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Wineries Fight State Shipping Laws

  Breaking Legal News  -   POSTED: 2007/12/10 17:52

Unionville Vineyards plans to expand by planting more pinot noir and adding Rhone varietals next year, but winemaker Cameron Stark knows he's fighting an uphill battle.

He recognizes New Jersey's reputation as a wine producer isn't exactly that of California or even Oregon. But vineyards here and in a dozen other states face another hurdle because of their states' stringent wine shipping laws, which wineries say are stymieing their growth and consumers say are limiting their choices.

"If laws changed, I think it would dramatically affect our business," said Stark, who came to Unionville from Napa Valley.

Many regions across the country are trying to become another Napa Valley or Sonoma, with wine industries that attract tourists.

But laws in some states still prohibit wineries from shipping directly to consumers, two years after a landmark U.S. Supreme Court ruling led many to believe that all states would allow vineyards to ship wine directly to consumers across the country.

The Supreme Court ruling overturned laws in New York and Michigan that prohibited consumers from buying wine directly from out-of-state wineries. Wineries and consumers had sued, alleging those states violated the Constitution because they allowed in-state wineries to ship directly to consumers but prevented shipments from out-of-state.

The court said either all wineries should be allowed to ship directly to consumers or none, but each state still decides whether to allow shipments.

In the states where direct shipping is still banned, it often amounts to battle between wineries that want new customers and wholesalers who want to keep the system intact where intermediaries are a required step between wineries and customers. Wineries can also keep more profit if they don't rely on a wholesaler or retail store.

Allowing direct shipping would add another benefit for less prominent regions whose wines haven't been reviewed by influential wine publications, which don't want to write about wines that aren't accessible to everyone, said Jim Trezise, president of the New York Wine & Grape Foundation.

"In order to get broad-based respect, you need national distribution," he said. "You can get respect, but it's narrowly focused with the few people who can get your wines."

The ruling and a subsequent new state law allowed New Yorkers to receive wine from California and other states.

At the same time, it also opened channels of commerce to allow consumers in other states to directly receive New York wines, Trezise said. He noted that last year, the Finger Lakes region of New York State and the North Fork of Long Island landed on the cover of Wine Spectator.

That's attention emerging regions can only dream about.

Curtis Wallin, owner of Holly Ridge Winery in Livingston, Tenn., said the Internet has spurred interest from potential customers around the country, and he would like to be able to ship to whoever wants to buy his 35 varieties of wine. He said legislators in Tennessee aren't pushing for changing the shipping laws.

"We'd see between 30 and 40 percent increase of sales," said Wallin, who produces about 1,500 cases annually. "We're just a small winery and that's why shipping would mean a lot to us."

Bill Nelson, president of WineAmerica, the national trade association of American wineries, said bills died in Arkansas and Oklahoma this year, but there is legislative interest in a few states for next year.

One of those is New Jersey. About 3.3 percent of the nation's table wine — or 11.5 million cases, according the 2006 Adams Wine Handbook — was consumed last year in the Garden State, making it the most populous state with restrictive shipping laws, Nelson said.

Wineries in New Jersey cannot ship wine, and consumers cannot receive direct shipments from any state, including New Jersey.

With nearly three dozen wineries and more opening next year, New Jersey is looking to promote wine as an economic development strategy, said state Agriculture Secretary Charles Kuperus.

State Senator Ray Lesniak and Assemblyman John Burzichelli, who chair economic development committees, say they support changes to the shipping laws.

"I think a free flow of goods and services is good for the economy and good for the consumer," said Lesniak, who favors wines from Bordeaux and Burgundy. "The more we restrict trade, the less quality of services you get and the higher the price to the consumer and it damages the economy."

Burzichelli said he doesn't agree with the argument that shipping wine is a public safety concern because of arguments that underage drinkers would buy wine on the Internet.

"I grew up in households where there were barrels of homemade wines in the basement," he said.

They're likely to find opposition from New Jersey wholesalers. Lobbyist Jeffrey Warsh said wholesalers' concerns are public safety and taxation, and not losing their cut of profits.

"I'm surprised that the public safety concerns are so minimized in favor of commercial interests," he said.

He said wholesalers wouldn't be affected by the "small, obscure vineyards producing small batches of product."

But those are the exactly types of wines that Matt Wagner would like to have shipped to him from California: Kosta Browne and Merry Edwards Wines in Sonoma or Robert Hall Winery in Paso Robles.

"Basically, I can't get the wine I want," said Wagner, 29, of North Plainfield, N.J.

He enjoys boutique wines with small production that aren't sold in local stores. He also wants to buy directly from vineyards he and his wife have visited on vacations.

"There are ways around it," he said. "If you have relatives who live in Illinois, you can say, 'Hey, hold on to it until I see you next year.'"

Unlike New Jersey, Illinois allows direct shipping from wineries to consumers.

A 2003 federal lawsuit working its way through the court system in New Jersey also says consumers cannot get the wine they want because of shipping laws.

New shipping laws would help wineries as they try to grow, said Tom Sharko, owner of Alba Vineyard in Finesville, N.J., which produces about 13,000 cases per year with 60 percent of sales at the winery. He is planting more chardonnay, Riesling and pinot noir on his 93 1/2 acres, adding to foch, chambourcin and cayuga grapes.

He'd like to start a wine club and ship a few bottles per month to customers on a mailing list.

"There are wine clubs in California that sell their whole production that way," he said. "Instead of relying totally on a New Jersey base for customers, we would have a United States base of customers."

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