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Proposed Law Would Cork Michigan's Growing Wine Industry

New opportunities for thousands of acres of farmland at risk

August 25, 2005 | By Patty Cantrell
Great Lakes Bulletin News Service


Michigan wineries like L. Mawby and Black Star Farms use direct shipping to help build markets for their unique products.

TRAVERSE CITY — Of all the breathtaking scenery in this Grand Traverse region, the sight of sun-drenched wine grapes winding around newly built trellises is perhaps the most inspiring for anyone concerned about the future of farmland here.

We now have 22 wineries on the Leelanau and Old Mission peninsulas, with seven more preparing to open in the next five years. These wineries — some of which are winning prestigious international awards — provide a promising new market for a growing number of local farmers who are fortifying their challenged businesses by adding grapes to their production. The two peninsulas’ wineries, which represent more than half of the state’s total, are also adding a refreshing flavor, along with valuable sales, to northwest Michigan’s tourism industry.

But all this — from wine industry jobs to preservation of scenic views — hangs in the balance right now as the Michigan Legislature wrestles over a proposal by the Michigan Beer and Wine Wholesalers Association to stop the flow of wine from smaller, independent wineries directly to wine lovers and the restaurants and retailers that cater to them.

The wholesalers’ move comes after the U.S. Supreme Court ruled in May that a Michigan law allowing in-state wineries, but not out-of-state wineries, to ship directly to Michigan customers was discriminatory. Michigan must now choose either to allow all wineries everywhere — or no wineries anywhere — to ship directly to state residents. The Michigan Beer and Wine Wholesalers Association is pushing the second, highly restrictive option, with House Bill 4959 and Senate Bill 600. But a competing set of bills introduced by northern Michigan lawmakers would, instead, allow the first: Limited interstate and intrastate wine shipping.

Strangulation vs. Growth
The bills allowing shipping -- House Bills 4987 though 4990 and Senate Bills 625 through 628 -- would keep Michigan's wine industry growing and, with it, efforts to generate new jobs, save farmland, and enrich communities. The wholesalers’ move to stop direct shipments of wines, on the other hand, will certainly strangle Michigan’s young wine industry in its toddler stage and cut off the opportunity for thousands more acres of farmland to go into wine grape production.

In fact, the only reason Michigan has an increasingly world renowned wine industry today is because the Legislature in the 1970s specifically allowed small-scale winemaking entrepreneurs to sell and ship wine directly rather than go through wholesalers, as Michigan’s post-Prohibition Liquor Control Act required. Lawmakers wanted to make room for entrepreneurs and innovation in Michigan’s then-tiny wine industry, something that even the wholesalers supported. How else would they have some future opportunity to handle successful, larger-volume Michigan wines if they didn’t allow the wineries to first grow their businesses with small-scale sales of mostly limited-edition vintages?

Today a number of Michigan wines have grown, by virtue of direct sales, to volumes that wholesalers now handle. If the wineries can continue to incubate their products with direct shipping, more Michigan wine labels will come into such wider distribution. That would benefit everyone: Small wineries, big distributors, customers, and rural communities. Until now, growth has been impressive: Some 1,500 acres of vineyards in the state now attract more than 600,000 visitors and generate $75 million for the state’s economy each year. The Michigan Grape and Wine Industry Council is working to put nearly 10 times as much farmland in wine grape production by 2024.

But wholesalers, apparently fearful of any further opening of their protected middleman territory, are now pushing for a return to complete control over wine distribution, no matter the devastation to Michigan’s 43 wineries, their host communities, or the many more farms and rural areas that would prosper along with a growing Michigan wine industry.

Misleading Claims
Most lawmakers can see through the hysteria about underage access to direct-shipped wine that, thanks to a wholesaler-funded lobbying effort, has dominated the debate so far. The argument is disingenuous, if not highly misleading: Underage access to alcohol through direct shipping has not been an issue for wholesalers in the more than 30 years that Michigan wineries have been filling in-state orders. Teenage bingers are unlikely to stock their parties with high-end wines or go through the stringent and multiple identification checks that specialty wineries use successfully to prevent any such thing.

Tellingly, the wholesalers are unconcerned about the access “problem” when it involves the Michigan party stores and other retailers that they service. Those retailers have the right to direct-ship any kind of alcohol — including liquor and beer, which are far more popular than wine with teenagers — anywhere in the state, and would still have this right if the current anti-wine shipping legislation passes.

The wholesalers also claim that allowing out-of-state wineries to ship directly to Michigan buyers will lead to direct shipments from makers of beer and spirits. But that, too, is highly misleading. Michigan law already prohibits direct shipping by brewers and distillers, period; neither in-state nor out-of-state producers can legally do it.

Changing that law is an entirely separate matter. It is also a highly unlikely scenario because brewers and distillers, with their smaller number of much larger-run products, are well served by the wholesale industry. It is simply not worth such a brewer’s or distillers time to engage in small, direct shipments. It is, however, very worth the time of the nation’s small wineries, which collectively offer as many as 200,000 mostly micro-volume labels and depend heavily on the niche marketing that direct shipment allows.

Now’s the Time
Michigan lawmakers should follow the lead of New York and California, which have already responded to the U.S. Supreme Court decision by opening their states to limited shipping from out-of-state wineries. Our state’s legislators now have the perfect opportunity to do so, too, thanks to an alternate package of bills introduced by two northwest Lower Michigan state lawmakers, Senator Michelle McManus and Representative Howard Walker. The bills are co-sponsored by, among others, two of their nearby colleagues Senator Jason Allen and Representatives Kevin Elsenheimer and David Palsrok.

The package — Senate Bills 625 through 628 and House Bills 4987 though 4990 — further tightens controls over any possibility of underage purchases and caps the amount wineries can ship. That will keep direct sales in the connoisseur realm and leave wholesale volumes to the state’s distributors. These are bills where, again, everybody wins — wineries, distributors, customers, and rural communities.

Michigan lawmakers must stand up for the jobs and farmland that Michigan will gain by allowing small winery sales to flourish with direct shipping and grow to wholesale volumes. Calls and letters now to support the McManus-Walker package will make the difference.

Patty Cantrell directs the Michigan Land Use Institute’s entrepreneurial agriculture program. You can reach her at patty@mlui.org

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