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My home state of Ohio has taken one giant leap backward, restricting Ohioans’ access to direct-shipped wines from out of state. Effective today, citizens from Akron to Zanesville and everywhere in between can no longer order wine delivered direct to their homes from out of state wineries that make more than 150,000 gallons (63,000 cases) a year.
This rules out the largest wineries but also a lot of medium-sized high quality wineries, too, whose products are in high demand. To me, it sounds like Buckeye-staters can no longer order wine directly from biodynamically farmed Benziger Family Winery, or single-vineyard Merlot from Duckhorn Vineyards, or Petite Sirah from Markham Vineyards.
Mark Fisher, probably the pre-eminent Ohio wine blogger, has been on this topic, and reading his post today it’s starting to look like a scandal (my word, not his). Legislators are saying they didn’t understand the bill. Or they didn’t read it. It had poor wording and outright mistakes, like a section that said consumers were limited to no more than 24 9-liter bottles of wine per year for direct shipment. Most people think they meant 9-liter cases, which are the standard dozen of 750 ml. bottles. Ship Compliant Blog has details.
I think what it all comes down to is the Ohio wine distributors flexing their muscles at the expense of consumers. Distributors, who have held a government-mandated monopoly of sorts since the repeal of Prohibition 1n the 1930s, are finally having to face some competition — from wineries selling directly to consumers and not going through the antiquated and unnecessary three-tier system of producer, distributor/wholesaler, and retailer.
The Granholm decision by the Supreme Court cleared the way for a certain degree of freedom for direct shipping, but it was not an overall cure. The court basically said that in-state wineries and out-of-state wineries had to be given equal rights in each state, but left if up to the states to legislate those rights.
My guess is that the Ohio distributors realized that they couldn’t keep all of their old monopoly, so they decided to keep as much of it as they could. By setting the bar at 63,000 cases, probably all of Ohio’s own wineries are OK to ship direct, because they’re mostly medium sized or small. That made it easier for the legislators with Ohio wineries in their districts to support it.
Since distributors carry mostly the products of large wineries it made sense to them, I assume, to focus on protecting their sales of the biggest brands they carry.
To me it just sounds like pure political muscle. People in the wine business in Ohio have restricted the free market, have limited Ohio consumers’ access to wonderful wines from out of state, and have, as I see it, legislated themselves more profits. Is that what Ohioans elected their representatives to do?
Filed under: Industry Issues, Regions
October 1st, 2007 at 7:50:52 PM
As a native from near your hometown, it is very counter-current to all the positive movements in direct shipping. The wholesaler’s lobby wins again.
October 2nd, 2007 at 2:06:52 AM
I will no longer buy wine in my home state of Ohio. Prices are high, selection is poor and (strike three) now law is unfair. Good luck to the Ohio wine lobby.
October 3rd, 2007 at 7:02:00 PM
Totally unfair…won’t buy any wine in Ohio
October 3rd, 2007 at 7:46:08 PM
Hi jim,
I am a wine club manager at St. Supery winery in Napa. Great post. You hit the nail on the head. The good news is that this sort of “de facto” discrimination can be challenged in court. Even though the bill on its face does not blatantly distinguish between in and out of state wineries, the argument can be made that the underlying intent is clearly to favor in state vs. out of state wineries. Keep up the good work!!
Bryan
October 3rd, 2007 at 7:47:01 PM
Distributors get especially annoyed when they learn that some of the larger wineries, in order to promote their brand (which should please the middle tier because it translates into sales off the menu and shelves) make limited production, vineyard designated wines available only to their wine club members and through the tasting room.
That said, and putting aside the political chicanery, the headline ~Ohio Consumers Lose~ may be more hyperbole than reality. Don’t about 98% of all American wineries produce under 50,000 cases? What’s your estimate, Jim?
The consumers who lose are in places like Phoenix where the limit drops to under 13,000 cases.
And then there are the out-in-cold retailers who, ironically, launched the ~Coalition for Free Trade~ which masterminded the Supreme Court ruling….
October 3rd, 2007 at 8:36:54 PM
It’s not just the out-of-state wineries that will no longer ship to Ohio. Due to the stringent reporting, the direct shipping regulations, and the fact that we cannot track how much wine a consumer has received, we, Kinkead Ridge, an ultra-premium, internationally-recognized, boutique Ohio winery, will no longer ship direct to Ohio consumers either. Congratulations to the beer and wine wholesalers and the lobbyist hired by northern Ohio wineries for this legislation, which trumped the brief shining period when Ohio was an open state.
October 4th, 2007 at 9:39:17 AM
Jim, great article. I agree that it is very unfortunate that medium and large wineries can no longer ship. Even though they represent a small percentage of the total number of wineries in the U.S., the medium-sized wineries represent a very large percentage of volume that is shipped directly to consumers.
I think this law will be changed next year. They will likely go back to the state congress to fix the bad language in the bill that says “No family household shall purchase more than twenty-four cases of nine-liter bottles of wine in one year” anyway. When they do, I think there will be enough pressure from wineries and consumers to also strike the capacity cap. Bryan makes a great point in his comment that the cap can also be challenged in court. That is already happening in Massachusetts, where the Family Winemakers seek to overturn a similar cap on production volume.
October 4th, 2007 at 1:11:31 PM
While I agree with you philosophically, Jeff, it might be argued that by having this sort of arbitrary cap the smaller mom and pops will ship more into Ohio. Maybe they are the ones behind this stealth move ;^) . They are certainly the wineries who need every sale, not Rosemblum, Dry Creek, Mondavi, Kendall Jackson, Silver Oak etc. who, by the way, are able to afford compliance programs like the great one offered by Six88 Solutions….
October 12th, 2007 at 12:44:30 AM
I personally look at this as a huge step backwards towards the prohibition era. As a boutique winery owner in Spain, importing our wines into Ohio, we are forced to maintain a distributor in Ohio, which we have. So direct sale in our corner was a mute point as you cannot represent (or sell) your own wine in the State of Ohio if it is produced outside of the State. However, it does affect me directly as a consumer, I can no longer be a member of J Phelps, Napa Mumm, or any other wine club as they cannot or will not direct ship to me. This is a restriction of free trade and directly limits my ability to buy what I want from whom I want. I would be happy to help in any campaign that has been started to fight this total trade injustice… where do I sign?
October 16th, 2007 at 3:29:37 PM
Approximately one year ago Matt Dolan, State Representative was trying to get the law changed which would prevent direct wine shipments to Ohio consumers. He initiated a Bill, SB 259 which did not pass. I personally spoke with Senator Grendell, Governor Taft and Representative Dolan. Senator Grendell and Governor Taft assured me that this bill did not have their support and they would not ever approve such a Bill. I was shocked that not only did a Bill pass October 1, 2007 but Senator Grendell was the major sponsor after receiving $8000.00 political contribution from the Wine and Beverage Distributors. So the entire State of Ohio consumers get screwed to support the Distributors and the antiquated three tiered liquor purchase system in Ohio. Welcome back to the dark ages!!! I am now focused on getting this Bill reversed and vigorously campaigning against these legislators. Stay tuned!