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Celebrating the direct shipping progress we made in 2016... and all that's changed in 11 years

I am typing this from Vermont, where we've taken the boys for New Year's to get a dose of real winter.  And Vermont has been cooperating, with 8 inches of snow the day after we arrived and temperatures that have since that snowfall stayed below freezing to keep the snow light and powdery.

It's lovely to be able to come back to the place I grew up, and even more so to be able to bring our California kids to experience this magical place: to rediscover the best sledding runs that will take you over the frozen pond; to find the best icicle roofs; to explore the pine groves whose boughs, covered with snow, make a great secret fort.  Of course, you have to also make peace with the fact that the sun goes behind the western hills around 2:30pm.  It's typically full dark by 5.

Happily, we have lots of fireplaces and a wine cellar that my dad has given us free rein to plunder.  Some of the treats down there are wines from the very early days of Tablas Creek... wines like the 1997 Rouge, back in the day when we thought we were only going to make one red wine and one white wine each year.  Things have definitely changed at the winery.  

Things have changed around the country too. I remember the challenges my dad had in getting those wines from California to their Vermont house back in the day.  The nearest of the 13 states to which we could send wine legally via UPS or FedEx was West Virginia.  Because of his connections, he was able to get wine shipped to a distributor warehouse in a neighboring state and then have someone from the warehouse come and bring the wines here.  I used to help him load the cases down into the underground cellar after they arrived. But this clearly wasn't practical for most wine lovers. Happily, things have changed a great deal since the Granholm v. Heald decision in 20051.  Vermont is one of 39 states we can ship to, encompassing 86.7% of the United States' population and 88.4% of its wine market.  Of the 12 prohibited states, only New Jersey (#5) and Connecticut (#18) fall in the upper half of total consumption by state.

The progress has come in fits and starts, with several states opening up in the immediate aftermath of the Granholm decision and continued but irregular progress since then.  I thought it would be fun to look at how the shipping map has changed in a graphical way. Notice that until 2004, the states to which we could ship clustered around the west coast and the upper Midwest:

Shipping State Animation

The key holding of the Granholm decision was that states could make whatever rules they wanted about wine shipping, as long as they didn't use the rules to give their in-state wineries a competitive advantage.  They could allow easy shipment, place restrictions on shipment, or prohibit it altogether.  But they couldn't carve out exceptions for their local wineries (read: constituents and potential donors).  This key point meant that change came first in other wine producing states like New York, Virginia, Texas and Michigan, whose local wineries demanded that their legislatures maintain their access to their local customers. The example that these states set -- and the fact that none of the negative side-effects warned of by liberalized shipping's opponents came to pass -- encouraged other states to follow suit. Typically, the resistance to liberalized shipping comes from wine & spirits wholesalers who don't want to miss out on their cut of profits on wine sales that might otherwise pass through their hands on the way to a retail shop. In the back rooms of state legislatures, where liquor wholesalers are major campaign donors, such an argument can be persuasive. But this sort of special interest legislation doesn't play so well out in the open, and the umbrella advocacy group Free the Grapes played (and continues to play) an important role in drafting model legislation and helping spread the word broadly whenever a state's legislature debates a shipping issue. By 2008 half the states and well over half the US population had the right to order wine from most wineries.

In addition to opening markets for their local wineries and making their own consumers happy, states realized that creating direct shipping legislation was also an easy way to bring revenue into their coffers.  For most states, we have to collect and remit sales taxes on each shipment (though it's worth noting for the record that I have trouble seeing why this is constitutional when Quill Corp. v. State of North Dakota determined in 1992 that states cannot ask merchants to remit taxes unless they have a physical presence in the state in question). In general, as far as I can tell, most wineries are so happy to just have access to these markets that they've made the pragmatic decision not to rock the boat.

The three states that opened up this year are all in the top half of wine consuming states: Pennsylvania (#10), Arizona (#17), and Indiana (#23). Together the more than 26,000,000 residents of these three states represent 6.2% of the American wine market and more than a third of the consumers we couldn't ship to at the beginning of the year.

What lies ahead for direct shipping in 2017? With fewer and fewer states prohibiting it, and with no problems reported in any of the states that have opened up, the pressure will continue to mount on the handful of holdouts. That said, we're unlikely to see another year like 2016, not least because there aren't many states left of the importance of those that opened up this year. What's more, several of the remaining states to which we don't ship actually have shipping laws on the books; they're just too convoluted and/or too expensive for it to make sense to take out the license. New Jersey and Connecticut fit that description, as do South Dakota and Louisiana.2  That leaves a handful of low-consumption states in the deep south (Oklahoma, Arkansas, Mississippi, Kentucky, and Alabama), as well as mostly-Mormon Utah, whose general resistance to alcohol and lack of in-state wineries to apply pressure are likely to mean change will come slowly if at all. And it leaves two small states on the east coast (Rhode Island and Delaware) with complicated post-Prohibition blue laws, which seem the most likely to open up next. Delaware, in particular, has debated shipping legislation the last two years.

We'll keep working on both the prohibition states and those like New Jersey whose laws were written to protect distributors from as much competition as Granholm would allow.  Maybe 2017 will be the year the ball will drop for them.  Meanwhile, I'm going to open up another great bottle and enjoy knowing that for 86% of the country, it's no longer just those connected to someone in the distribution business who can patronize the wineries they love. That's progress anyone can root for.

Footnotes
1. If you'd like to read our thoughts in the immediate aftermath of the Granholm decision, I posted them in our Summer 2005 Newsletter. Although this was a while ago -- in the same newsletter we announce the release of our first-ever Mourvedre -- the observations and predictions are still relevant. 
2. For a sense of the calculus involved, check out this post from early 2015 that broke down states into tiers based on the cost of doing business there.

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