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New York Eyes Wine in Grocery Stores

Governor's budget includes a proposal to allow wine sales in supermarkets; liquor store owners object

Mitch Frank
Posted: December 17, 2008

New Yorkers may finally be able to buy Chardonnay and brie at the same time in their local supermarket if a provision in Gov. David Paterson's budget passes the state legislature. As part of a laundry list of proposals for closing a $15.4 billion deficit, Paterson has proposed legalizing wine sales in grocery and convenience stores.

The idea has been debated in Albany for decades, and has repeatedly sparked angry fights between grocery stores, liquor stores, New York wineries and wholesalers. But many feel it will pass this time. "It's going to be a pitted battle, but its chances are better than ever," said Jim Trezise, president of the New York Wine and Grape Foundation, which is officially neutral on the proposal.

New York state law currently limits beer sales to the state's 19,000 grocery stores and wine and liquor sales to the 2,400 liquor stores. (Small wineries also sell wine in their tasting rooms.) Thirty-five states allow grocery stores to sell wine.

Paterson proposed the change in hopes of raising additional revenues. The recession and the downturn on Wall Street have left the state facing a huge budget hole in the fiscal year that ends in March. In his budget, which he'll formally release on Tuesday, Paterson has proposed 137 new taxes, tax increases and fees, along with $9 billion in spending cuts. He estimates that the state can raise $105 million next year by charging grocery stores various fees for the right to sell wine. He's also proposed increasing excise taxes on wine from 18.9 cents a gallon to 51 cents. (Although that's still below the national median of state excise taxes on wine.)

Grocery stores have long pressed for the right to sell wine. The proposal first surfaced in the 1960s, and was last seriously debated after Gov. Mario Cuomo proposed it in 1984. But liquor store owners, most of whom sell far more wine than spirits, have fought it tooth and nail. Wholesalers have also opposed it, but appear to be staying neutral this time.

"We proposed it some time ago as part of a strategy of growing New York state agriculture and helping economic revitalization," said state Agriculture Commissioner Patrick Hooker, who believes it will increase wine sales and specifically New York wine sales. "When you currently have only 2,400 outlets to sell wine and you're going to add 19,000 more, you are going to have growth."

Trezise agrees. "If you put more wine in front of consumers, consumers will buy it."

"We are very, very pleased," said Jo Natale, a spokeswomen at Wegmans, one of the larger supermarket chains in upstate New York. Wegmans also has stores in New Jersey and Virginia, where wine sales are allowed in grocery stores, and Natale said those are some of their most successful locations because the store can pair wine and food. "It's not unusual for people who just moved to New York to call and ask, 'Why don't you sell wine at my store?'"

Wine and liquor store owners, not surprisingly, are not thrilled by the idea. They built their businesses on the understanding that they wouldn't have to compete with supermarket chains and convenience stores. "Consumer access to wine is a good thing, but this does put a lot of small stores in danger," said Chris Adams, executive vice president at Sherry-Lehman. Adams thinks smaller mom-and-pop stores could be devastated by the change. Sherry-Lehman's owners have lobbied against the move in the past.

Other liquor store owners have cried foul, arguing that the governor's plan would kill their businesses, eliminating jobs in a recession. A few have even raised the "think of the children" argument, claiming that grocery stores will not be able to keep wine out of the hands of minors. (Grocery stores are required to ID for beer sales.)

Most in-state winery owners are cautiously optimistic, but a few have reservations that grocery stores will be more interested in selling big name brands with high margins than small local wines. "On the face of it, it sounds good," said Charles Massoud, owner of Paumanok Vineyards on Long Island. "But I'm not sure it will create that much more demand for wine. And wine stores are hurting already." Vintage New York, a small chain of stores in Manhattan focusing exclusively on New York wines, recently closed its doors for good.

Natale insisted that Wegmans would focus on New York wines as enthusiastically as it focuses on local produce. Chains like Whole Foods have embraced the "locavore" phenomenon.

Trezise believes liquor stores may be able to derail the proposal if the governor and legislature fail to suggest compromises to help them. One possibility would be allowing wine and liquor stores to sell other products, such as cheese, snacks, more wine accessories and tobacco. Another option would be eliminating the limit on outlets. Currently, wine stores are restricted to one location per license.

Regardless of what the final proposal looks like, it will be several months before it becomes law. The fight over the entire budget will be contentious, with both Democrats and Republicans and upstate and New York City residents objecting to various elements. Small provisions like the wine sales proposal have a way of disappearing in committee. But many wine lovers in the Empire State will be waiting eagerly for the chance to pair their wine and food in-store.

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