Supreme Court decision OK
’s out-of-state shipments
Local wine makers were thrilled Monday by a U. S. Supreme Court decision that allows them to ship wine directly to customers in some of the country’s biggest wine markets.
“It will definitely open some markets that we haven’t been involved in at all,” said Cheryl Durzy, vice-president of sales at Clos LaChance Winery in San Martin. “This makes me rethink where my marketing dollars go. I’m going to want to maybe do some advertising in New York, maybe do some advertising in Florida.”
Monday’s 5-4 decision invalidated laws in New York and Michigan forbidding consumers from buying wine directly from out-of-state wineries. The ruling doesn’t require the states to allow wine imports but prohibits them from differentiating between inter- and intra-state wine sales. If a state wants to prohibit direct sales across state lines, it must also do so within its borders.
Justice Anthony Kennedy, writing for the majority, said that while the Constitution grants states broad authority to regulate alcohol, they may not discriminate against out-of-state wineries simply to protect local economic interests.
“It is evident that the object and design of the Michigan and New York statutes is to grant in-state wineries a competitive advantage over wineries located beyond the states’ borders,” Kennedy wrote.
Durzy said that Clos LaChance sells about 90 percent of the 30,000 cases it produces annually through a wholesale distributor. She said that direct sales could boost the winery’s business and the percentage of profits it keeps.
Steve Wilson, marketing and communications director for Morgan Hill’s Guglielmo Winery said the decision will help small wineries compete with the giants of a $21.6 billion industry. Customers in other states will be able to buy wine over the Internet, and tourists who visit South Valley wineries will be able to ship wine home.
“It’s a good, positive move, especially for smaller wineries,” Wilson said. “We don’t have a wholesaler in New York. Our options are limited, and it’s really hindering to small wineries such as ourselves.”
Guglielmo and Pedrizzetti wineries are both small enough to benefit from the new rules.
Gene Guglielmo, one of three brothers who own and operate the winery on East Main Avenue, said the ruling was a good 80th anniversary present – this is their celebration week.
“This is a real plus for wineries of our size,” Guglielmo said Monday after the ruling was made public. “We’ve been waiting for this for 60 years, ever since Prohibition.”
Guglielmo’s currently ships to 26 states but expanding to all 50 will improve their service.
“Now people can call us and we can ship our wines to them everywhere,” he said.
Ed Pedrizzetti hadn’t heard about the court’s decision Monday morning but was happy to get the news.
“This is great,” Pedrizzetti said. “We’ve always had trouble getting wines to some of our customers.”
Pedrizzetti and his wife, Phyllis, have owned and operated their family winery on San Pedro Avenue for 56 years.
He said about 30 percent of the winery’s business is out-of-state shipments but was looking forward to increasing that with the new freedom.
“We get a lot of out-of-state people in the tasting room who want us to ship to them but we couldn’t,” he said.
State Senator Abel Maldonado, R-Santa Maria, represents not only Morgan Hill’s wineries but those in the Santa Ynez Valley that were the backdrop to the recent hit movie, “Sideways.”
“The Supreme Court decision to overturn state laws in New York and Michigan banning the shipment of California wines is like a good Pinot Noir embodying complexity and delicacy yet, outpouring with elaborate flavors representing all of California’s wines,” Maldonado said Monday.
The case centered on the 21st Amendment, which ended Prohibition in 1933 and gave states authority to regulate alcohol sales. Nearly half the states subsequently passed laws requiring outside wineries to sell their products through licensed wholesalers within the state, enabling state governments to collect millions in alcohol taxes.
But the Constitution also prohibits states from discriminating against out-of-state businesses. That led to challenges to the Michigan and New York laws by winemakers who want to cater to Internet customers.
In a dissent, Justice Clarence Thomas contended the ruling needlessly overturns long-established regulations aimed partly at protecting minors. State regulators under the 21st Amendment have clear authority to regulate alcohol as they see fit, he wrote.
But Wilson said the regulations already in place effectively keep wine out of the hands of minors.
“I think we’re doing our part to keep those concerns down,” Wilson said. “We stipulate through our shipper that an adult signature is required for delivery. We pay extra for that.”
Twenty-four states, including Florida, have laws banning direct out-of-state wine sales. After California, New York and Florida are the biggest wine markets in the country. Durzy said she has customers who are not able to buy Clos LaChance wine because the winery is without a distributor there.
“I have a list of 100 customers who have been regulars who can’t get our wine right now,” she said. “Hopefully, once Florida reviews everything, it will open us up to those customers even though we don’t have a distributor.”
Durzy said she’s confident that New York will not follow the path of neighboring New Jersey and ban all direct sales because the state will not want to harm its own vibrant wine industry.
Chris Kitze, chairman of Wine.com, said Monday that he doesn’t believe the ruling “will have quite the impact people think it’s going to,” but boutique wineries like those in South Valley will benefit most.
“The people this is going to apply to is 0.1 percent of the overall wine market,” Kitze said. “This is for people who plan ahead, collectors. These our are customers and the customers at small boutique wineries.”
Gilroy Dispatch reporter Matt King can be reached at mk***@gi************.com or 847-7240. Carol Holzgrafe covers City Hall for The Times. She can be reached by e-mail at ch********@mo*************.com or phoning (408) 779-4106 Ext. 201.
