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Vanessa Gonzales, assistant tasting room manager at Macchia Winery, stuffs a box for a man in New York who ordered a case of wine, on Friday at Macchia Winery in Acampo. (Brian Feulner/News-Sentinel)
Too much red tape
Lodi wineries want to ship straight to buyers, but Kentucky, among other states, says 'no'
Say you're from Kentucky and taking a grand tour of California. You just visited Yosemite, and while there other tourists tipped you about the wonderful wine country up in Lodi.
You visit one of the local wineries and fall in love with Old Vine Zinfandel. Unfortunately, the liquor stores back home don't carry the brand.
But they can just ship you a case or two, right?
Unfortunately, no. It's actually a felony offense to ship wine to residents in Kentucky.
"That's a bummer, too, when you have to turn down people just because of shipping restrictions," said Lani Holdener, who owns Lodi's Macchia winery with her husband, Tim. "I don't think that's fair. I don't think that's constitutional."
Kentucky is one of a handful of states — most of which are located in the nation's southern Bible Belt — that restrict shipping wine to customers. Direct-to-consumer sales is a fast-growing element of the wine industry, and one that is being fueled by social networking sites such as Facebook and Twitter.
So while small independent wineries like Macchia and several others in the Lodi area have better means of connecting with their customers, they are limited in what they can actually send them.
For small wineries, shipping straight to customers is key to building their brand because most don't have the staff, or produce enough wine, to capture the interest of national wholesalers and distributors.
But it's not particularly easy to comply with states that do allow shipments to consumers.
Lani Holdener points to a conversion to gallons she must calculate in order to ship her wines to another state. Holdener has to fill out different paperwork for different states, and sometimes the variations even change by county. Holdener is the owner of Macchia Winery in Acampo. (Brian Feulner/News-Sentinel)
Many states have their own licensing requirements and taxes that wineries need to comply with, as well as limits on how much customers can purchase. For example, an Illinois customer can only receive 12 cases a year while someone in Indiana can get 24 cases per household per year.
To provide direct-to-consumer sales in Indiana, a winery must also not have had an "active relationship" with a distributor in the last 120 days, and paid the annual $100 sales license fee as well as excise tax of 47 cents per gallon within 30 days after every month, in addition to a 7 percent sales tax.
Remember, that's just the rules for Indiana. Wyoming has its own rules, as does Arizona, Missouri and the rest of the 30 states that allow shipping to customers.
Two states, New Mexico and Iowa, are reciprocal states that allow any wine in from any state that allows wine from the two states into it.
Holdener said she relies on information provided by the Wine Institute to stay up to date on what's required for each state. She said that due to fees and taxes, it's sometimes unfortunate to not be able to sell to someone because it will cost more in ensuring compliance.
A $50 wine sale often isn't worth a $100 licensing fee, plus taxes and shipping fees for a small winery.
"It's a huge barrier, especially for small wineries like ourselves. We sometimes have to turn down sales because of the cost barriers associated with certain states," said Kyle Lerner of Harney Lane Winery.
Lerner remains optimistic because, even though there may be challenges in shipping wine, there's still great potential in "agritourism," or just plain old foot traffic.
"In Lodi, we've seen our traffic increase exponentially since we've opened," he said.
Lerner estimated that only about a fourth of the winery's sales are direct-to-consumer shipments, and the "lion's share" comes out of the tasting room.
The patchwork of liquor laws across the country is a holdover from the days of Prohibition, said David Lucas, owner of The Lucas Winery. He said that when the feds decided to abandon national regulation on wine, beer and spirits, it was up to the states to set their own laws.
Lucas took a legal challenge all the way to the U.S. Supreme Court to overturn a New York law that forbade out-of-state wineries to ship to consumers but allowed New York wineries to ship out of state.
The case had initially been struck down by the New York federal court, but the Supreme Court decided to pick it up on appeal.
The 5-4 decision by the court in 2005 resulted in more opportunities for more shipping of wine to consumers, but it also created more paperwork for wineries.
"Some of these things mean you have to send them your birth certificate and have it notarized," Lucas quipped. "Being able to go direct to the consumer is the only way to do it."
Mark Chandler, executive director of the Lodi Woodbridge Winegrape Commission, said one of the biggest hurdles facing the Lodi wine industry is just getting the product into the hands of the consumer.
Chandler said that while it may be every winery owner's dream to sell all of their inventory out of the tasting room, the reality is that they still need to market their wine to a wider audience.
Direct-to-consumer laws have received stiff opposition from lobby groups, such as Wine & Spirits Wholesalers of America, that represent distributors and wholesalers. Such companies see direct-to-consumer sales as a threat to their business and a way for underage kids to get their hands on booze.
They advocate the "three-tier" system in which a producer sells to a wholesaler, who in turn sells to a retailer. In the direct-to-consumer model, the middle tiers are eliminated and the producer sells straight to the buyer.
Chandler said he sees direct-to-consumer sales as a benefit for wholesalers and distributors. Wineries can build brand awareness themselves, and ultimately retailers and distributors would fill the increased demand.
As compliance has become more complicated, several firms, such as ShipCompliant, have created software and computer programs to fill the demand.
Steve Gross, state relations director for the San Francisco-based Wine Institute, said California wineries now have the ability to ship directly to more than 80 percent of the nation's wine drinkers.
That greater access does come with added costs and paperwork, he said.
"We certainly understand that there are ongoing issues with the compliance, and the cost of some of the permits seem prohibitive to smaller wineries," he said.
But the institute and other groups like Free the Grapes have been able to open up more states to shipping because wineries are willing to work with the compliance process.
"In order for us to continue to open up new states, we need to show we can be in compliance with state shipping and tax law, and avoid sales to minors — all the things that matter to other states," he said.
Gross said the solution exists for wineries to work with a compliance firm to make sure every shipment is legal.
For Lucas, he really sees one way to improve the situation.
"It could be a lot better. It just could be done away with," he said.
Contact City Editor Andrew Adams at andrewa@lodinews.com.
(Map courtesy of the Wine Institute)
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Cogito wrote on Jul 15, 2009 9:16 AM:
wtf wrote on Jul 15, 2009 9:05 AM:
wtf wrote on Jul 15, 2009 9:04 AM:
Still, Lodi's getting exposure. This is from an an ad sheet I received today in my in box from the Sacramento Natural Food Co-Op:
Lodi Old Vine Zinfandel
Produced from 100 year old vines, this Zin shows bing and black cherry fruit with a touch of spicy oak. "
Cogito wrote on Jul 15, 2009 8:20 AM:
Comments on this story are now closed.