In wine wars, we side with wineries

by Larry Meyer
MRA Chairman and CEO

The controversy over direct shipments of wine in Michigan concerns much more than consumers’ right to have wine shipped to them or wineries’ right to self-distribute. Retailers, restaurants and liquor distributors also are fighting for their interests.

It started with a U.S. Supreme Court ruling that states cannot allow instate direct shipment of wine without also allowing out-of-state wineries to do the same. The state legislature must remedy the situation, but the bills currently being considered would hurt wineries, retailers and restaurants.

The current version of House Bill 4959 (which passed in September) limits the number of cases Michigan wineries could direct-ship to 500; more absurdly, it takes away the current right of wineries to self-distribute—to sell their products directly to restaurants and retailers without going through a distributor.

Distributors already handle 80 percent of the wine sold in Michigan, but no distributor will take on a wine until it has a sizable market. To build that market, smaller wineries self-distribute. Hundreds of varieties of Michigan wines would never make it off the premises of wineries if they had to depend on being carried by a distributor.

To make matters worse, the proposed legislation would force Michigan wine stores to restrict their sales to face-to-face transactions for wine club members and holiday gift baskets containing wine—no more sales by mail order, Internet or telephone. These kinds of sales require shipping, and in the current bill only “direct shippers”—wineries, by definition of the proposed law—can use those alternate means of sales.

Michigan Retailers Association has sided with the wineries, restaurants and consumers in opposing the legislation. The newly formed Coalition of Michigan Wineries, Retailers and Restaurants is fighting hard for fair legislation that doesn’t harm retailers or threaten Michigan’s growing wine industry.

But the opposing side, represented primarily by the Michigan Beer and Wine Distributors Association, is powerful and has found some powerful allies. That’s why it’s important to understand the issue and recognize what’s at stake.

For retailers and restaurants, what’s at stake is their ability to offer hard-to-find Michigan wines. They will be forced to limit their offerings and limit the channels through which they sell some products, which means displeasing customers and losing sales.

Stores and restaurants like Dusty’s Cellar in Okemos—which operates a highly rated restaurant and wine bar and also sells hard-to-find Michigan wines and gift baskets—will suffer. Michigan wines not carried by any distributor—and there are many—will drop off the menus and disappear from gift baskets.

Clearly, those with the most at stake are Michigan’s small wineries. Direct shipments to consumers account for up to 40 percent of the sales by the smaller wineries, and in many cases direct shipments to retailers and restaurants are the biggest portion of their direct-sales business.

To garner support for the restrictive bill, its proponents are touting it as a way to keep wine out of the hands of minors. However, federal government officials have gone on record that underage access is not and has not been a problem in states where shipping is legal.

Moreover, the safeguards used by wineries are rigorous and have worked well for years. Not once in 30 years has a Michigan winery been cited for sel-ling to a minor—a record we retailers should envy.

The coalition is working with legislators like Sen. Michelle McManus on alternatives that address the need for reform without taking drastic measures that essentially give distributors a monopoly on Michigan wine sales.

In this economic climate, the last thing Michigan needs is a law that threatens one of its few thriving industries and places unnecessary restrictions on retailers and restaurants to boot.