Overcoming Barriers to Innovation in the Wine Industry

Is there any compelling reason a winery ought to be required by law to use any amount or percentage of grapes from within the state where it resides? I can’t think of one.

Kansas winemakers are finishing up there 2012 harvest about now and doing so under a new rule concerning the origin of grapes they use to produce wine. Under Kansas law that went into effect this year, 30% of a winery’s annual production must be based on grapes grown in Kansas. The previous figure was 60%. This is not a requirement that 30% of any given wine must be made with Kansas-grown grapes. Only that 30% of the winery’s production be the result of Kansas Grown grapes.

In a state like Kansas, where climate events can often decimate a crop and where the amount of vineyards can’t often supply enough fruit to satisfy production desires, the issue of importing grapes or juice from outside the state is important to many wineries. The recent change in the Kansas law that now allows 70% of a winery’s grape material to come from outside the state, rather than the former 40%, addressed this key economic concern. But not everyone agrees.

The winery owners in Kansas that opposed liberalization of Kansas’ state-grown grape rules thrown down an interesting argument: The importance of promoting regionality and preventing consumer fraud. Michelle Meyer, owner of Holy-Field Vineyard in Kansas, puts it this way:

“I really don’t care how many [wineries] there are as long as they put out a good product that is truly a regional product. The great wines of France aren’t grown in Italy. … A Kansas product is something you bring to life from the ground up.”

In the LJworld.com article on the issue, Kansas winery owner Greg Shipe puts it this way:

“This is the most important thing for the wine industry in Kansas, more so than anything else. We’re trying to build an identity for Kansas wines, and it has to be grown here to do that…Wineries are one of the No. 1 things for agro-tourism, but we need to give people an honest product, too. A lot of people that come to farm wineries are expecting the wine to be grown here in Kansas.”

Shipe and Meyer make a good argument for the benefits of developing a regional identity for Kansas wines. But here’s what I’m wondering: If Kansas wine manufacturers ought to be required to use any amount of state-produced ingredients in the wine they produce, ought not all manufacturers of all kinds of products in Kansas be required to use a specific amount of Kansas-produced materials in their manufacturing?

Should the Kansas craftsmen who build furniture be required to source at least 30% of the wood that goes into making a chair from Kansas forests? Shouldn’t Kansas chocolate makers be required to source 30% of their cocoa beans from Kansas cocoa bean plantations? What about the materials Kansas based artists use to produce fine art?

Here’s the fact of the matter: Allowing winemakers to produce wine in any manner they want, with grapes grown anywhere (inside or outside the state) makes good economic sense and makes good on any claims to want to foster economic liberty. Federal labeling laws will assure that consumers are not duped. And those wanting to establish a regional identity for a state’s wines are free to point out that “our wines are made from home-grown grapes, while others are not”.

Originally, the proposal was to remove entirely any provision in Kansas law that a Kansas-based winery use any percentage of state-grown grapes. This is the most sensible position. However, one can imagine that Kansas wineries that went to the trouble of growing their own grapes—a more expensive proposition than simply buying them from anywhere you could find them—opposed the proposal to eliminate any sourcing requirements. The 30% requirement was the compromise.

Economic vitality and economic success almost always springs from innovation. Innovation requires a certain amount of freedom to maneuver. Where the wine industry is concerned, government is notorious for erecting barriers to innovation. It has become standard operating procedure and is an ingrained mindset among lawmakers and regulators. The fight to overcome the sillier, most egregious and and useless barriers to innovation is a tough one.

In Kansas we see that often this fight is often won in incremental ways.


10 Responses

  1. Dominic Martin - September 20, 2012

    Tom—Enjoyed your article on the evolving legislation that governs Kansas winemaking. I teach Viticulture and Enology at Highland CC here in Northeast Kansas.We are part of VESTA. The industry is growing, but pretty slowly. As fuel prices continue to increase, regionality will be required! Farming is changing every day since it must do so to survive. Thanks again for your sharp and keen perspective. Dominic

  2. Thomas Pellechia - September 20, 2012


    From the TTB regs, to use the word “Kansas” on the label: “Not less than 85% of the volume of the wine is derived from grapes grown in the labeled viticultural area…”

    If TTB considers Kansas a viticultural area (a complete state can be considered a viticultural area) and since a state can make its requirements more but not less stringent than TTB, then the 30% rule in Kansas would mean that the wine must be labeled “American” wine. Under that condition, the Kansas producer loses Kansas identity, and that makes the rule stupid, unless it is intended to help Kansas grape farmers maintain a piece of the grape pie; then, it has a purpose.

    • Dr John A Brewer - September 20, 2012

      The corrrect TTB percentage to be labelled as Kansas Wine is75% of the grapes must be grown in Kansas as this designates a State wide vinicultural location. Kansas does not have any sub catagories like Napa Valley which requires the larger percentage. Any wine made with any fruit other than grapes, can not be labelled as Kansas (or any other state) because vinicultural locations are defined as grape growing areas only. I.E. 100% Kansas grown peach wine can not be labelled as Kansas Peach Wine, only Peach wine. Producers of non -grape wines who use fruit from Kansas have to tell their customers that the wine is from kansas grown fruit. The Kansas grown requirement covers all wine produced in Kansas, not just the grape wines.

  3. Thomas Pellechia - September 20, 2012

    Thanks, John, for the clarification, although as it relates to grapes, the drop from 85% to 75% doesn’t change what I observed in my comment regarding TTB requirements, except for the fact that I always assume that the word “wine” refers to grapes and no other fruit.

    So, the question is: do Kansas wine producers care whether or not they can use the “Kansas” designation on the label?

    • John Brewer - September 20, 2012

      Yes the wine producers care, but the Kansas grown content requirement applies to all wine, not just from grapes. Non-grape wine producers that use Kansas grown peaches, blackberries, elderberries, apples, etc. would like to say that they are Kansas, but Federal labelling laws do not allow it. All wineries are trying to find their market segment, and the easiest way to do that is to have “local” wines. However, not all fruit (grapes included) grow equally well across the state. The appellation system for grape wines was important a hundred years ago because transportation limited wine production to locallized areas. The particular grapes that could be grown in an area, the strains of wild yeast available in that area, and the style of the wine making for that area created a unique “terroir” for wines from that area. With modern transportation, grapes can be sourced anywhere in the world, there are over 1800 cultured wine yeasts (which all produce different flavors) available to the wine maker, and winemaking styles influenced by every winemaking school from France to Australia. The Federal labelling laws follow the historical appellation system. By this system, a wine made in California but with grapes grown in Kansas can be labelled as a Kansas wine. The Kansas grown content requirement for Kansas wineries restricts the types and quantities of wine that can be produced in Kansas. Over 400 wineries outside of Kansas can ship directly to a consumer in Kansas with no Kansas grown content, but Kansas wineries have to have 30% of all of the fruit they use grown in the state of Kansas to sell to the same customer. This restrains trade. The Kansas grown content regulation debate is really about the business model for what a winery should be. Being forced to grow 30% of the grapes (or other fruit) used to produce wine, severely limits the establishment and growth of wineries and makes it almost impossible to compete with wineries in most of the US where there is no grown in state requirement..

  4. NRC - September 20, 2012

    Doesn’t Napa Valley have requirements that a certain percentage of the grapes crushed at the winery must be from the Napa Valley? There are apparently some loopholes for older wineries, but I believe that this is the case.

  5. Lee Newby - September 20, 2012

    Stick to the 85% rule as it is becoming accepted around the world, consumers must be told the truth.

    Look into the “cellared in Canada” issue.

    Short form, big companies make the rules and one was the tiny fine print on the back of the bottle saying “Cellared in Canada” (not even a straight forward “Bottled in Canada”) for their large generic brands. The wines where sold beside and among the Canadian wines in BC and Ont wine stores and people bought them believing they were buying cheap Canadian wine, well the wine was just bottled in Canada in a CELLAR and could be a blend of Chilean, South African and Australian Cabernet Sauvignon, wherever the cheapest bulk wine they could get came from.

    I have no problem with wines blended from any wine in the world as long as the label spells it out in big letters and plain language, don’t support the development of cellared in Kansas wines.

  6. Thomas Pellechia - September 20, 2012

    The issue of words on the label is a minefield of misinformation regarding the “terroir” of wine, the value of sourced fruit as opposed to local fruit, the sense that “estate grown” guarantees some sort of quality, the conceit of small producers and the overwhelming political power of large producers, plus a few other concerns that are important or not depending on location and size of the industry.

    The problem that I see with labeling requirements is that they generally skew toward marketing, which is why PR people hate stringent requirements and certain segments of the wine industry idolize stringent requirements.

  7. JohnLopresti - September 24, 2012

    One of the difficult parts of regarding Kansas as a producer of v.vinifera is the winegrape’s traditionally best quality in temperate climates and in a climate moderated by a nearby body of water.

    Still, Kansas has a long history of viticulture, and several native wild grapes, as well. The USDA reported 69,000 gallons [1] of still tablewine production in 2010 in Kansas.

    I do not picture 14′ tall winegrape trellises, harvested with a mechanical harvester, in fields alongside the historic Chisholm trail.

    Still, this is quite a different sort of viticulture than in a place which gave rise to the label dispute known in the courts as Bronco v. Jolly [2] based on rules and regulations in the premium growing region of California in 2005.

    One interesting document available online is a legisture bill summary listing the Kansas proponents and opponents [3] who testified during hearings on formation of the new rule decreasing the required amount of in-state sourced fruit in a Kansas labeled wine. I guess I agree with Tom’s open market view, but Kansas enology and viticulture will need to develop their own identities to help educate the public and the ‘agro-tourists’.

    [1] http www nass usda gov/ Statistics_by_State/Kansas/Publications/Economics_and_Misc/Winery/2010WineryRelease pdf
    [2] caselaw lp findlaw com/ data2/californiastatecases/C037254A PDF
    [3] http www kslegislature org/ li/b2011_12/measures/documents/supp_note_sb379_02_0000 pdf

  8. Good Reads Wednesday « Artisan Family of Wines - September 26, 2012

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