State lawmakers turn winery tourism industry sour

By AVON WATERS

Two new bills regulating the sale of wine in Indiana may turn the Indiana wine industry into sour grapes.

If passed, winery industry officials estimate all but one of Indiana’s 34 wineries and tasting rooms in the state would eventually close.

The bills being considered by the Indiana Legislature will shut down Indiana wineries, said Tia Agnew, co-owner with husband Brett Canaday, of New Day Meadery in Elwood. The Meadery is scheduled to open in March.

“Our whole business plan is based on direct sales and sales to mom and pop retail stores and to local restaurants,” Agnew said. “The bills take two out of three avenues of sales away from us. We’re Indiana’s smallest winery. We are a boutique winery and it could put us out of business.”

House bills 1190 and 1250 address constitutional issues raised by a May 2005 United States Supreme Court ruling of a New York state liquor distribution law. The ruling brought the constitutionality of liquor distribution laws in Indiana and other states into question. House Bill 1190 was passed by the house this month and is now in committee for Senate approval.

Essentially the court ruled that all parties, whether in state or out of state, had to be treated the same when it came to shipping within, to and from states, or else it violated interstate commerce laws. Currently wineries can ship wine in and out of the state as customers visited tasting rooms while traveling through the state. The bills will eliminate direct shipments by wineries and provisions in the laws could close the tasting rooms too.

“We’re going to fight to keep our business,” Agnew said. “If the bills go through, I can’t sell directly to retailers.”

Under the new bill, New Day Meadery must require a customer taste the wine and agree to then pick it up at a liquor store. Agnew then would have to have a wholesaler pick up a bottle or case at her store, take it to a warehouse, re-price it and then ship it to a liquor store close to the customer. The liquor store owner would then call the customer and give them five days to pick it up.

“That’s a big burden and process to overcome customer objections to the process,” she said. “It creates a nearly impossible burden to overcome.”

That won’t work for small Indiana Wineries, said Lundstrom, owner Anderson’s Orchard and Winery, Valparaiso. There’s nothing that requires wholesalers to work with small wineries. With limited storage space, most distributors don’t want to deal with small quantities of wine that Indiana wineries produce.

“I’ve already approached all three major wholesalers in the state, and I’ve been turned down,” Lundstrom said. “They are not interested in the one or two customers that want my wine.”

He said that distributors want to deal with large wineries like Ernest and Julio Gallo of California. They produce, under different names or labels, about 80 percent of what is found in a wine aisle at a grocery store or in a wine shop.

“You total up all production of the wineries in the state of Indiana, and it’s less than one day’s production for Julio Gallo. One day,” Lundstrom said. “Ernest and Julio Gallo are the largest lobbyists for distributors in Indiana.”

According to www.followthemoney.org, beer, wine and liquor interests, most of them wholesalers, paid $820,000 in 2004 to political campaigns in Indiana.

Bill Oliver, owner of Oliver Winery, Bloomington, said Indiana Wineries are a growth industry. They add value to Indiana agriculture products. Wines made from apples, fruits, berries and grapes add tremendous value to the raw products produced in Indiana.

“1190 is a disaster for us,” he said. “It eliminates selling to consumers and to stores. Some wineries count on that and count on 50 percent of that for their sales.”

With a growth rate of 15 percent for gallons sold annually, Indiana wineries continue to be a growth industry, according to the Indiana Wine Grape Council data. The bills presented also contain a provision that if anyone challenged the new bill in court, then it becomes more constrictive by disallowing direct sales through tasting rooms.

“If we lose our tasting rooms, there’s only one winery that will survive — that’s us,” said Oliver on a break from meetings with legislators Wednesday. “We had lengthy negotiations with wholesalers, but what came out of it was a bill that was almost wholesaler crafted. We feel we got duped.”

Most winery owners feel they are going to lose their business investments, said Agnew of New Day Meadery. This dampens the excitement of looking forward to opening a new business in Elwood.

She said, “There’s new wineries that want to get started but now they are holding off because of this. And those that are opened and thinking of expanding, they are on hold too.”

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