MACCHU PISCO ENTERS ILLINOIS. Macchu Pisco has signed Tenzing Wine & Spirits as its distributor in Illinois. Pisco exports from Peru jumped 77% in the first four months of this year fueled by demand in the US, according to data from the Association of Peruvian Exporters. Macchu is the second largest exporter. Its brands include a single-grape pisco, Macchu Pisco, and a blended pisco, La Diablada.
WIRTZ BEVERAGE ILLINOIS is forming a new Heartland Division that will align outstate sales and operations from Rockford, Peoria and Bellville. Jeff Roth was named vp of sales for the division. Previously he worked for both Gallo and as director of sales for Empire Merchants’ on-premise wine division. The Heartland Division will include more than 120 employees and currently accounts for 1/3 of the company’s sales revenues.
WENTE FAMILY ESTATES has boosted its sales and marketing team with these new appointments: Andrea Beard, Southern California director of sales; Dan Meunier, New England regional sales manager; Tom Campese, area sales manager, Texas and Louisiana; and Stefanie Jackel, national brand manager for entwine, the wine collaboration with Food Network. Furthermore, Heather Everett has joined the marketing team. Andrea most recently conducted Southern California wine sales at Diageo Chateau & Estate Wines. Tom most recently worked for Bronco Wine Company as regional sales manager, and Stefanie was the director of marketing at Constellation Wines US.
HEAVEN HILL DISTILLERIES has added Walter Simonz to its sales team as Wisconsin Regional Manager where he will be responsible for the Heaven Hill portfolio throughout the state.
WILLIAM GRANT & SONS has appointed the former head of Gucci Group, Robert Polet, to the board as a non-executive director, effective Sept 1.
HOOD RIVER DISTILLERIES has hired Donna Gaudreault as operations manager and Ryan Gregory as an Idaho sales representative.
Until tomorrow, Megan
“Things are more like they are now than they have ever been.”
Gerald R. Ford
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