Holding Your Nose…and hoping for the best

Posted by Tom Wark on Apr 14, 2006

It’s not something to be proud of, but it’s often the case.

Sometimes, when you’ve been working for long long time on something and you just want it to be over, you are willing to accept a conclusion to the project that you know just isn’t the best it could be. But, it does bring the project to a conclusion so you accept mediocrity.

Most of us take this route from time to time, but the problem with it is….down the line….you start to think about what it is you settled for and realize…."that was dumb".

This is exactly what has happened in Illinois, where it appears a number of wineries are now opposing the compromise they supported that led to a Wine Shipping & Sales law. The compromise between the state’s wineries and wine wholesalers would have removed wineries’ right to sell direct (self distribute) to retailers and restaurants and forced them to use wine wholesalers instead, made it far more difficult for out-of-state wineries to ship direct to Illinois residents, and came with a promise, not a mandate, that Illinois wholesales would work to give distribution to any Illinois winery that wanted it.

It appears that the compromise was supported by some wineries only after they tightly held their nose. It was also disclosed that the Illinois Wineries Association membership did not vote among themselves to see how much support for the compromise existed in their organization.  It appears now that the hand is off the nose the smell is rising up.

The compromise bill that was set to be approved in the legislature now appears to be dead. The biggest losers in this latest development are clearly the wine wholesalers of Illinois who got just about everything they wanted: 1) revocation of the Illinois wineries’ right to go around them, 2) a guarantee that out of state wineries could not go around them 3) a limit on the amount that wineries could ship directly to consumers and 4) no mandate that they must distribute Illinois wineries’ products.

Now all this is off the table.

With no bill to consider it’s likely that one of 2 things will happen. There will be another round of negotiations between wineries and wholesalers to come up with a new bill or a lawsuit will ensue that forces Illinois to abandon it’s current set of laws that allow Illinois wineries to sell direct to retailers, but prohibits out of state wineries from doing the same. If the latter occurs and Illinois’ laws are found unconstitutional, then the legislature will be forced to act to change the laws. And because the compromise accepted by the wineries was so lopsided in favor of the wholesalers, waiting for a lawsuit really seems like a win-win for the wineries.

However, there is new player in the game this time around: retailers. It was reported that the Illinois Retail Merchants Association didn’t like the compromise because it did not give them the right to ship direct to consumers. This is a reasonable objection. Add to their dissatisfaction the formation of the new Specialty Wine Retailers Association that is dedicated to opening direct shipping to out of state retailers and you now have two powerful groups in the game that will put their weight behind liberalizing freer commerce and more direct consumer access to wine products.

The lesson here is that states must take a comprehensive look at their alcohol beverage laws when faced with the need to changes them. The stakeholders are not merely the wineries. The include wholesalers, retailers both in and out of state, wineries in and out of state and the state’s alcohol beverage control commissions invested with the regulation and tax collection duties.