Compromise May Boost Wine Legislation

By Anita Szoke, Journal Star, Peoria, Ill.

May 8–PEORIA — Wineries, beer distributors and others in the industry have reached a compromise that will allow wine to flow more freely in Illinois while still addressing concerns about control and quantity.

But the Specialty Wine Retailers Association, a group that represents out-of-state wine retailers throughout the nation, is up in arms, saying the proposed legislation prohibits Illinois consumers from buying from out-of-state wine shops.

The agreement is an amendment to House Bill 429, which could be voted on by the Illinois House of Representatives anytime this week.

Under the compromise, a winery will be allowed to ship up to 12 cases of wine per person per year after obtaining a winery shippers license, which requires the shipper to pay Illinois’ excise and sales taxes.

The compromise includes safeguards to prevent shipments to underage individuals and gives the Liquor Control Commission the power to conduct Internet stings and revoke the license of violators.

It also allows small wineries, which produce 25,000 gallons of wine or less a year, to “self-distribute” or sell up to 5,000 gallons of their wine per year directly to retailers such as restaurants and stores. That covers about 95 percent of wineries in Illinois, said Dave Strickland, a consultant with the Illinois Grape Growers and Vintners Association who lobbies on behalf of wineries.

“That’s an important opportunity to be able to reach our customers and to help our small wineries continue not only to grow but to literally stay in business,” Strickland said. “We went into these negotiations needing two things: to serve our customers and continue to grow our industry. We need to send wine directly to consumers and self-distribute directly to retailers.” The debate over wine shipment in Illinois was triggered by a 2005 U.S. Supreme Court ruling that said all states allowing local wineries to ship directly to in-state customers must also permit out-of-state wineries to do the same. Justices said laws in Michigan and New York that only allowed for in-state direct shipping violated the U.S. Constitution because they were discriminatory to out-of-state businesses.

Thus, Illinois needed to address the issue so as to comply with the Supreme Court decision. The wine industry sought more latitude to continue to cultivate a growing industry in Illinois and distributors wanted more control, expressing concern about unfettered wine sales.

After lengthy negotiations, the key players agreed to support the proposed legislation, including The Associated Beer Distributors of Illinois, Illinois Grape Growers and Vintners Association, Wine and Spirit Distributors of Illinois, the Beverage Retailers Alliance of Illinois (which represents independently-owned packaged liquor stores), and the Wine Institute.

The compromise eliminates the discriminatory provisions of current Illinois law and allows the Illinois Liquor Control Commission to continue to perform its regulatory function to control alcoholic liquors entering Illinois, the groups say.

“The affected industry parties worked together to figure out what we could agree on and then collaborated as a team to reach a compromise on the primary concern of maintaining Illinois’ right to control and regulate alcohol beverages,” said Bill Olson, president of the Associated Beer Distributors of Illinois.

“Once the lines of communication were opened, everyone had the opportunity to provide input,” said Paul Jenkins, executive director of the Wine and Spirits Distributors of Illinois. “I am pleased we will all stand and support this compromise.”"We were committed to the continued development of the wine industry in Illinois by preserving the ability of small wineries to create a market for their wines. We have accomplished that goal,” said Paul Renzaglia, president of the Illinois Grape Growers and Vintners Association.

“What made this process complicated is that each group represented had individual interests on the table,” said Jerry Rosen, executive director of the Beverage Retailers Alliance of Illinois. “The main issue raised in the (Supreme Court decision) was discriminatory treatment between in-state and out-of-state wineries. This legislation addresses that issue while allowing a fair marketplace for the brick-and-mortar alcohol beverage retailers in Illinois.” Agreement was reached when the Illinois Retail Merchants Association dropped its objections after language was included reaffirming that in-state retailers would be able to continue to operate as permitted under current Illinois law.

“It adds language that says nothing in this act changes what Illinois retailers are allowed to do today in terms of transferring, delivering or shipping liquor,” said Rob Karr, vice president of government and member relations with IRMA. “We are allowed to deliver beer, liquor and wine in Illinois and we are allowed to ship wine in Illinois.” But the Specialty Wine Retailers Association wants consumers and legislators to oppose the bill, saying if it passes, Illinois consumers won’t be allowed to buy from out-of-state wine retailers.

“It begs the question, ‘why eliminate the consumer’s choice to buy from out-of-state retailers?’” said Tom Wark, the group’s executive director. “We believe this kind of anti-consumer legislation that benefits only a small but powerful cabal of alcohol wholesalers should be opposed by both Illinois consumers and Illinois legislators.” But those who support the bill said the specialty wine retailers are trying to muddy the waters and that the issue is about wineries, not about retail outlets in other states. The proposed legislation allows Illinois consumers to buy from out-of-state wineries, Strickland said.

“It’s the IGGVA’s belief that if a consumer in Illinois wants to purchase a wine that is being sold by a specialty wine retailer in California, the consumer should be able to contact the winery and be able to purchase directly from that winery instead of having to use the specialty wine retailer shop,” he said.

Added Rosen: “There’s a story about faulty logic that goes: ‘a dog is an animal, a cat is an animal, therefore a dog is a cat.’ The out-of-state retailers are using the same faulty logic. Wineries can sell their product to the consumer and retail liquor stores can sell liquor products to the consumer, therefore retail liquor stores are wineries.” State Rep. Edward Acevedo, D-Chicago, the bill’s sponsor, is urging fellow lawmakers to support the legislation, which he said brings Illinois into compliance with the Supreme Court decision. “If the General Assembly does not pass this legislation, Illinois will be in direct conflict with the Supreme Court decision,” he said in a statement.

Strickland said Illinois consumers are the biggest winners in the legislation.

“They will continue to be able to find the Illinois wines they are getting to know and growing to like and at the same time the wines that they prefer from other states or countries will also be readily available,” he said. “It’s an extremely good bill for wine consumers of Illinois, who we believe will have a greater opportunity to not only enjoy Illinois wines, but to continue to partake in the brands and varieties of other states.”

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