Overcoming Barriers to Innovation in the Wine Industry
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.