Washington's I-1100 has very few downsides and a lot of upsides. The obvious upside is that it would take the state of Washington out of the Prohibition-era legal and statutory scheme, the reasons for which seem irrelevant in the 21st Century. And the counterpart to this argument, that allowing private liquor sales will dramatically increase desperately-needed state revenue, is also a compelling argument in favor of I-1100.
Another upside - and I've firmed up my position on this - is that small wineries, breweries, and distilleries will be able to sell directly to retail venues, rather than going through a distributor. I think it is more important for entrepreneurial operations thrive, and innovation is something that the Pacific Northwest is good at - there is no shortage of small operations around the state, and they should be given every available opportunity to compete. I-1100 would do just that. I don't think the distribution business needs protecting, and evolution will run its course. Nature evolves according to natural selection. Large banking institutions evolve when banking and lending laws are changed. And so too, the wine industry will change as the laws change. Where the distribution industry may have once been relevant, perhaps it isn't anymore.
The downside? Fears by small wineries and others that they will have difficulty competing or will be required to extend credit to retailers where they did not do so before, which affects their cash flow, are understandable. Whatever fears small wineries or others may have about being able to compete or worries about cash flow are easily laid to rest because through networking and connections, there are those who can assist with marketing and with negotiating payment agreements in the commercial centers of the state and beyond, that will most likely open up the market to those wineries, where it may have been previously inaccessible. More competition, yes, but on a much larger playing field.
I-1100 is what the state needs now, and it's time to put the Prohibition-era laws behind us.
Monday, August 30, 2010
Sunday, August 22, 2010
Environmental Laws and Winemaking
Do environmental laws affect your wine operations? Do you know whether you are in compliance? The federal Clean Water Act, Clean Air Act, FIFRA (the federal pesticide law), and Safe Drinking Water Act may apply if you are in the business of growing grapes and/or turning those grapes into vino. What happens to the piles of wine waste--do you burn them? Then the Clean Air Act may apply to you. How much water does it take to supply the vineyards, and what is the source of the water? Chances are the Clean Water Act has some bearing on the water you use, and possibly the Safe Drinking Water Act.
In the state of Washington, the Department of Ecology regulates water use permits if your wine-making operations use over a certain number of gallons of water per day, and if they do, a permit to exceed that amount is required. The permit application is a public participation process, and certain deadlines and time periods must be met.
If you are growing grapes using biodynamic methods, FIFRA won't apply, but if you use any pesticides, FIFRA and state laws will apply, as these laws regulate their use.
Certain smaller operations don't use the volume of resources that would require compliance with some of these laws, but if you are a growing small business and your operations are getting larger, you will need to be aware of some of these laws and regulations. Medium to large operations may already be aware, but the laws change and you don't want to be caught red- (or white) handed!
(OK, I admit that was a really bad pun).
In the state of Washington, the Department of Ecology regulates water use permits if your wine-making operations use over a certain number of gallons of water per day, and if they do, a permit to exceed that amount is required. The permit application is a public participation process, and certain deadlines and time periods must be met.
If you are growing grapes using biodynamic methods, FIFRA won't apply, but if you use any pesticides, FIFRA and state laws will apply, as these laws regulate their use.
Certain smaller operations don't use the volume of resources that would require compliance with some of these laws, but if you are a growing small business and your operations are getting larger, you will need to be aware of some of these laws and regulations. Medium to large operations may already be aware, but the laws change and you don't want to be caught red- (or white) handed!
(OK, I admit that was a really bad pun).
Wednesday, August 11, 2010
Saturday, August 7, 2010
The Rough Road to Modernizing Washington's Liquor Laws
We're just not the same as the other 49 states - Washington is an enigma. Our current liquor laws maintain the post-Prohibition era statutory scheme set up in 1933, but the industries it regulates have evolved far beyond what that scheme was aimed at regulating in 1933. Initiative 1105 on the Washington ballot this November would maintain part of that scheme, but the legions of small craft wineries and breweries in the state would fare better than under its competing ballot initiative, I-1100.
Washington has what is referred to as the three-tier system, implemented after the repeal of Prohibition (the 21st Amendment), that essentially requires that wine and beer retailers purchase alcohol from distributors (hard liquor is sold only by the state in its liquor stores), and the state fixes the price. I-1105 would retain the distributor system and the fixed price requirement, but would eliminate state-run liquor stores, allowing private retailers to sell hard liquor. Maintaining the price control requirement would continue to protect the small wine and beer makers and would not give big box stores the advantage of buying wholesale at volume discounts, thereby making the retail price lower.
While Washingtonians don't need the protection of the state controlling where they purchase their liquor, the burgeoning craft wine and beer industry here doesn't need the added financial stress of competing with Costco, Kroger brand stores (QFC, Fred Meyer), or other big box retailers. I-1100 would definitely give the big box stores the heavy advantage in being able to purchase and sell wine, beer and liquor at a significant discount, which would probably lead to the doors closing on many smaller manufacturers of beer, wine, and liquor (Washington recently allowed distilleries to operate in the state - a 2008 state law gives hard alcohol makers some of the same rights to serve and sell as their brewing and fermenting counterparts).
Maybe the reason other states don't have the innovative wine and beer industry that Washington does is because Costco and others competed them out of the market. I-1105 would keep the level playing field.
Washington has what is referred to as the three-tier system, implemented after the repeal of Prohibition (the 21st Amendment), that essentially requires that wine and beer retailers purchase alcohol from distributors (hard liquor is sold only by the state in its liquor stores), and the state fixes the price. I-1105 would retain the distributor system and the fixed price requirement, but would eliminate state-run liquor stores, allowing private retailers to sell hard liquor. Maintaining the price control requirement would continue to protect the small wine and beer makers and would not give big box stores the advantage of buying wholesale at volume discounts, thereby making the retail price lower.
While Washingtonians don't need the protection of the state controlling where they purchase their liquor, the burgeoning craft wine and beer industry here doesn't need the added financial stress of competing with Costco, Kroger brand stores (QFC, Fred Meyer), or other big box retailers. I-1100 would definitely give the big box stores the heavy advantage in being able to purchase and sell wine, beer and liquor at a significant discount, which would probably lead to the doors closing on many smaller manufacturers of beer, wine, and liquor (Washington recently allowed distilleries to operate in the state - a 2008 state law gives hard alcohol makers some of the same rights to serve and sell as their brewing and fermenting counterparts).
Maybe the reason other states don't have the innovative wine and beer industry that Washington does is because Costco and others competed them out of the market. I-1105 would keep the level playing field.
Wednesday, August 4, 2010
Deregulation or Modernization?
I-1100 in Washington would deregulate the sale of spirits in the state, and would also impact the sales of beer and wine indirectly. But it would also modernize the law which was written for a less mature society coming out of the Great Depression and the horrors of Prohibition-era bootlegging and underground sales of alcohol. So it's a bit of both.
Deregulation is rarely a good thing if you care about things like competition, creativity and entrepreneurial innovation, and discouraging monopolies. Deregulation in other industries has almost always led to monopolies, or a small number of huge corporations controlling an industry leaving little room for competition from smaller companies. Large corporations find that they have difficulty competing with the originality and the innovation of smaller companies so they buy them out and snuff out the competition, while also snuffing out innovation. Americans seem to heartily embrace smaller companies and innovation, but Americans also like to buy things cheaply when they go to the store. Deregulation, which leads to control by large corporations, can also lead to large corporations being able to offer products at a cheaper price. Hmm, a conundrum. To regulate or not to regulate.
Right now, because the state controls the flow of the alcohol industry, there is a ban against volume discounts. I-1100 would repeal this ban. Companies like Costco would be able to negotiate volume discounts from suppliers, buy directly from the supplier, not a distributor (now a requirement), and pass on the discount to its customers. Sounds like a bargain, no? However, companies such as small breweries and wineries would also be pressured to sell at a discount, which would likely hurt the profits of small, innovative companies. Make no mistake, Costco does have the buying power to control the market price - it simply isn't a level playing field.
Yet Costco buys direct from vendors in many other states that don't have the bans against volume discounts and other restrictions found in Washington state law, and life seems to flow along ok in that regard. Many other states allow all forms of intoxicating liquor to be sold by private retailers, but one thing many other states and regions don't have is a burgeoning craft wine and beer industry, like we have here in the Pacific Northwest, especially in Washington. I-1105 is also being trotted around as the answer and would not be quite as sweeping as I-1100. More to come on this blog about I-1105 ~ Stay tuned.
Privatization of liquor sales would undoubtedly bring in more revenue to the state, something Washington badly needs. But is I-1100 the way to do it? Is it too broad and far-reaching?
Deregulation is rarely a good thing if you care about things like competition, creativity and entrepreneurial innovation, and discouraging monopolies. Deregulation in other industries has almost always led to monopolies, or a small number of huge corporations controlling an industry leaving little room for competition from smaller companies. Large corporations find that they have difficulty competing with the originality and the innovation of smaller companies so they buy them out and snuff out the competition, while also snuffing out innovation. Americans seem to heartily embrace smaller companies and innovation, but Americans also like to buy things cheaply when they go to the store. Deregulation, which leads to control by large corporations, can also lead to large corporations being able to offer products at a cheaper price. Hmm, a conundrum. To regulate or not to regulate.
Right now, because the state controls the flow of the alcohol industry, there is a ban against volume discounts. I-1100 would repeal this ban. Companies like Costco would be able to negotiate volume discounts from suppliers, buy directly from the supplier, not a distributor (now a requirement), and pass on the discount to its customers. Sounds like a bargain, no? However, companies such as small breweries and wineries would also be pressured to sell at a discount, which would likely hurt the profits of small, innovative companies. Make no mistake, Costco does have the buying power to control the market price - it simply isn't a level playing field.
Yet Costco buys direct from vendors in many other states that don't have the bans against volume discounts and other restrictions found in Washington state law, and life seems to flow along ok in that regard. Many other states allow all forms of intoxicating liquor to be sold by private retailers, but one thing many other states and regions don't have is a burgeoning craft wine and beer industry, like we have here in the Pacific Northwest, especially in Washington. I-1105 is also being trotted around as the answer and would not be quite as sweeping as I-1100. More to come on this blog about I-1105 ~ Stay tuned.
Privatization of liquor sales would undoubtedly bring in more revenue to the state, something Washington badly needs. But is I-1100 the way to do it? Is it too broad and far-reaching?
Monday, August 2, 2010
Voting and Alcohol
Let's revisit the days of bathtub gin, speakeasies, and Satchmo. The 18th Amendment to the U.S. Constitution (establishing Prohibition) was ratified on January 16, 1919. The 21st Amendment repealed Prohibition and was ratified on December 5, 1933. Oddly, during one of the most affluent times our country has ever seen, no one was legally allowed to sell or drink any alcohol--beer, wine, or spirits--publicly. Of course, in the late nineteenth century, whiskey created a lot of problems in the wild west, where women were imported from points east to provide "entertainment" for the giddy "speculators" that perched themselves on speculative lands throughout the Rocky Mountain and Pacific territories, and whiskey was provided to tribes as a tonic "for what ails you." Clearly, the social impacts of unmitigated alcoholism caused a backlash by others who wanted to put a stop to alcohol-induced anti-social behavior, which led to the outlawing of alcohol nationwide.
Then there's the whole bathtub gin culture that sprang up as a backlash to the backlash. I've never taken a bath in gin, and probably never will. It sounds really unsanitary. But that wasn't what was meant by bathtub gin. It wasn't about taking a bath in gin--oh well. Bathtub gin was a term that referred to a juniper berry alcohol that was manufactured in bathtubs or other large containers during Prohibition hidden away in bootleggers' digs. The bathtub gin, often of unreliable quality, was frequently bottled and sold to legitimate purchasers or medical suppliers. The manufacture and use of bathtub gin declined radically after the 21st Amendment was ratified in 1933.
Other than repeal, the primary operative clause of the 21st amendment states that: "The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited." So that meant that states must quickly enact laws that regulated the "transportation or importation" of intoxicating liquors into their state, which they promptly did.
The Supreme Court occasionally had the opportunity to rule on 21st Amendment issues, most recently in Granholm v. Heald (2005), which held that the Twenty-first Amendment does not overrule the Dormant Commerce Clause with respect to alcohol sales, and therefore states must treat in-state and out-of-state wineries equally. The Court criticized its earliest rulings on the issue, (including State Board of Equalization v. Young's Market Co.) and promulgated its most limited interpretation to date:
"The aim of the Twenty-first Amendment was to allow States to maintain an effective and uniform system for controlling liquor by regulating its transportation, importation, and use. The Amendment did not give States the authority to pass nonuniform laws in order to discriminate against out-of-state goods, a privilege they had not enjoyed at any earlier time."
The state of Washington will be asked to vote on an initiative, I-1100, the Washington Privatize State Liquor Stores Act, on November 2, 2010 in the general election. Right now, as it stands, all hard liquor (not beer and wine) is controlled by the state and only sold in state-run or state-contracted liquor stores. This law traces its roots back to the 21st Amendment authorizing states to regulate the transportation and importation of liquor into their state, and the first version of RCW Title 66 was enacted in 1933, with amendments in 1937, 1939, 2003, and 2005. I-1100 would close state liquor stores, authorize the sale, distribution, and importation of spirits by private parties, and repeal certain requirements that govern the business operations of beer and wine distributors and producers. Stores that held contracts to sell spirits could convert to liquor retailer licenses. The legislation would not change the amount that liquor, wine and beer are taxed by the state, and would not change the drinking age or any parts of the law that regulate bars and stores selling alcohol to those under the legal drinking age. It is almost a foregone conclusion that the state will make more money by allowing retailers to sell liquor, as is allowed in many other states. A state monopoly on liquor sales does not ab initio imply that the state will take in more revenue because it controls the sale of liquor. This seems to me to be a grown-up law for the 21st century.
Then there's the whole bathtub gin culture that sprang up as a backlash to the backlash. I've never taken a bath in gin, and probably never will. It sounds really unsanitary. But that wasn't what was meant by bathtub gin. It wasn't about taking a bath in gin--oh well. Bathtub gin was a term that referred to a juniper berry alcohol that was manufactured in bathtubs or other large containers during Prohibition hidden away in bootleggers' digs. The bathtub gin, often of unreliable quality, was frequently bottled and sold to legitimate purchasers or medical suppliers. The manufacture and use of bathtub gin declined radically after the 21st Amendment was ratified in 1933.
Other than repeal, the primary operative clause of the 21st amendment states that: "The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited." So that meant that states must quickly enact laws that regulated the "transportation or importation" of intoxicating liquors into their state, which they promptly did.
The Supreme Court occasionally had the opportunity to rule on 21st Amendment issues, most recently in Granholm v. Heald (2005), which held that the Twenty-first Amendment does not overrule the Dormant Commerce Clause with respect to alcohol sales, and therefore states must treat in-state and out-of-state wineries equally. The Court criticized its earliest rulings on the issue, (including State Board of Equalization v. Young's Market Co.) and promulgated its most limited interpretation to date:
"The aim of the Twenty-first Amendment was to allow States to maintain an effective and uniform system for controlling liquor by regulating its transportation, importation, and use. The Amendment did not give States the authority to pass nonuniform laws in order to discriminate against out-of-state goods, a privilege they had not enjoyed at any earlier time."
The state of Washington will be asked to vote on an initiative, I-1100, the Washington Privatize State Liquor Stores Act, on November 2, 2010 in the general election. Right now, as it stands, all hard liquor (not beer and wine) is controlled by the state and only sold in state-run or state-contracted liquor stores. This law traces its roots back to the 21st Amendment authorizing states to regulate the transportation and importation of liquor into their state, and the first version of RCW Title 66 was enacted in 1933, with amendments in 1937, 1939, 2003, and 2005. I-1100 would close state liquor stores, authorize the sale, distribution, and importation of spirits by private parties, and repeal certain requirements that govern the business operations of beer and wine distributors and producers. Stores that held contracts to sell spirits could convert to liquor retailer licenses. The legislation would not change the amount that liquor, wine and beer are taxed by the state, and would not change the drinking age or any parts of the law that regulate bars and stores selling alcohol to those under the legal drinking age. It is almost a foregone conclusion that the state will make more money by allowing retailers to sell liquor, as is allowed in many other states. A state monopoly on liquor sales does not ab initio imply that the state will take in more revenue because it controls the sale of liquor. This seems to me to be a grown-up law for the 21st century.
Monday, January 25, 2010
New Wine Labeling Law in Effect in Washington
On December 31, 2009, new wine labeling laws went into effect due to legislation that was passed unanimously by the state legislature. The new Washington law requires that any wine with a label claiming or implying that its contents are from Washington must contain at least 95 percent Washington-grown grapes.
Federal law is similar to the old Washington law, in which the federal Alcohol and Tobacco Tax and Trade Bureau (TTB) allows a wine to use the name of a state on its label, as long as 75 percent of the grapes used in the production of that wine come from that particular state. Federal requirements for AVA indications on the label are even more stringent. In order to use the more specific name of a particular American Viticultural Area (AVA) on a wine label, the TTB requires that 85 percent of the grapes used be from the particular AVA stated on the label. But now the new Washington law is more stringent that federal law, increasing the content requirements to 95% beginning in 2010.
Why would labeling wine with a higher percentage of grapes from a particular state or a particular AVA be desirable? For one, it strengthens the reputation of anything branded as a "Washington" wine, so the consumer knows they will be drinking a wine that has a very high percentage of grapes grown in this state, and if they like what they taste, they know the quality of the beverage is attributable to Washington-grown grapes. Same principle applies to the AVA denotation.
Washington wines certainly have a lot to be proud of and the new law will undoubtedly strengthen the reputations of Washington wines.
Federal law is similar to the old Washington law, in which the federal Alcohol and Tobacco Tax and Trade Bureau (TTB) allows a wine to use the name of a state on its label, as long as 75 percent of the grapes used in the production of that wine come from that particular state. Federal requirements for AVA indications on the label are even more stringent. In order to use the more specific name of a particular American Viticultural Area (AVA) on a wine label, the TTB requires that 85 percent of the grapes used be from the particular AVA stated on the label. But now the new Washington law is more stringent that federal law, increasing the content requirements to 95% beginning in 2010.
Why would labeling wine with a higher percentage of grapes from a particular state or a particular AVA be desirable? For one, it strengthens the reputation of anything branded as a "Washington" wine, so the consumer knows they will be drinking a wine that has a very high percentage of grapes grown in this state, and if they like what they taste, they know the quality of the beverage is attributable to Washington-grown grapes. Same principle applies to the AVA denotation.
Washington wines certainly have a lot to be proud of and the new law will undoubtedly strengthen the reputations of Washington wines.
Tuesday, January 5, 2010
Champagne Continued
Laws governing the use of the name Champagne on a bottle of sparkling wine are rooted in the legal protections established in the early twentieth century. The area of France currently known as Champagne where champagne is produced was established by law in 1927 when an earlier law was adapted and a second Champagne zone was added to the official Champagne region, which enabled farmers from the Aube and Seine-et-Marne region to deliver grapes for Champagne. The production area, known as ‘la Champagne’, is spread over 312 villages. It consists of the entire Region of Champagne-Ardennes plus the departement of Yonne (in Burgundy, to the south), Aisne (in Picardie, to the west), Seine-et-Marne (in île-de-France, to the west, south of Picardie), and Meuse (in Lorraine, to the east).
The production of Champagne is centered around the cities of Reims, Châlons-en-Champagne and Épernay. The composition of the subsoil, combined with Champagne’s micro-climates, determines the subtle differences between each cru (cru = "growth place") and influences the characteristics of individual wines. Although other French wine-producing regions claim to have made sparkling wine earlier, this area was the first place to produce the bubbly beverage in significant quantities.
The trademark of Champagne is one of the best protected trademarks in the world. The "Comité Interprofessionnel du Vin de Champagne (CIVC)”, an organization in France established to protect the rights of champagne producers, uses its efforts to prevent any improper use of the name. CICV has been very successful in Europe. Within the European Economic Community (EEC) their guidelines have been established as law.
There were earlier incarnations of the laws protecting the use of the term Champagne, and limiting it to sparkling wine produced in a well-defined region of France. In December 1908 the French government decided that Champagne could only be called Champagne if the grapes originated from a neatly defined area in the Marne and Aisne area. This immediately antagonized the winegrowers outside of the area who had for many years delivered their grapes to the Champagne makers. The farmers from the Aube area were incensed.
In February 1911 further guidelines were established which would penalize manufacturers who used grapes from Aube for their Champagnes. This triggered the infamous Champagne riots. These riots ran amok and on April 11, 1911, 5,000 angry Champagne farmers from the Aube region joined forces and stormed through the official Champagne region, rioting and demolishing everything within their reach. As the story is told, streets were flowing with wine and Champagne. 40,000 "peacekeepers" were summoned and ruthlessly "restored" law and order. Damage to the infrastructure of the region and the Champagne houses was left in their wake.
In June 1936 the Appelation d’Origine Controlée (AOC) for Champagne was established. At that time it was necessary to include that distinction on the label. As it stands today, Champagne may only be called Champagne if produced from grapes originating from an area that has been approved by the AOC.
The production of Champagne is centered around the cities of Reims, Châlons-en-Champagne and Épernay. The composition of the subsoil, combined with Champagne’s micro-climates, determines the subtle differences between each cru (cru = "growth place") and influences the characteristics of individual wines. Although other French wine-producing regions claim to have made sparkling wine earlier, this area was the first place to produce the bubbly beverage in significant quantities.
The trademark of Champagne is one of the best protected trademarks in the world. The "Comité Interprofessionnel du Vin de Champagne (CIVC)”, an organization in France established to protect the rights of champagne producers, uses its efforts to prevent any improper use of the name. CICV has been very successful in Europe. Within the European Economic Community (EEC) their guidelines have been established as law.
There were earlier incarnations of the laws protecting the use of the term Champagne, and limiting it to sparkling wine produced in a well-defined region of France. In December 1908 the French government decided that Champagne could only be called Champagne if the grapes originated from a neatly defined area in the Marne and Aisne area. This immediately antagonized the winegrowers outside of the area who had for many years delivered their grapes to the Champagne makers. The farmers from the Aube area were incensed.
In February 1911 further guidelines were established which would penalize manufacturers who used grapes from Aube for their Champagnes. This triggered the infamous Champagne riots. These riots ran amok and on April 11, 1911, 5,000 angry Champagne farmers from the Aube region joined forces and stormed through the official Champagne region, rioting and demolishing everything within their reach. As the story is told, streets were flowing with wine and Champagne. 40,000 "peacekeepers" were summoned and ruthlessly "restored" law and order. Damage to the infrastructure of the region and the Champagne houses was left in their wake.
In June 1936 the Appelation d’Origine Controlée (AOC) for Champagne was established. At that time it was necessary to include that distinction on the label. As it stands today, Champagne may only be called Champagne if produced from grapes originating from an area that has been approved by the AOC.
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