The Indiana Wine Dance

Posted by Tom Wark on Feb 24, 2006

There must be a number of managing editors at Indiana newspapers that are somewhat pissed off. By no fault of their own they are having to update the direct shipping story in their state in such a way that makes them look like they got it wrong.

One day after a closely-watched and heavily attended committee meeting took place in the Indiana Legislature and a compromise on the direct shipping issue between Indiana wineries and the wine wholesalers was accomplished, the president of the Indiana Senate killed the pending legislation. The move effectively ends any possibility of a conclusion to the bitter shipping battle in Indiana until at least January of next year.

On February 23, the Indianapolis Star ran a story under this headline:
"Bill altered to allow wine shipping"

Not more than a few hours later, they ran this one:
"Wine-shipping legislation goes sour"

There is some real "insiders baseball" going on in Indiana right now.  And it’s hard to really understand who is pushing which agenda. For same reason, Sen. Robert Garton, the President of the Indiana Senate killed the compromise legislation that would have allowed any winery in country to sell direct to Indiana retailers, a right only Indiana wineries have had. It was not a perfect compromise, but it did represent a good deal of work and politics by  a lot of interested parties. And if you are wondering, Garton appears to have accepted no or very little in the way of campaign contributions from wine wholesalers.

Garton claimed he just learned that there was pending litigation on the issue and announced the Indiana Legislature tries not to impose on the judiciary’s duty. It’s highly unlikely that the existence of pending legislation was only just discovered by Garton. Hell, I knew about it and I live in California.

Without addressing the issue of which branch of government should take the lead in addressing concerns of the state, you have to wonder what is gained by putting off a legislative fix to the problems of Indiana wine distribution until January 2007 when the legislature will presumably take up the issue again after the court rules on a lawsuit that is challenging Indiana distribution laws as discriminatory and unconstitutional. It is unlikely the various parties involved will have changed their minds or views in ten months: wine wholesalers want all sales to go through them but are willing to compromise while wineries everywhere want the right to sell to whomever they want, in any way they want and as much as they want, but they two will accept a few restrictions.

In other words, why Garton killed the compromise is unclear to most people right now. There’s lots of speculation. But this post is already filled with enough speculation and machiavellian "to-dos" for now.

No matter what happens, it’s likely that the controversy will arise in Indiana again in 2007. What might make the difference in terms of what either side in the matter can achieve for themselves and their industries is what they do in the mean time to turn public and political opinion to their views.

Undoubtedly the wine wholesalers can revert to their tried and true method of gaining support: campaign contributions. Wineries being so small as an industry don’t have this option. Wholesalers spent upwards of $600,000 on campaign contributions during the 2004 Indiana election cycle.

But I think the impact of more wholesaler contributions is overrated. I think that the public relations battle can be won by either side between now and next January depending on if they choose to continue to fight it. The wholesalers are already on the ball. Not more than a day ago they released  the results of a "push poll" they conducted that was designed to produce a specific opinion from the public that was favorable to their interests. It’s well done, but phony in it’s obvious slanting of the issue. Nonetheless…the poll is out there and suggests that Indianans just won’t abide direct shipment from wineries to consumers or retailers.

These kind of polls aren’t cheap. And they are effective. If the wine wholesalers choose to continue the PR battle without any organized response by the wineries you could easily end up with a public that believes minors are boozing it up using the Internet and that somewhere located in the depths of the Bible there is something about how wine wholesalers will inherit the earth.

My hope is that while the court works its way through the lawsuit and legislative matters are reinvigorated next year, the wineries will rally around a few strong voices to keep alive the messages of economic fairness, the work of the family farmer and the corruption of mandated power .

Meanwhile, I think we are going to see one more federal court rule that allowing in-state wineries to sell to retailers but not out of state wineries is unconstitutional. The Indiana case is really set up to do that and the precedent exists. Yet for Indiana, this issue is able to turn on a dime because there are others that might weigh in on the matter. You might have the state Liquor authority move to hold hearings on what would be their desire to see all shipping in Indiana shut down by the fiat of the Liquor authority rather than by the work of the legislature. The head of the state authority on liquor already tried this back in May, but was stopped from implementing his plan when a court found that he had issued these new direct shipping rules outside the bounds of his authority. The court’s injunction on his rules ends this month. While the wineries are likely to ask for a continuation of the injunction that won’t stop Liquor authority commissioner David Heath from trying use proper channels and rules to shut down direct shipping.

The growing Indiana wine industry is up against lot.

But, others have lot at stake too, besides wineries and wine wholesalers. If you open up sales by wineries to retailers to any producer in America you really unlock some great opportunities for wineries in the big wine producing states like California, Washington, Oregon and New York. I image in time a pretty good sized trade between wineries and restaurants/retailers would develop, providing greater margins for both wineries and retailers, and potentially better prices for consumers.

Yet, there doesn’t seem to be much interest by California wineries in getting behind the Indiana wineries in their fight to keep direct sales open to them and to open it up for others. It may be that I’m simply not privy to any help that may be going on behind the scenes. But I’ve not heard of any. I have heard that CA’s largest association of wineries, The California Wine Institute, has made efforts to oppose shipping bills in different states that place restrictions on the size of the winery that is allowed to ship. If this is true then it seems pretty clear that the Institute is more concerned with only taking care of its medium to largest members rather than working on behalf of a more open and liberal national wine trade.

This is understandable and it’s hard to blame them for this. It takes the kind of vision that few associations possess to work on issues outside the most immediate view of their members.

There are other reasons why out-of-state wineries might not involve themselves in the Indiana battle and may not even be welcome to it. There is little of PR value to be gained for the Indiana wineries by having wineries from out of state express their desire to horn in on the Indiana market. It’s just much easier to depict the desire to liberalize the wine trade into some conspiracy by large California wineries.

As I said, it’s "Insider’s Baseball". However, what’s really interesting about the Indiana battle over who gets to sell wine to whom is that so many of the arguments and procedural weapons that are or will be used across the country are right now on display in Indiana.