Friday, Feb. 22, 2008
Wineries push for direct sales legislation
Wholesalers fight bill that would allow consumers to buy via mail
by Rebecca McClay | Staff Writer
‘‘In the long run, [directing shipping] helps because it grows the market,” says Anthony Aellen, here leading a tour of Linganore Winecellars in Mount Airy last summer.
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A bill to allow wineries to sell and ship wine directly to customers has run into a roadblock: the state’s wholesale distributors.
The House and Senate versions of the bill would create a direct shipper’s license, available for $100, letting wineries or retailers ship up to two cases per month to a Maryland consumer. It would require packages containing alcohol to be labeled and delivery personnel would need identification and a signature from recipients proving they are legal drinking age. Wineries would pay sales and excise tax on the products annually.
But while oenophiles and wineries back the proposal, Maryland’s distributors say it would damage the state’s ‘‘three-tiered” system that requires beer, wine and liquor makers to sell products to wholesalers, which then distribute them to retailers.
Lobbyists for wholesalers testified Monday before the House Economic Matters Committee that the proposal could threaten the industry, in part by also opening the door for direct sales of beer and liquor. They argued the alcohol would be more available to minors through Internet sales, and would be less profitable for the state and less regulated.
‘‘Of course it would have a direct impact on the distribution business,” Nicholas G. Manis, deputy director of the Maryland Beer Wholesalers Association Inc., said Tuesday. ‘‘It affects the three-tiered system.”
Under the three-tiered system, individuals in Maryland may not receive wine — from either local or out-of-state wineries — directly at their homes. Nor may they mail it to themselves.
‘‘We believe this bill would help our local wineries sell more and create markets,” said Kevin Atticks of the Maryland Wineries Association, which represents 30 state-licensed wineries. ‘‘We know Maryland wine laws are a mess. Regulations are a mess.”
The House bill will be referred to a subcommittee, which will make recommendations before the committee’s final decision. Del. C. Sue Hecht (D-Dist. 3A) of Frederick, a member of the Economic Matters Committee, was unavailable for comment.
Anthony Aellen, president of Linganore Winecellars in Mount Airy, said the change would allow smaller wineries to shore up a local market and then partner with distributors. As Maryland’s largest winery, Linganore Winecellars produces more than half of the state’s wine, with roughly 50,000 cases per year, Aellen said. Its chardonnay, merlot and other varieties are sold at more than 600 stores in Maryland and have been sold through a distributor for more than 13 years.
Even if the direct-sales proposal is adopted, Aellen said, he has no plans to drop his distributor link.
‘‘In the long run, [directing shipping] helps because it grows the market,” Aellen said. ‘‘You have to grow to a certain size before the distributor will carry you. ... To make it easier for a winery to market, you can’t do anything but help the whole industry.”
A small winery can boost sales from 10 percent to 15 percent by shipping directly to consumers, according to the Maryland Wineries Association.
Since 2006, Maryland wineries have been able to ship directly to retailers or restaurants, but Maryland is one of 15 states that still do not allow interstate, winery-to-consumer shipments.
Fiore Winery in northern Harford County churns out between 15,000 and 20,000 cases each year, which is just enough to secure a distributor. Owner Michael Fiore said he has no plans of dropping his Maryland distributor if the bill passes.
‘‘It’s very difficult for a winery my size to cover the state,” Fiore said. ‘‘I would like to establish a stronger foothold in the state of Maryland.”
Fiore has been eager to fulfill requests for direct sales from customers throughout the country, including many in Maryland. The new law could boost his revenues by 10 percent to 20 percent, he estimated.
‘‘Everybody should have the right to buy whatever wine they like,” Fiore said. ‘‘I’m hopeful [a change] will happen soon.”
A Supreme Court ruling in 2005 requires all states to treat out-of-state wineries the same as in-state operations. So, if Maryland allows its small local wineries to ship, it would also have to allow those in other states to. Aellen said he’s not worried about out-of-state competition.
‘‘There are a lot of [Maryland] wineries so small that they can’t get their product everywhere,” Aellen said. ‘‘Nobody’s going to lose their shirt because a California winery is going to ship a few cases to Maryland.”
Other pending alcohol laws
Lawmakers are also reconsidering both how to classify flavored malt beverages such as Mike’s Hard Lemonade and Smirnoff Ice, and whether to allow grocery stores and chains such as Weis Market and Trader Joe’s to sell alcohol.
Flavored malt beverages have long been taxed as ‘‘beer” in Maryland and may be distributed by retailers who hold a beer license. With a reclassification as ‘‘spirits,” the tax would be higher and the drink available at fewer outlets.
Opponents of the classification change argue the beverage is brewed much as beer is; proponents argue the brew is heavily altered with removal of flavors, carbonation and alcohol and added with other flavors and ‘‘spirits” alcohol.
Maryland lawmakers, like those in Maine, may establish a fourth category in addition to the ‘‘beer, wine and spirits” liquor classifications. Maryland is among several states reconsidering the ‘‘beer” classification of malt drinks.
Maryland’s wine industry
29 licensed wineries sold 1.15 million bottles in fiscal 2007, up nearly 20 percent from 2006.
Annual 2007 wine sales are estimated at $12.7 million, compared with $3.45 million in 1997.
Maryland’s wineries produce more than 240 varieties sold at roughly 600 retailers and 100 restaurants.
Boordy Vineyards, which opened in 1945, is Maryland’s oldest winery.
Maryland grape growers harvest an average of 800 tons per year.
Source: Maryland Wineries Association
