Wine in Grocery Stores Proposal Is Killed

New York governor's plan to allow sales in state's 19,000 supermarkets is cut from budget; wine excise tax increased

Mitch Frank
Posted: March 30, 2009

New York wine lovers will continue buying their food in one store and their wine in another, it appears. The proposal to allow wine sales in New York's grocery stores was pulled from the proposed state budget during negotiations between Gov. David Paterson, Assembly Speaker Sheldon Silver and Senate Majority Leader Malcolm Smith. The full budget will be voted on by the legislature later this week, but there is little chance the wine proposal will be reintroduced. If passed, the budget will raise excise taxes on wine from 19 cents a gallon to 30 cents a gallon, or about 6 cents a bottle.

The original proposal, which would have given grocery stores the right to sell wine in return for paying state license fees, set off an intense lobbying fight between wine and liquor store owners and supermarket chains. Currently, 35 states allow wine sales in grocery stores, while New York limits beer sales to the state's 19,000 grocery stores and wine and liquor sales to the 2,400 liquor stores.

Paterson hoped to help close the state's $16 billion budget deficit by raising the excise tax and by charging grocery stores fees, which he believed would raise $160 million over the next two years. Proponents of the idea argued that by giving consumers more access to wine, the state would gain funding and wine sales would increase by 20 percent. But liquor store owners loudly protested, arguing it would force 1,000 stores to close, eliminating jobs during a recession.

"I can't believe the state would turn down $160 million," said Scott Osborn, the owner of Fox Run Vineyards and a supporter of the proposal. "Here is $160 million raised without increasing taxes. How can you throw that away?"

"Here we had an opportunity to expand the market for wineries, to help the groceries, who are hurting in this economy, and yet one small special-interest group was able to stop the whole process," said Jennifer Carlson, a spokeswoman for Vote Wine 2009, a coalition of supermarkets, the state farm bureau and some wineries.

A spokesman for the liquor store owners' coalition, Last Store on Main Street, which had the support of other wineries, called it a victory for the little guy versus big-box stores. "Politicians talk all the time about protecting small businesses," said Mike McKeon. "The legislature chose to save small businesses. They chose to save jobs."

The manner of the proposal's defeat left its supporters even more frustrated. With Democrats controlling both the Governor's mansion and both legislature chambers, Paterson, Silver and Smith engaged in closed negotiations. At some point over the weekend, the wine proposal was removed from the budget. One of the proposal's supporters familiar with the talks said that Silver was opposed to the idea and would not discuss it. Silver could not be reached for comment.

David Whiting, owner of Red Newt Cellars and a supporter of the proposal, found the experience frustrating. "Plenty of legislators privately told me they supported the idea," he said. "But people were not willing to speak out."

Paterson offered several concessions to liquor store owners, including allowing them to open more than one location and allowing them to sell items like cheese, snacks and party supplies, but lobbyists for the store owners were not interested, according to a source familiar with the talks.

The legislature will vote on the $131.8 billion budget Wednesday or Thursday. While Democrats have a majority, public anger over the closed nature of the negotiations and the final bill, which closes the deficit primarily by raising taxes on upper-income residents and includes $170 million for pet projects, could still derail it.

Advocates of the proposal say they are not giving up and are considering introducing standalone legislation that would accomplish the same goal. "We're not going to stop," said Carlson. "Without this, consumers will continue to pay higher prices and have less choice. Without this, the life will be choked out of the New York wine industry. There's no place for them to grow."

Osborn echoed that complaint. While Last Store on Main Street argued that supermarkets would never carry local wine, Osborn complained that liquor stores don't carry much local wine, making it hard for the industry to grow.

Whiting agreed. "We were trying to increase our customer base," he said. "I need to expand my business and reach new customers."