News-Gazette.com: Food

Bill would force big changes on Illinois wineries, consumers

By Kirby Pringle

News-Gazette Staff Writer

Published Online February 8, 2006

   Indiana is a mighty goofy place when it comes to laws governing its wineries.
   This column was going to be a long rant against the Hoosier state when I got an e-mail from a friend that made me rethink my stance: Illinois is almost as goofy.
   Actually, let me rephrase that: liquor distributors in both states are coming off as greedy oinkers.
   Distributors are the driving force behind an abrupt about-face in Indiana in how the state allows its wineries to sell wine to customers. And it should be no surprise that their big money is the driving force behind a bill in the Illinois legislature that would also have a major impact on how wineries -both in-state and out - sell products to their customers.
   A bit of background. The landscape changed drastically last May 15 when the U.S. Supreme Court ruled that states cannot treat in-state wineries differently than they do out-of-state wineries. Some states - like Indiana, for example - allowed in-state wineries direct shipments to their Hoosier customers, but out-of-state wineries could not ship to Indiana customers.
   The Supreme Court said that practice is unconstitutional and it appeared the playing field had been leveled for free trade.
   Not so fast. Alarm bells went off at liquor distributorships, which were apparently alarmed that the ruling would eat away at their business. If more wine was shipped directly to consumers, that could mean fewer cases passing through their warehouses.
   Indiana, Michigan and Pennsylvania decided to do an end-run around the Supreme Court ruling and the three immediately ruled that direct shipments by their in-state wineries were now illegal. David Heath, head of Indiana's state Alcohol and Tobacco Commission, the day after the Supreme Court ruling, posted this statement on the commission's Web site: It has come to our attention that wineries in Indiana may be engaged in selling wine by taking orders via internet, mail and or telephone and directly shipping to the consumer's address. This method of sale is contrary to Indiana law.
   He then cited two Indiana laws that he said supported his position.
   Indiana wineries were shocked. Why? They had been shipping directly to customers since 1979 - with the obvious blessing of the state's Alcohol and Tobacco Commission.
   And so Indiana's wineries rightly cry foul and sued in court to overturn the ruling. At the hearing in November, lo and behold, who shows up to support the state's new position? The CEO and general counsel of Monarch Beverage Co., the largest wholesaler in the Midwest, along with a lobbyist and an attorney representing the Wine & Spirits Wholesalers of Indiana.
   The wineries won a preliminary injunction that prevents the state from enforcing the new Heath bulletin through March 31. In the meantime, the Indiana legislature is looking at competing bills - ones that would support in-state wineries and direct shipments and others that would make direct shipments illegal.
   Here in Illinois, the situation isn't as dire - but the liquor distributors have been able to introduce a bill (H.B. 4350 in the House and S.B. 2180 in the Senate) that would change the landscape for in-state wineries and consumers.
   The legislation would force Illinois wineries to use distributors to sell their products to retail outlets. Currently, Illinois wineries can sell directly to retailers.
   Here's the really disingenuous part: Most distributors aren't interested in dealing with Illinois wineries because they are too small and many of them are in the hinterland.
   In addition, the bills would limit the number of cases (12 bottles in a case) that wineries can ship to customers. And perhaps worst of all, the bill would take away Illinois' status as a reciprocal state.
   Other reciprocal states (13 total) are California, Colorado, Hawaii, Idaho, Iowa, Minnesota, Missouri, New Mexico, Oregon, Washington, West Virginia and Wisconsin. In essence this means, Wineries in your state can sell to residents in my state, as long as wineries in my state can sell to customers in your state. You can't have freer trade than that.
   I get the distinct feeling that's what worries the nation's liquor distributors with the Supreme Court ruling. After all, free trade could get out of hand and an Illinoisan who is a fan of some obscure, tiny winery in Arizona (so small it only sells wine out of its tasting room) could now easily buy a case of wine over the Internet.
   The Illinois Grape Growers and Vintners Association has countered with its own proposed legislation, H.B. 4444. It would up the amount of gallons a winemaker could make every year, increase the number of cases that could be sold to a customer and creates an out-of-state shipper's license for direct shipment of wine to Illinois customers (age 21 and over, of course).
   Both bills have been voted out of committee and are ready to move forward. So it looks like there may be some changes and we're a little scared of the prospects, says Paul Renzaglia, winemaker at Alto Vineyards, based in Alto Pass with a branch office in rural Champaign.
   Our sincerest hope is that we can make some sort of compromise, he adds. We're a small industry in Illinois, but growing very rapidly. These giant, nationwide companies are trying to put a stop to it. Still, I'm very optimistic with what is happening now in Illinois. This is, hopefully, just a glitch.