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Alabama: Small wineries want law changed to allow self-distribution

Source: Gadsden Times Montgomery Bureau
By Dana Beyerle
Published: Sunday, May 8, 2011 at 9:12 p.m.
Alabama’s small wineries hope 2011 will be a good year for legislation allowing them to self-distribute wine so they can compete against big vintners. Small wineries are supporting a bill by Rep. Becky Nordgren, R-Gadsden, that would allow them to self-distribute up to 24,000 gallons a year and cut out the middle man between them and retailers.
“We’re trying to benefit the wine industry by trying to open more doors to produce wine,” said Jahn Coppey, who with his wife, Janie, operates the Wills Creek Vineyards northwest of Attalla. “Dollars are created by visitors coming in. “Nordgren said her legislation would help small wineries expand as a business and as tourist attractions as part of Alabama’s wine trail. With the legislative session winding down, her bill has remained in a House committee since it was introduced March 31. States such as North Carolina that have altered their laws have seen significant growth in the number of small vintners, Nordgren said.
Opposed to changes in the current distribution law is the Alabama Alcoholic Beverage Control Board, whose administrator is appointed by Gov. Robert Bentley, an avowed promoter of small business opportunities. Alabama operates the three-tier alcoholic beverage system of manufacturer, wholesaler and retailer. It’s designed to separate functions so one doesn’t control it all. “Basically, we can, under the three-tier system, sell wine here, but it will not let us sell to anyone else without going through another distributor,” Coppey said.
Alabama is in the minority with a state alcoholic beverage control agency. It’s a significant tax contributor to the state’s General Fund. Alabama supports the three-tier system left over from Prohibition when alcohol makers controlled supply and distribution to retailers and the ability to withhold the booze unless retailers met their price.
“We want to say that we are not against small wineries, but in our state everything dealing with alcoholic beverage sale and distribution is in the three-tier system,” said William Thigpen, assistant administrator of the ABC Board.Other states – North Carolina is mentioned by Alabama’s wineries – have relaxed their laws and allow direct wine sales, creating expanded opportunities for wineries and the tourism potential for wine trails. Some believe the three-tier system adds to the price of wine. Alabama has a dominant distributor, MBC United Wholesale. A spokesperson couldn’t be reached for comment.
Coppey grew up in the Swiss wine country. Working in the space program in Huntsville in 1971, he met his future wife. Their Wills Creek Vineyards on Duck Springs Road produces about 1,000 cases a year of sweet muscadine wine, about 12,000 bottles. Coppey said small winemakers cannot compete with the Gallos of the world because unit costs are too high when you factor in the distributor. “This is something that we have requested because in several states, they have allowed (self) distribution on a small scale directly to retailers,” Coppey said. “Under the law, we can only sell within 200 feet,” said Coppey. “If I made a wine, I could not sell it two miles away.
“He said, for example, there is a caterer in Collinsville who wanted to directly buy a small quantity of wine for events, but could not because the distributor did not cover Collinsville. “She had to go to another distributor who doesn’t carry our wine,” Coppey said. “She had to purchase California wine.” ABC Board attorney Bob Hill said while the board supports helping Alabama’s businesses, changing the three-tier system would upset the regulatory process. “We have an act, as a lot of states do, that provides that someone is not supposed to own an interest in businesses in more than one tier,” Hill said.
“The three-tier system is recognized as a valid regulatory process, and what this bill does, as I read, is allow them to not only be in two but in all three tiers, to do wholesale as well as retail businesses,” Hill said. Hill said the ABC Board is trying to help by allowing wineries to sell their products in ABC stores, where shelves do not contain wine as they once did. The U.S. Supreme Court has even ruled on wine distribution. In 2005, the court said New York and Michigan laws that treated in-state wineries differently than out-of-state wineries were unconstitutional.
The issue also involves major lobbying groups. The Wine and Spirits Wholesalers of America oppose altering the three-tier system while the Specialty Wine Retailers Association advocates easy movement of wine across state lines. Burt Patrick, owner of Ozan Vineyard and Winery near Calera, would like to see Alabama become one of the states that allow direct sales. “The bill basically would normalize Alabama’s small winery laws with most other states,” he said. “We’re kind of behind the times in recognizing wineries as a small-business issue versus the big-business issue.”
He said having to use a distributor when a customer may only need a few cases inhibits competition. “The reason we want to be treated differently than Gallo that produces 70 million gallons a year is our scale is so small we can’t overcome the cost,” Patrick said. “After a certain size, if you get bigger, you’ll get back into the three-tier system.” Patrick said wineries aren’t “negative on distributing,” but are negative on inefficiency and lack of choice in how to serve local customers “within 15 miles.” “It’s an ideal situation for a small winery to be able to service his local community, to take care of that restaurant over there that wants your wine, to take care of a grocery store across the street that wants your wine,” he said.