Some related articles:
Will Buying Wine Get Easier?
Impact of Court Ruling
Will Be Muted at First;
Where You Can Order From
By KATY MCLAUGHLIN
Staff Reporter of THE WALL STREET JOURNAL
May 17, 2005; Page D1
Like many fine wines, yesterday’s Supreme Court ruling on wine shipping may take some time before it can be enjoyed by consumers. But small wineries and wine aficionados are heralding the decision as a landmark moment in a long effort to make wine-buying easier.
The Supreme Court decision addressed a type of law, common in a number of states, that makes it harder for people to order wine through the mail. Specifically, some states allow wineries within their borders to ship to local consumers – but block out-of-state wineries from sending bottles to their residents. The court, focusing on laws in New York and Michigan, said these laws are unconstitutional. The ruling comes as many states are easing restrictions on shipping wine, an increasingly common practice as Web sales take off.
Wine-industry experts expect the court’s ruling to eventually have a major impact on laws in six other states – Florida, Vermont, Massachusetts, Connecticut, Indiana and Ohio – that give some preference to their local wineries over out-of-state ones. There are 15 more states that essentially don’t allow any direct shipping at all. Because they aren’t treating in-state and out-of-state wineries differently, they won’t be compelled to change their laws as a result of this ruling.
At least some state legislatures will now have to align their laws with the Supreme Court ruling. The court decision makes the old state laws unconstitutional, effectively rendering them unenforceable.
But consumers who try immediately to get direct shipments from their favorite out-of-state wineries will probably be disappointed. That is because wineries say they want to see new legislation before they start shipping to consumers’ doors. The Wine Institute, a lobbying group for 821 California wineries, says it is advising its members not to attempt direct shipping to the states affected by the Supreme Court ruling until the new rules are clear. And even if wineries were shipping, they may have trouble finding someone to deliver it. As state wine regulations have evolved, package carriers like UPS and FedEx have tended to wait for absolute clarity about the laws before agreeing to ship wine through their services.
Those who ultimately stand to benefit from the new laws are people like Andrea Bennett, one of a growing number of wine hobbyists in the U.S. Ms. Bennett, who lives in Longboat Key, Fla., goes on a wine-tasting vacation to Napa and Sonoma valleys in California about once a year. She can’t have any of the wine she buys there shipped to her, because that is a felony in Florida. So she hauls cases back on the airplane, asks friends to stash bottles in their bags, and even has some wine sent to her brother in Denver. “When he comes to visit, he brings me a couple bottles of my wine,” says Ms. Bennett, an insurance consultant.
Ms. Bennett is free to order from Florida wineries – but that isn’t the wine she wants.
The ruling comes as the movement to ease state laws governing wine shipping – an effort led by wineries – has been picking up speed. Ten years ago, just four states allowed out-of-state wineries to ship directly to consumers; today, 27 states allow for some form of direct shipping. In 2003 alone, three states – Virginia, South Carolina and North Carolina – introduced legislation that allows for direct shipping.
Just last week, the governor of Texas signed a bill that allows direct shipping from wineries to consumers in all parts of the state, effective immediately. Texas is the fourth-largest wine-consuming state, after California, New York and Florida, according to Free the Grapes, a California group that advocates changing wine-shipping laws.
The main opponent of loosening the state laws is the Wine and Spirits Wholesalers of America, a trade group that represents wholesalers. The wine sellers argue that the new laws reduce states’ abilities to collect taxes and keep alcohol out of the hands of minors.
But there could be a twist to yesterday’s ruling. Instead of easing the rules on out-of-state wine shippers to give them the same benefits enjoyed by in-state wineries, some states may instead decide to get tougher with both groups.
The Supreme Court said only that states should treat in-state and out-of-state wineries the same. Last year, New Jersey headed off a suit charging discrimination by simply abolishing direct shipping for everyone, including its own in-state wineries. Industry experts generally believe that most states will avoid that route, for fear of upsetting their wineries and consumers.
The ruling, as well as recent changes in law in various states, are limited in scope, and alcohol remains a strictly regulated product. Consumers, for example, still can’t buy a bottle of wine, pack it up, and send it through the mail or a common carrier. Neither the post office nor package shippers allow that. Only wineries were addressed by the ruling; it most likely won’t change anything for retailers.
For consumers, there are several benefits to being able to order bottles directly from wineries. The Wine Institute, a lobbying group for California wineries, says that 83% of all wineries aren’t represented by a distributor in every state. That means that in some cases the only way to taste many wines made by small, family-run businesses is to order it from the maker. Wineries that direct ship to consumers know who is buying their wine, and often send newsletters, emails and invitations to events or sales. Direct shipping also allows people vacationing in, say, Michigan, Virginia, New York or, of course, California (where about 65% of the nation’s wine is produced) to try wine in a tasting room, buy a case, and not have to lug it home.
But direct shipping is unlikely to ever account for a major piece of the $23.2 billion U.S. retail wine market (that figure includes foreign wine). Direct shipping represents a tiny portion of the market – an estimated 1% to 3% of all wine sold. The number of consumers motivated enough to seek out special, winery-specific wines is limited. Also, direct shipping is expensive because wine is heavy and needs to be sent in temperature-controlled conditions.
Most wine gets to consumers through the “three-tier” system, which means that wineries sell to wholesalers, who sell to retailers.
In the past few years, Internet shopping, along with growth in the number of small wineries, has spurred interest in selling and buying wine direct without a middleman. As a result, a cottage industry of logistics companies have cropped up to help wineries understand laws, get permits, and move their wines through the three-tier system. New Vine Logistics, a four-year-old Napa, Calif., company, shipped a million bottles last year, about four times as much as in 2003.
In states where direct shipping isn’t allowed, logistics companies and some of the bigger wine Web sites are often able to get wine to consumers by selling it to a wholesaler in the consumer’s state, and setting up an in-state retail office.
The downside is that it can take as long as six weeks for consumers to get their wine and it can be expensive for the winery, says Lesley Berglund, CEO of Winetasting Network, a company that runs a retail Web site, winetasting.com, that sells wine from 150 small wineries. Winetasting Network is a unit of 1-800-flowers.com.