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Georgia Opens to Direct Shipping

Wineries and wholesalers agree on compromise permitting wineries to sell direct to residents

Robert Taylor
Posted: May 19, 2008

Georgia Gov. Sonny Perdue signed a law on May 13 allowing Georgians to order wine directly from out-of-state wineries. The act is part of a growing trend in recent winery direct-shipping legislation—compromise between the Wine Institute (which advocates direct-shipping rights) and alcohol wholesalers. Without opposition from the Wine & Spirits Wholesalers of Georgia, the bill passed with strong majorities in both the house and senate. Perdue's signature brings the state into compliance with the Granholm decision handed down by the U.S. Supreme Court in 2005.

The new law allows residents to receive up to 12 cases of wine a year from any winery in the United States. Under the state's previous regulations, residents could purchase just five cases of wine annually from Georgia wineries and could not purchase wine from any out-of-state winery that was already represented by a Georgia wholesaler or distributor. "Technically some shipping was legal, but the boundaries around those shipments were so extreme that very, very few wineries were shipping anything because the law was so convoluted," said Jeremy Benson, executive director of direct-shipping advocacy group Free the Grapes. As of July 1, when the law goes into effect, any winery that obtains a permit may ship to Georgia residents.

The law also requires wineries to obtain age verification, either directly from the consumer or through a third-party age-verification system. Wineries found to have shipped wine to an underage recipient may have their permit revoked for five years. Wineries are also responsible for documenting and paying all applicable Georgia state sales and excise taxes.

"We were living in the Dark Ages here in Georgia, but all the sudden the governor [a teetotalling Christian conservative] signed all these wine bills. It was historic," said State Sen. Renee Unterman, one of the bill's sponsors. (Unterman also sponsored and passed the "Merlot to Go" bill, allowing wines to be recorked and brought home from restaurants, and a bill allowing the state's wineries to serve and sell wines from tasting rooms.) "We've been working on these bills for three or four years, and this time everyone came to the table. It just shows that persistence pays off."

After direct-shipping bills from both the Wine Institute and the Georgia wholesalers failed last year, the two sides came to a compromise at the end of 2007. "In December, we were contacted by the wholesalers and the Georgia wineries to see if we could get together and create a bill that everyone would be happy with," said Hunter Limbaugh, a lobbyist for the institute who focuses on the Southern states. "Once the wholesalers dropped their objections … it was smooth sailing. It's a huge improvement in Georgia, [the 13th largest state for wine consumption]."

Fred Kitchens, president and general counsel for the Wine & Spirits Wholesalers of Georgia, while officially neutral on the bill, did not oppose it. "We felt that it was an agreement between the Wine Institute and the Georgia farm winegrowers, and we thought it was a good compromise," Kitchens said. "It's a good, consumer-friendly bill. Wholesalers have been the target of a lot of bad publicity and accusations, but the wholesalers in Georgia are realistic and progressive."

The success of the Georgia bill and successful compromise legislation in other states could provide a model for future legislation. In 2006, Colorado substantially expanded direct-shipping laws when the state's wholesalers, wineries and retailers compromised on a similar bill. In 2007, Illinois approved a direct-shipping bill which benefited both out-of-state wineries and in-state retailers (though out-of-state retailers lost their right to ship directly to Illinois residents) and struck down the state's reciprocal shipping laws, which had only allowed consumers to receive wine shipments from other states' wineries if those states accepted shipments from Illinois wineries. Illinois' permit-based direct-shipping law goes into effect June 1.

The Georgia legislation is a victory for those opposed to reciprocal-shipping laws and caps on the annual productions of wineries permitted to ship wine. "The permit bill is working in so many states now that it's become incredibly obvious that this works," Benson said. "Anecdotally, I've talked to many wineries that have said that in the states where they can direct ship, their three-tier sales [sales through a wholesaler] are stronger than in the states in which they can't ship. Direct shipping is a great direct-marketing tool; it's not a substitute for a restaurant or retail purchase."

Dennis Cakebread, of California's Cakebread Cellars, agreed that direct shipping benefits retail sales as well. "The states that we're able to ship to definitely have a more vibrant consumer base," Cakebread said. "The amount of cases that get shipped direct is so small, but the benefit in terms of marketing value is huge. In states we can ship to, our thee-tier sales are also strong."

Also joining the ranks of the cap-free, permit-shipping states, Wisconsin's governor signed a bill this past March that created a permit system to replace the state's previous reciprocal-shipping laws, which only allowed wineries in California to ship to Wisconsin residents.

Wholesalers in Florida were unsuccessful during this past legislative session in passing a bill that would place caps on the size of wineries permitted to ship to Florida residents. This is the third consecutive session in which they attempted to place limits on the state's direct-shipping laws. Ohio, which does place a cap on the production volume of wineries that can ship into the state, is currently considering legislation which would raise the state's annual production cap from 150,000 gallons to 250,000 gallons, though the volume raise could potentially make very little difference in the number of wineries permitted to ship into Ohio. "I don't think it will make any difference. A cap is still a cap; it penalizes a winery purely for its success," Benson said.

John Albritton
Irvine, CA —  April 21, 2010 12:37am ET
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