Illinois Wine Controversy Settled

Posted by Tom Wark on Mar 3, 2006

The most controversial political issue in Illinois over the past few months has apparently come to an end with a compromise struck between Illinois 63 wineries and the states’ wine and beer wholesalers. The upshot of the compromise is wineries in Illinois and across the country will have the right, after payng for a license, to ship up to 12 cases per year to an individual, while Illinois wineries have lost their right to sell direct to retailers and restaurateurs.

Everyone involved appears to be speaking of the deal as a victory, including the wineries.

"This is a good deal for the wineries," said Kim Morreales, the wineries’ lobbyist. "I think we surprised everyone that we were able to have as much impact in Springfield as we were able to muster."

In an interview with FERMENTATION State Senator Dave Luechtefeld said the deal comes with a commitment from the wholesalers to reach out to the Illinois wineries to represent them around the state.

"They (the wholesalers) made a commitment to work closely with the wineries and to push Illinois wines," Luechtefeld said. "Whether they will do this is another question; I don’t know if they will."

As it stands, the ability to get Illinois wines to retailers and restaurants now is completely in the hands of the wholesalers. If they choose not to represent a winery that winery has no way to sell its wines to retailers and restaurants. None. Morales told FERMENTATION that the Illinois wineries will be watching very closely the kind of attention that the wholesalers give wineries. She noted that wholesalers have already begun to negotiate with individual wineries.

"My understanding is that Associated Beer Distributors of Illinois have already begun sending out winery contact information via email to wine wholesalers across the state," Morreales told FERMENTATION. "This is a great start.

According to Morreales, the wineries were also able to obtain a verbal commitment for additional state funding for Illinois wineries to help promote the industry.

The negotiations between wholesalers and wineries took place over several weeks. It appears that the issue the wholesalers were willing to go to the wall for was stopping wineries in Illinois from selling direct to retailers and restaurants. Their insistence on this  position comes after a Federal Judge in Washington State ruled a state cannot allow its own wineries from selling direct to retailers while preventing out of state wineries from doing the same.

The wineries choose to go to the wall for the right to ship direct to consumers. They were originally faced with a proposal that allowed them to only ship up to two cases per year to a consumer and only after an initial face to face transaction.

How were the wineries able to beat back the powerful wholesalers on the issue of direct to consumer sales? According to Morreales by mobilizing consumers and a lot of media work as well as reaching out to the legislators.

"With the help of Free The Grapes we were able to generate about 6,000 letters and emails to legislators across the state," said Morreales.

Morreales also pointed to the positive coverage by the media.

"We had great support from the press. Every editorial that came out was pro-winery," Morreales notes. "This support was probably the turning point in the debate."

Nearly every editorial and article that ran on the controversy made note of the argument made by the wholesalers that direct to consumer sales would help put alcohol in the hands of minors. This argument was debunked across the board. It will be interesting to see if other wholesaler organizations across the country that are seeking to take away sales from local wineries take note of the efficacy of the "Minors Argument". It appears that few if any sensible people still think this argument carries any weight. Senator Luechtefeld refereed to the idea that minors will get their hands on alcohol via direct sales as "Bogus".

Finally, Morreales led an effort on behalf of the wineries to get critical information about the Illinois wine industry into Legislators’ hands. Positive press coverage was forwarded to every legislator in Illinois. In addition, information packets hold background on the huge growth in the Illinois wine industry as well as the ways by which the wholesalers proposal would hurt the industry.

Illinois Governor Rod Blagojevich was also critical in moving forward negotiations. He apparently made it clear that he would not sign a bill that hurt the Illinois wine industry. This was important motivation for both sides finding a compromise.

There appears in all of this to have been a feeling among wineries that they were lucky to get what they wanted given the power of the wine and beer wholesalers lobby that is based on millions of dollars of campaign contributions.

Dick Saltz of Illinois winery Fox Valley told FERMENTATION that without the ability to sell direct to restaurants and retailers wineries are going to have a difficult time growing.

"Not everyone got what they wanted," said Saltz. "We’ll have to wait and see if the wholesalers live up to their end of the bargain and help the wineries distribute their product.

This writer is very skeptical that the wholesalers will make any significant effort to sell Illinois wines. There is very little precedent in the wholesaler world for their salespeople really working hard to sell wines that offer little profit for wholesalers…such as Illinois wines.

There is nothing in the bill that either forces Illinois wholesalers to represent Illinois wineries or work to put these wines on restaurant wine lists or on retail shop shelves. Nor is there there any remedy for the wineries if the wholesalers fail to live up to their verbal commitment to work hard on behalf of the wineries.

The wineries in Illinois say that if the wholesalers don’t live up to their side of bargain to reach out and to represent Illinois wineries they will be willing to introduce new legislation. That’s good because I fear they are going to need to do this.