Pinot Law

ShipCompliant has an important entry for those of you who currently ship, or plan to ship, to the Illinois.  That state will be instituting its new permit process, effective June 1st.  The application is available here.

But I also came across another interesting item regarding this change to Illinois law.  According to this entry, “FollowTheMoney.Org” tracked state campaign contributions for the Illinois House representatives that sponsored the bill (HB 429).  Here are the results:

• Representative Edward Acevedo: received $32,000 from alcohol wholesalers since 2000,including $10,000 since the legislation was introduced last year.
• James Clayborne, Jr.: received $85,000 from alcohol wholesaler interests since 2000, including $15,000 since the legislation was introduced.
• Governor Rod Blagojevich: who signed HB 429, has received more than $500,000 just from alcohol wholesalers in Illinois since 2002, $50,000 of which was given to him since he signed the bill into law.

I have said it before, but it is imperative that the wine industry act as a group in order to avoid these unfortunate setbacks.  Whether it is through involvement with state or national associations, it is imperative that we make our voice heard on these types of issues.  While we lost Illinois, at least we won in Georgia.

Stay vigilant — Stay active — Stay informed!

Most small, farm wineries have enough things to worry about: the heavy hand of federal and state regulation, confusing shipment laws, and now even the weather. But be sure to add one more thing to the list: scam artists.

A few weeks ago, our winery received an e-mail from Mr. John Nelson. Claiming to be an American living in Seoul, South Korea. Mr. Nelson said he came across one of our wines at a Christmas party, loved the taste and wanted to have some shipped to Seoul for his birthday party.

Being raised in New Jersey and having gone to school in the Bronx, my radar immediately went up.  Fortunately, after typing a few search terms into Google (i.e., “John Nelson” Seoul, wine) I came across this website from a winery in California.  The blog entry — by Mary Baker of Dover Canyon Winery — confirmed my suspicions: Mr. Nelson and his wine request was nothing more than a major scam.

Mary Baker’s entry is well worth the read and goes into this scam in far greater detail than I ever could.  But the bottom line for all of us out there is this: if it sounds too good to be true, and/or just a tad bit suspicious, it probably is.

I am sure that most of you are aware that the wine industry lost a legend yesterday — Robert Mondavi passed away at 94. There is not much that I can say about the man that has not already been said. However, my favorite insight in Mr. Mondavi is that according to this article, when he sold his wine empire to the highest bidder in 1992, he vowed at the time to “start over.”

And one other point I think is worth mentioning. The above article points out that many in the wine industry point to Mondavi as the singular driving force that propelled California winemaking from a “cottage industry” to a global force. I think that speaks volumes to what one person can do for an industry region, in this case winemaking in California.

A couple of interesting articles caught my eye this week — one humorous and one quite telling for the wine industry.

First the humor, from an article here. TTB has ordered a California brewery to stop using the phrase “Try Legal Weed” on its bottle caps. On the one hand, I can understand TTB’s position that it does not want to condone drug use in any way, shape or form. On the other hand, the brewer in question is located in Weed, California. The article is very good and well worth the read (hat tip to Snark Hunting and Above the Law for bringing this to my attention).

Second comes the business article. According to this article here, equity fund manager Vinum Capital Management LLC has formed a $250-million private equity fund that will focus solely on acquiring and operating mid-size premium and super-premium wine properties producing between 20,000 and 150,000 cases annually. Wineries in California, Oregon and Washington are on the list.

I found the article interesting because it appears that the prospect of more significant consolidation in the wine industry may be upon us. Is this a good thing or a bad thing? On the one hand, this kind of capital can bring significant resources to wineries that may be underfunded and not operating at full capacity. On the other hand, is consolidation a good thing in terms of quality and diversity in the industry.

Time will tell, and until then I may see about getting some beer from Weed, California.

Weed used under a Creative Commons License provided by TooFarNorth.

If you are a Virginia winery, I hope you did not miss this article in a recent edition of the Washington Post.  It involves the launch of the Virginia Wine Distribution Company, a state subsidized entity that will act as a ‘virtual’ wholesaler for small, farm wineries.

The bottom line, the VWDC will permit small wineries to distribute their own wine to retailers.  The VWDC will essentially be a virtual middleman that is informed of the shipment, while the winery actually delivers the goods.  It remains to be seen how this all works out, but I think Virginia has taken a step in the right direction with this one.

Interesting article here on the TTB’s very own John Manfreda. The story provides a very good overview on several of the initiatives undertaken by Manfreda: from wine labeling proposals to overhaul of the AVA process, it details each of these initiatives in a fairly thorough manner.

What I find most interesting in the article, however, was the statement that Manfreda appears to be doing this not only absent any industry support (which is an understatement), but also absent government support.  Some may not be surprised by that, but in Washington, D.C. when there is absence of support on any third-rail type issue, the initiative is usually relegated to the dust heap.

I just wish the proposed nutrition labeling proposal were in the trash already.

“I say to you that the VCR is to the American film producer and the American public as the Boston strangler is to the woman home alone.”

-Jack Valenti, Motion Picture Association of America (1982)

Jack Valenti had it all wrong when he said that to Congress back in 1982, but he was merely doing what he thought was right at the time. Hollywood was terrified that VCRs would destroy their industry through illicit copies and — God Forbid! — fast forwarding through commercials.

Fast forward to today, and of course it is a different story. Hollywood embraced the VCR years ago, and has now transitioned to the DVD. And of course by embracing the technology, it has reaped the rewards. According to this report, in 2002 just over 50% of households in the US had DVD players, but by 2006 that number skyrocketed to nearly 86%. And according to this report, the movie ‘Transformers‘ has generated over $302 million in DVD sales alone. Keep in mind, that number does not include rentals and box office.

Now I know what you are asking: I thought this was a wine law blog. It is. And here’s why the MPAA and VCRs in 1982 is relevant to wine today.

Because much in the same way that the movie industry in 1982 feared technology, ignored the desires of consumers and failed to see the business potential of the VCR, the wholesalers in this country today are doing the exact same thing, this time with the Internet. In case you missed it, the Wine & Spirit Wholesalers of America (WSWA) issued a press release a couple of days ago touting a recent study indicating that their industry contributes over $137 billion to the U.S. economy every year and adds 1.1 million jobs that pay almost $71 billion in wages.

The press release and related studies are nothing more than defense of — in many respects — an outdated system. The WSWA’s CEO Craig Wolf, says that the U.S. wholesale system is “explicitly designed to prevent a black or gray market” and it keeps “all transactions for beverage alcohol in the U.S. on the books.” He then says the wholesaler system is “one of the main reasons we need to guard against attempts to erode the regulations we have in place.” Of course, that’s wholesaler code for “don’t permit self distribution by wineries” and “don’t permit direct sales to consumers over the Internet.”

And in case you doubt me, go to their “Wholesaler Economic Impact Wizard” and you can see what I am talking about. It is essentially a menu of reports available on a state-by-state basis. I pulled up the report for Direct Shipping in Wine in Virginia and learned that my home state “further harms the industry by allowing the direct shipment of products to consumers.”

I do not wish to belabor the point, but the sooner the wholesalers realize that a major paradigm shift has occurred in the wine market, the better off they will be. The Internet is not going away any time soon, and it is already revolutionizing how wineries and consumers interact. Arguably, by permitting self distribution and direct shipments to consumers, small wineries can grow into big wineries — and big wineries will need a wholesaler to ship their goods. As the wine industry goes larger and more competitive throughout the country, that is great news for consumers, wineries and yes, even wholesalers.

I bet somewhere Jack Valenti is smiling.

Untitled photo used under a Creative Commons license, courtesy of Marcin Wichary.

For wineries quite a bit, particularly when it comes to American Viticultural Areas, or “AVAs”. There is a great article in today’s San Francisco Chronicle regarding the ongoing rulemaking proceeding at TTB addressing TTB’s rules governing AVAs.

TTB’s proposals constitute a fairly broad rewrite to its existing regulations governing AVA designations. What I think the article does a great job of capturing, is the significant cost and expense associated with both brand names and AVA designations. By the former, I am referring to those wineries which have spent significant time and capital establishing a respected brand name. As the article points out, in some instances these brand names can be greatly diminished — and actually rendered moot — when it collides with an established AVA.

My personal opinion is that TTB has struck the right balance on this issue with its proposal. Specifically, the article discusses the ‘rolling’ grandfather clause, that would permit certain wineries to use their established brand name regardless of the presence of an AVA application. For example, if a winery named “Millers Ridge Mountain” was approved for TTB label purposes and in use for a certain number of years, it would not be blocked from continuing to use that name even if an AVA designation is subsequently established for “Millers Ridge Mountain.”

Of course, this does not mean that everyone in Virginia should start running out to name their winery “Napa Valley Winery.” If the TTB’s rules are adopted, they would only apply to yet-to-be established AVAs.

The other interesting issue discussed in the article is the veritable explosion in AVAs over the last several years. I think even if TTB tightens up its alleged ‘rubber stamp’ approval, you will continue to see even more AVAs down the road.

used under a Creative Commons License courtesy of Stewart.

An interesting article here regarding a Federal Court’s decision to overturn the Commonwealth of Virginia’s decades-old ban on alcohol-related advertising in college newspapers. The Court concluded that the law violates the student publications’ right to free speech.

Virginia and Virginia Tech students had filed the suit, and the judge found no evidence that the Virginia Alcoholic Beverage Control rules actually curbed the behavior they were meant to address (i.e. underage drinking). I found this article particularly interesting as a Virginia winery, since our neighbor to the West — West Virginia — apparently has a rule on the books that no adult resident or duly licensed retailer or distributor may advertise the availability of wines by shipment to residents of West Virginia.

In other words, in Virginia it is OK to advertise to a market largely consisting of underage drinkers (i.e. college students), but in West Virginia it is illegal to advertise wine to anyone residing in the state. Makes a lot of sense . . .

Wisconsin residents may still be reeling from the departure of their favorite son from Lambeau Field, but it looks like they will soon have something else to cheer about.  According to Free the Grapes, Wisconsin Governor James Doyle signed Senate Bill 485 which replaces the state’s current wine shipping law and will go into effect on October 1, 2008.

While this is certainly good news, one of the comments to the Free the Grapes  blog entry noted some valid shortfalls.  In particular, while Senate Bill 485 permits direct wine shipments to consumers, a winery may not sell wine directly to retailers and can only sell to wholesalers.  This same commenter noted that “What Wisconsin needs is a system that allows both in-state and out-of-state wineries to sell directly to retailers and consumers . . . [a]s for the wholesalers…do they really need protectionist legislation to survive?”

I could not agree more — and Wisconsin isn’t the only state with that problem.  Even Virginia, is still tinkering around with how to handle winery to retail shipments — nearly three years after the Granholm decision.

Anyway, for all you out there with an interest in Wisconsin other than football and cheese, I thought I would pass this along.

Welcome to Wisconsin used under a Creative Commons license  KATYA de countess of WIS.