Months after a Supreme Court decision paved the way for out of
state wine shipments, vintners in San Benito County are still
waiting to see the payoff, but remain optimistic about what the
decision could mean for business in the near future.
Hollister – Months after a Supreme Court decision paved the way for out of state wine shipments, vintners in San Benito County are still waiting to see the payoff, but remain optimistic about what the decision could mean for business in the near future.
“As someone just reading the news, you might get this impression that they’ve lifted the ban and now everyone can ship where they please, but it’s a bit more complicated,” said Dan Payne, director of national sales for Hollister-based Leal Vineyards. “It’s not full-proof yet by any stretch.”
The big shift in shipping came last spring when the Supreme Court struck down laws in New York and Michigan that allowed wineries to ship directly to in-state consumers but forbade out-of-state businesses from doing the same thing. The court said either all wineries should be allowed to ship directly to consumers or none, a blow to the old distribution system that required a wholesaler to sell to restaurants and retailers.
“The best result of that decision was what happened with Texas,” said Josh Jensen, owner of Calera Winery. “They decided to let everyone ship to their state for free. When bureaucrats do that, it’s nirvana. Unfortunately, most don’t, and that’s just bad for consumers who have less choice.”
The ruling was particularly important to smaller wineries that don’t have the volume for wide distribution in liquor stores and supermarkets and rely on direct sales to consumers, many of whom have developed a taste for their products on winery visits.
“The court ruling was helpful, but we’re a 30-year-old winery, we already have a great network of distributors,” Jensen said. “But for a brand-new little mom and pop winery, this is exactly what they need. Being able to ship to consumers directly could mean the difference between life and death for them.”
Since the Supreme Court ruling, New York, Michigan and Ohio have loosened shipping restrictions. Texas also made shipping easier just prior to the high court ruling.
“It’s definitely given us more options,” Payne said. “Really it’s great because we’re not a big brand, and it’s an opportunity for real wine connoisseurs out of state to get our product.”
According to Payne, out-of-state shipping constitutes about 5 percent of Leal Vineyard’s business, with most orders going out to North Carolina, New York and Texas.
In December, shipping to New York became practical when the New York State Liquor Authority OK’d using UPS for wine shipments. FedEx also is working to get approval.
“It will get better as time goes on,” said Jensen. “Right now, between wine club members, tasting room order and our mailing list, our out of state business makes up about 10 percent of all our business. But that’s an attractive 10 percent, because we get much more per bottle.”
The overall shipping picture is brighter for local wineries, who have seen their potential shipping audience increase considerably.
“We’re thinking really positive about it, but it hasn’t made a huge impact yet,” Payne said. “Right now we’re focused on getting people down here for weddings and festivals, and when they go back to Kentucky or Texas, they have a personal connection with us, and a few years down the road we’ll be shipping out of state a lot more frequently.”
This month, Napa vintner Dennis Cakebread is sending out cases of wine to thirsty New York state customers, seven long months after the Supreme Court ruling paved the way for the shipments.
“What we’ve learned about this is patience and persistence,” Cakebread said. “These lawsuits aren’t like an episode of ‘L.A. Law’ – after one hour you win your case and you’re off and running.”
For Tom Shelton, president and CEO of Joseph Phelps Vineyards, finally being able to ship wine felt really good: “It’s something we’ve been waiting for forever it seems.”
And on a hill high above the Napa Valley, Linda and Patrick Elliott-Smith, owners of tiny Elan Vineyards, were getting their paperwork squared away after January floods knocked their power out and slowed down an already glacial bureaucratic process.
“I see the light at the end of the tunnel,” said Linda Elliott-Smith.
A lot has changed since the Supreme Court opened the door to shipping wine across state lines. But change hasn’t been swift in an industry that sometimes seems as rich in red tape as it is red grapes.
“We’re in a highly regulated industry. This isn’t like selling sweaters,” said Jeremy Benson, executive director of Free The Grapes, a Napa-based group that has been working to loosen shipping restrictions. “The regulations are there and we have to work through them.”
“It makes a huge difference,” says Cakebread, part-owner and senior vice president of sales and marketing at Cakebread Cellars which began with a 156-case vintage in 1973 and now makes about 95,000 cases a year.
For a small winery like Elan, which makes about 1,000 cases a year, being able to ship is crucial, said Linda Elliott-Smith, who’s had 15 cases of cabernet sauvignon paid for and ready to go to New York for awhile. She offered reimbursement during the paperwork wait, but the customers, big fans of Elan’s elegant reds, were willing to wait. “It’s nice that we have customers who are true followers.”
The New York law only allows shipments from states that extend similar privileges to New York vintners, which some experts say may not be constitutional. Michigan’s new law, signed by the governor in December, says wineries can’t ship more than 1,500 cases per year in direct-to-consumer shipments and also prohibits out-of-state wineries from selling direct to restaurants and retailers.
At Joseph Phelps, Shelton celebrated the California-New York connection when he hosted a dinner last year for New York Gov. George Pataki, who was visiting wine country.
“We got the flow going both ways,” he said. In a bit of bottle diplomacy, they served wines from New York state.
Free Lance staff writer Danielle Smith contributed to this report.
