Pennsylvania is on the verge of allowing direct wine shipping!

Don't faint.

This afternoon, I saw an alert from Free the Grapes that the Pennsylvania Legislature passed House Bill 1690 by a tally of 157-31. The bill is on its way to Governor Tom Wolf's desk, and while he has not indicated that he will sign it1, the statement he posted on his Web site, the fact that he's on the record as supporting direct wine shipping, and the fact that the file name of the page calls the bill "historic" all seem encouraging:

Tom Wolf Statement

Although it does not do away with the state-run liquor stores, the bill does modernize the sales of alcohol in several ways. It allows wine to be sold in grocery stores (where beer is sold already) as well as in other establishments that sell prepared food. It allows state-run stores to be open more consumer-friendly hours, including on Sundays and holidays.  And it allows those same stores to implement discount and loyalty programs, which should be good for consumer prices.

Almost hidden in the announcements about the bill's passage were the sections that allow out-of-state wineries to apply for a $250 permit to ship wine to Pennsylvania consumers. As is typical in direct shipping bills, we will collect the sales taxes that are due the state, and remit them to the state.2 Of course, the permit details will have to be worked out; I couldn't find in the text of the bill anything about how often and to whom the tax reports would have to be filed.  But it looks fairly straightforward, which would place Pennsylvania into either Tier 2 or Tier 3 of my State of the Union, Wine Shipping Edition that I published early last year. The bill would go into effect 60 days after being signed by Governor Wolf.

As Pennsylvania is easily the largest state to prohibit direct wine shipping outright, it was at the top of the target list for wineries. But given the arcane and unique nature of Pennsylvania's liquor distribution system, and the breakdown of last year's negotiations over a Republican requirement to tie modernization with the privatization of the state stores, it really wasn't on my radar screen as a possibility this year. I'm evidently not the only one caught by surprise; the Free the Grapes home page today offered "hot topic" templates for contacting legislators in Rhode Island, Delaware, Arizona, and Oklahoma (but not Pennsylvania). Why was it revived?  Apparently, as a relatively uncontroversial way to help close a projected $1.6 billion budget shortfall. The additional liquor licenses, and the increases in liquor tax revenue, are projected to add an additional $150 million/year to the state's coffers.

FreethegrapesMore money for a state in need of it? More choice and potentially better prices for consumers? And access to consumers in the 6th-largest state in the country for wineries? Sounds like a win/win/win. Thank you, Free the Grapes, for staying on this.

Footnotes:
1. At 6am Wednesday, June 8th (PDT), Governor Wolf tweeted that he would sign the bill, calling it "historic" and "the most significant step to reform the liquor system in 80 years". 
2. An earlier version of this article indicated that purchasers would still be responsible for paying the 18% PA "Johnstown Flood Tax". It appears that this is not the case (!) and only the 6% statewide sales tax, plus any applicable county and city taxes, will be collected on direct wine shipments.


What's next for the new Paso Robles AVAs

Last month, I had the pleasure of sitting on a panel discussing the process behind and prospects for the 11 new Paso Robles AVAs (short for American Viticultural Areas). This panel was a part of a conference organized by the Continuing Education of the Bar (CEB), for attorneys interested in wine law from around California.  Joining me on the panel were Steve Lohr (of J. Lohr Vineyards & Wines, another founding member of the Paso Robles AVA Committee) and Carol Kingery Ritter (of Dickenson, Peatman & Fogarty, the law firm that shepherded the AVAs through the federal approval process). [Map below, courtesy of Paso Robles Wine Country Alliance. Click to enlarge, or here for a PDF that also includes descriptions of the sub-AVAs.] 

AVA Map w 11 AVAs

Much of the discussion focused on how the AVAs came to be: the genesis of the idea, the research that took place to discover and support how to draw the boundaries, and the convoluted process that took place once the petition had been submitted to the TTB, lengthened by the TTB's decision to reconsider the fundamental nature of AVA labeling after receiving the submission.  I've written about all of these, and particularly the TTB's struggle with the concept of nested AVAs, on the blog in the past (you can find them all by scrolling through the Legislation and Regulation category tag).  I won't repeat those thoughts here, though I encourage anyone interested in the often convoluted regulations that govern the production, marketing and sales of wine to explore the archive at their leisure.

More interesting, to me, were the questions I received about why I thought the approval of the AVAs a good thing for Paso Robles, and how I saw them being used in the marketplace.  I'll dive into both topics in this blog.

Why the 11 AVAs area a good thing for Paso Robles

For me, there are three main reasons why the approval of the AVAs are good for the Paso Robles region as a whole.  

  1. Their approval is a concrete data point that the region is maturing. When the Paso Robles AVA was first proposed and approved back in 1983 it contained only five bonded wineries and fewer than 5000 planted acres of vineyard.  Big swaths of the AVA, including the area out near us, were largely untouched by grapevines.  In the last thirty years, Paso Robles has grown to encompass some 280 wineries and 32,000 vineyard acres.  Until the new AVAs were approved, it was the largest unsubdivided AVA in California, at 614,000 acres. By contrast, the Napa Valley appellation (which includes sixteen AVAs delineated within its bounds) is roughly one-third the area at 225,000 acres. The growth of the region has been a story in itself in recent years, but the approval of the AVAs is something tangible and official that encourages press, trade and consumers to take a new look at what Paso Robles has become. 
  2. The approval was done collectively, as a region.  There were 59 different Paso Robles growers and wineries involved in the Paso Robles AVA Committee, and the work was done hand-in-hand with the Paso Robles Wine Country Alliance.  This cooperation allowed the region to push (and eventually pass) a conjunctive labeling law, which guarantees that any winery who uses one of the sub-AVAs on their label will also be required to state Paso Robles equally prominently.  This safeguard ensures that the region will keep the accumulated marketing capital that we've all been working to build in the national and international marketplace.  And the cooperative nature of the AVA Committee reinforced the bonds of our community, which is in my experience a rare and valuable point of distinction for Paso.
  3. It provides a framework for wineries, sommeliers, and wine educators to discuss the incredible diversity of Paso Robles.  Those of us making wine here have been talking for years about how varied the climate, soils, and geography are in Paso Robles, and largely relying on anecdotal descriptions to support our points.  The research that went into the AVAs puts these facts at our fingertips, and facilitates the discussions that show why Paso Robles can make world class wines from grapes as diverse as Cabernet, Syrah, Roussanne, Mourvedre and Zinfandel.  As a quick summary: 
    • The Paso Robles AVA stretches roughly 42 miles east to west and 32 miles north to south. 
    • Average rainfall varies from more than 30 inches a year in extreme western sections (like where Tablas Creek is) to less than 10 inches in areas farther east. 
    • Elevations range from 700 feet to more than 2400 feet. 
    • Soils differ dramatically in different parts of the AVA, from the highly calcareous hills out near us to sand, loam and alluvial soils in the Estrella River basin. 
    • The warmest parts of the AVA accumulate roughly 20% more heat (measured by growing degree degree days) than the coolest.  This difference in temperatures is enough to make the cooler parts of the AVA a Winkler Region II in the commonly used scale of heat summation developed at UC Davis, while the warmest sections are a Winkler Region IV.  This is the equivalent difference between regions like Bordeaux or Alsace (both Winkler II areas) and Jumilla or Priorat (both Winkler IV areas).

How I expect to see the AVAs used in the marketplace

A criticism that I see commonly tossed out by the opponents of new AVAs (and not just Paso Robles') is that an AVA may be approved before it has meaning in the marketplace.  To me, that's putting the cart before the horse.  At the time ours were approved, really only the Templeton Gap AVA had any particular association in the market, and that was mostly as a geographical feature more than as a delineated area (in fact, much of what locals refer to as the Templeton Gap lies west of the Paso Robles AVA entirely).

Given that relative lack of market knowledge about the sub-regions of Paso Robles, should the TTB have denied the petition?  If they had, it's hard to see how these regions could ever be recognized.  Drawing the lines is an essential step in allowing those regions to develop an identity.  At that point, it's up to the wineries within (or at least, who source grapes from) those regions to make their names.  If they're successful at associating the region with quality and distinctiveness, the market will follow.  What is key is that the lines are drawn using good science, and I think that it's here that the Paso Robles petitions were particularly strong.  The climate, soils, and elevation studies that went into the proposals were the most comprehensive that the TTB has ever received, and I believe they will stand the test of time.

To get a sense of how we're using the new AVA designations, take a look at some of the wines that we bottled during the second half of this year.  You can see several (Tannat, Petit Manseng, Mourvedre, Cotes de Tablas Blanc, and Panoplie) with the new Adelaida District AVA noted.  The Patelin de Tablas, which incorporates fruit from four of the sub-AVAs, retains the umbrella Paso Robles AVA.  The Full Circle Pinot Noir, sourced from my dad's property about 8 miles south-east of us, carries the Templeton Gap AVA (click the photo to expand it):

LG Group

The distinctions between these different labels will make it easier for us to tell their stories: whether they are estate or not.  Whether they are single-vineyard or not.  Whether they are from our home vineyard or not.  And the fact that they all say Paso Robles should keep the market from being confused as to the bigger picture.

If I had to look into my crystal ball, I'd guess that of the 11 AVAs, there will be 4 or 5 that will achieve some market recognition within the next few years.  There will be another 2 or 3 that will achieve it, but somewhat later.  And there will be a few that never achieve much recognition in the market, either because there doesn't develop a critical mass of wineries located within that AVA to champion their AVA, or because the wineries that are located there decide that they would prefer to remain associated with Paso Robles rather than their sub-region.  And that's OK.  How many AVAs can anyone but the most bookishly-inclined sommelier name?  Even among wine lovers, most would be hard-pressed to name more than 30 of the 231 approved AVAs (as of November 2015).  If Paso Robles can add a few more to the common lexicon, it's a win for all of us here, and for wine lovers everywhere.


Celebrating a Recent Burst of Progress on Direct Shipping

It seems like progress in direct shipping goes in waves. There's a small flurry of movement, in states widely separated in geography and culture, and then a period when nothing much happens.  Then, for whatever reason, progress starts back up.

About six weeks ago I wrote a post State of the Union, Wine Shipping Edition in which I broke down the 51 shipping destinations (50 states plus the District of Columbia) into ten tiers, based on the ease and cost of doing business in each.  I could have written essentially the same article any time in the previous two years without necessitating significant changes (OK, there was one change: Montana became a shipping state in late 2013, but that was it).  Yet the six weeks since I wrote my State of the Union have seen two major developments, with a couple of others seemingly in the works.  Given that there aren't that many states still left that prohibit or severely curtail winery shipping (15, as of late January) that's a measurable blip.  Let's look at them one by one.

Cheers to Massachusetts!
We were thrilled when, late last year, the great state of Massachusetts passed a workable direct-shipping law (thanks, in part, to former New England Patriots quarterback-turned-vintner Drew Bledsoe). Although the law went into effect January 1st, 2015, it took the state a few weeks to process the flood of applications they received. But as of now, we can happily ship to residents of the Bay State, and they can sign up for our wine clubs. And after the winter they’ve had, it sounds like most of them need a drink!

A Bill Passes in South Dakota
South Dakota was until very recently one of the states with the most curious collection of wine shipping laws.  We couldn't ship wine there if we received an order, but only when someone made a purchase in-person at the winery.  And even then, the shipment was subject to the state's individual out-of-state alcohol purchase transport limit of one gallon per instance.  That's five bottles, maximum.  But just two weeks ago, the governor signed into law House Bill 1001, which sets up a straightforward shipper's permit requiring that wineries remit taxes and periodic reports, and verify the legal age of the purchaser. Pretty standard stuff, for wine shipping, and only a moderate burden to wineries.  The law will go into effect January 1st, 2016.

Progress in Indiana
Indiana is another state that throws some interesting roadblocks in between wineries who wish to sell their wares in the state and Hoosier consumers who would like to purchase them.  Right now, the state limits direct shipments to wineries who both take an initial order in-person at the winery, and don't have a relationship with a wholesaler in the state.  The state differs from South Dakota in that only the initial order must be taken in person (not every order) but the wholesaler prohibition means that it's always been a no-go for us.  In late January, the Indiana Senate passed Senate Bill 113, which would remove both the in-person requirement and the distributor prohibition, albeit at the expense of raising the winery shipping permit from $100/year to $500/year, which would make it one of the five most expensive in the country.  Still, this would count as progress.  The bill is now in committee in the Indiana House of Representatives.

Pennsylvania: Glimmers of Hope
With the passage of the direct shipping bill in Massachusetts, Pennsylvania (America's 10th-largest wine market) assumed the mantle of the largest wine market to prohibit winery-direct shipping.  But readers familiar with Pennsylvania will understand why, despite a growing in-state wine industry, there are unusually strong forces that stand in the way. Pennsylvania is one of only two states (Utah is the other) where wine sales are restricted to state-run stores, and with more than 600 stores in the state system, the combination of massive revenue that the stores direct into state coffers and the influence of the state employees' union mitigates against rapid change. Still, the prospects for change seem brighter now than at any time in my memory. The new Governor Tom Wolf went on record in February saying "I'm in favor of direct shipping". The bill, however, that passed the Pennsylvania House of Representatives last week looks to have limited prospects, because it moves faster than the Senate and Governor are comfortable with in privatizing the state stores. In any case, it seems like there is at least the possibility of movement in the Keystone State, although I'm not holding my breath.

Delaware: A Bill in the Works?
Finally, one more small crack of daylight, albeit in one of the smallest states of the union. In November, Delaware House Minority Whip Deborah Hudson made winery direct shipping the focus of her weekly address, pointing out that Delaware was one of just 9 states that prohibit shipping to consumers and inviting her fellow legislators to "objectively weigh the facts and set aside the baseless fears of special interest groups, allowing our residents and Delaware wineries to join the 21st Century". Amen to that!

As always, the best place to find out what's going on in the direct shipping realm, and to learn how you can help, is Free the Grapes.

Free the grapes


Community Roundup: Major Awards for Qupe and L'Aventure, Imminent Rain, Snow in the Rhone, and New Direct Shipping Opportunites

Last year, I debuted a weekly feature on the blog called Weekly Roundup, focusing on interesting news from our communities (Rhone and Paso Robles), fun articles that we'd found on the world of wine, and pieces from other social media channels that we thought would interest a wider audience.

Unfortunately, the series never got a lot of traction.  I didn't hear much feedback about it, we didn't get many comments (1, in all the articles) and it didn't get shared or clicked on all that much when we posted it.  And it was a fair amount of work to do each week, some of which frankly didn't have all that much that was exciting going on in our community.  So, I've decided to rechristen this as a roughly monthly endeavor, and make its focus more explicitly on our community.  So, please welcome the Community Roundup: an occasional foray into what else is going on in our world.  These are things that we think are sufficiently noteworthy and of interest to our audience to be worth sharing, but maybe less than a full post each.

And please continue to share your own feedback on this series in the comments section.  Is it something that you've enjoyed and would like to continue to see?  Are there areas that you'd like to see more of?  Thanks in advance!

Two Awards for Two Iconic Figures
This week, we've been pleased to hear that two industry veterans for whom we have enormous respect are receiving major awards. 

Stephan Asseo CroppedThe first is Stephan Asseo, whose desire to combine the strengths of Bordeaux and the Rhone introduced a new kind of fusion into Paso Robles.  Stephan began making wine in 1982, and for the next 15 years developed a formidable reputation in Bordeaux.  Looking to escape the restrictions of France's appellation controlee system, he came to Paso Robles, where he founded  L'Aventure Winery in 1998.  His work in the seventeen years since has played a major role in establishing Paso Robles as the home for some of the most innovative garagiste winemakers in California, and brought to prominence the "Paso Blend", combining grapes from different Old World traditions into something uniquely Paso.  We are excited to learn that Stephan will be presented with the 2015 Wine Industry Person of the Year award from the Paso Robles Wine Country Alliance.  Photo (right) is from the L'Aventure Facebook page.

Bob Lindquist CroppedThe second award recipient is Bob Lindquist, whose pioneering work at Qupe Winery was one of our inspirations, showing since 1982 that great Rhone varieties could be made in California's Central Coast.  Bob, throughout his time at Qupe, has been a tireless advocate for the wines of the Rhone, and a generous, patient, and humble figure in the movement.  He doesn't ever call attention to himself, which is one of the joys of his receiving only the third-ever Lifetime Achievement Award from the Rhone Rangers: that he'll get some richly deserved time in the limelight. My dad received this award last year, and the ceremony was great. If you missed it, I wrote a blog after that includes the amazing tribute video presented at his ceremony. If you're interested in joining for the celebration, you can; Bob's award will be presented at the Rhone Rangers San Francisco Winemaker Dinner. Photo (right) is from the Qupe Web site.

Snow in the Rhone
The Famille Perrin Instagram account is chock-full of great images, but one really stuck out this past week.  Snow isn't exactly a rarity in the Rhone Valley; they get a dusting at some point most years, but heavy snow is.  The photo that they shared of Gigondas under a heavy white blanket was stunning:

Snow in Gigondas

Rain in Paso Robles
At the same time, we're eagerly anticipating the arrival of our first real storm of 2015 tonight.  It looks like it will produce at least a few inches of rain for areas out near us, and I've read a report suggesting that the hills out here might see as many as six inches by Monday.  It's much needed; as my blog post from earlier in the week pointed out, we got less than 5% of normal rainfall in January.  A good head start on February (average rainfall: about 5 inches) would be great.

This rain (and the frost which is scheduled to follow) is particularly important because January was so warm that some California regions are reporting exceptionally early bud break. This isn't something we're worried about in the short term (I wrote about why last summer) but we're still at the point where some cold weather can shift the beginning of our growing season a few weeks later, reducing our risk of frost damage significantly.

New Direct Shipping Opportunities
FreethegrapesEarlier in January, I wrote a long piece on the state of wine shipping in the United States.  It wasn't really germane to the article -- which dealt more with the levels of expense and regulation within the three-dozen shipping states -- but it seems like there's been a little flurry of opportunity in opening some of the roughly dozen states that still prohibit all wine shipping.  Not only is Massachusetts set to open any day now, but the South Dakota legislature is debating a viable shipping bill, as is Indiana, and I've been hearing rumors that Pennsylvania is likely to move on wine shipping before the end of the year.  As always, the best place to go is Free the Grapes, where you can learn what's being debated and use their built-in templates to write state legislatures.

Drink for Thought: Wine State or Beer State?

Wp-winecountrybeercountry

I'm a sucker for maps.  There were several interesting ones, including the one above, in the Washington Post's article Do you live in beer country or wine country? These maps will tell you. The take-home message for me was that where there are wineries, there are likely breweries too.  Of course, there are hotspots where one or the other dominates, but fewer than you might think.  This is why I've found the reported worry in some corners of the wine community over the rise of craft beer silly.  In general, the people who love good wine love good beer, and increasingly, vice versa.  And more importantly, the people who love interesting wine look for interesting beer.  Nowhere more so than winery cellars.  The old adage that "it takes lots of good beer to make good wine" is absolutely true, in my experience.  Cheers!


State of the Union, Wine Shipping Edition

The preamble to the United States Constitution is short and sweet:

"We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America."

As we look forward to tonight's 226th State of the Union address, I am struck by the "more perfect union" reference in the preamble, as well as the wisdom of the founding fathers and generations of Supreme Court justices in prioritizing the Commerce Clause, which protects the federal government's exclusive role in regulating interstate commerce.  The 21st Amendment, which repealed Prohibition in 1933 and as a side-effect sheltered states from the Commerce Clause's requirement to maintain an open, fair market for all players, provides a glimpse into what a world absent the Commerce Clause might look like. We should all be thankful that most products we might want to buy don't have to face a similar regulatory nightmare.

So, in honor of the State of the Union, here is a summary of what the world of wine shipping looks like, from a winery's perspective, as we enter 2015, with states broken down into tiers based on the cost and ease of doing business there:

Where We Ship
Shipping map courtesy of the great free tools at ShipCompliant

Tier I: The no-brainers (AK, DC, MN, MO)

  • Right now, there are three states (and one district) that have neither permit fees nor significant  reporting requirements.  Thank goodness for them!  But, 4 of 51 isn't a great percentage.  All of the others make it more difficult or expensive to ship wine to customers who want it.
  • Total percentage of US population: 4.05%
  • Total number of reports required annually: 1
  • Total permit fees: $0

Tier II: Inexpensive and/or fairly easy (CA, CO, FL, IA, IL, MI, ND, NH, NV, VT)

  • There are an additional ten states with permit fees of $330/year or less and modest reporting requirements (6-16 times per year).  These states include some big ones like our home state of California, Florida, Illinois, Michigan and Colorado, but even for the smaller ones, the number of orders that a winery would need to fill in order to pay for the annual investment is very reasonable.
  • Total percentage of US population: 29.95%
  • Total number of reports required annually: 110 (11/state avg.)
  • Total permit fees: $1275 ($127.5/state avg)

Tier III: Moderate expense or requirements (GA, KS, MD, ME, MT, NC, NM, NY, OH, OR, TN, WA, WI, WY)

  • Once you get to the next tier of fourteen, a small winery would be excused for starting to run cost-benefit analyses before springing for the permits.  Some permits start to get expensive in this tier, like Tennessee's $450/year, Wisconsin's $400/year, or Maryland's $380/year.  Others are less expensive, or even free, but have difficult reporting requirements, like North Carolina (28 reports/year) or Georgia, New Mexico, Oregon, Wyoming and Washington (24 reports/year each).  Still, there are some pretty large-population states in this tier, and most wineries choose to ship to all or nearly all of them.
  • Total percentage of US population: 27.79%
  • Total number of reports required annually: 267 (19.1/state avg.)
  • Total permit fees: $3126 ($223/state avg.)

Tier IV: Difficult/expensive but worth the cost (TX, VA)

  • This is a tier with just two states.  Both are expensive (Texas's permit costs $526/year and requires 20 reports annually, while Virginia's permit is only $160/year but requires the submission of 36 reports) but both are also big enough to justify the cost.
  • Total percentage of US population: 11.06%
  • Total number of reports required annually: 56 (28/state avg.)
  • Total permit fees: $686 ($343/state avg.)

Tier V: Difficult/expensive and maybe not worth the cost (HI, ID, NE, SC, WV)

  • The main difference between this tier and the one above it is in the potential reward, rather than the expense.  Its five states are all small, and all expensive: as much as $600/year for the permit (South Carolina) and as many as 36 reports per year (West Virginia).  While nearly every winery ships to Texas and Virginia, there are many who don't ship to these five smaller states with often disproportionate costs and reporting requirements.
  • Total percentage of the US population: 3.65%
  • Total number of reports required annually: 112 (22.4/state avg.)
  • Total permit fees: $1766 ($353/state avg.)

Every winery has a different breaking point.  For us, it comes here.  We've decided that the 35 states above all warrant the expense of the annual permits and the reporting, though it's a close call on some in that last tier.  The 16 states below we either can't ship to, or have found that the requirements to do are unreasonable.  But before I look at those, it's worth doing the math on what shipping to the 35 "shipping" states costs in total: $6853 in permits plus the time and expense of preparing and filing 546 reports each year.  Figure an hour for each report, at $25/hour ($13,650) for a total expense of $20,503.  But for that cost, we can ship to 76.5% of the US population.  Available tools (like ShipCompliant, which we use and recommend highly) provide a savings over the labor of preparing the many individual reports, but still come with a cost.

Why don't states make the cut?  The reasons vary, and you'll notice that some of the "no-ship" states fall into more than one category.  But in most cases, you'll see some effort toward protecting distributors from competition, at the expense of both consumers and wineries.

On-site purchase requirements (AZ, IN, RI, SD, DE)

  • There are states that will allow a winery to ship (typically with few or no hurdles) if someone purchases wine at the winery, but won't allow the same customer to order wine by phone or email from home.  The logic written into the laws is typically couched in the guise of ensuring that only of-age buyers can purchase, but given that common carriers routinely check ID's in the 30+ states that allow direct shipping, it doesn't pass critical muster.

Distributor exclusivity (IN, LA)

  • There are two states that explicitly say that wineries can ship only if they don't have a relationship with a distributor in that state.  While this does protect distributors from competition from the suppliers they represent, I wonder if it discourages many smaller wineries from signing up with a distributor from those states.  The two states (Indiana and Louisiana) are both just large enough markets (2% and 1.5% of the US population, respectively) and just far enough away from California that we've decided that it's not worth foregoing the wholesale business we do for an uncertain amount of direct business.

Capacity caps (AZ, NJ)

  • The capacity cap is the distributor lobby's wedge issue of choice at the moment.  It writes into law that wineries below a certain size may ship direct to consumers, while wineries at or above that size must use the 3-tier system and sell their wine through traditional channels.  Typically, this capacity cap is set just above the size of the state's largest winery, protecting all the local wineries' business models while shielding distributors from as much competition as possible. In the recent case of Massachusetts, the link was made so explicit (it was promoted on the floor of the legislature) that a federal appeals court declared it in violation of the Granholm v. Heald decision that established the primacy of the Commerce Clause in the interstate shipment of wine.  But in other cases it has withstood legal challenge, and with New Jersey's recent capacity cap bill and a push last year to add one in Florida, it seems likely we'll see more in the future.  The capacity caps have been set as low as 25,000 gallons (roughly 10,000 cases) in places like Arizona (which we don't fall under), and as high as 250,000 gallons in New Jersey and Ohio (which we do).

Label registration (CT)

  • Connecticut is a shipping state for many wineries, but it's not without its expenses and challenges.  First, it's the third-most-expensive permit, at $595/year, and requires 28 reports to be filed annually.  Second, you must register each label you propose to sell in the state at a cost of $200/label, renewable every 3 years.  At Tablas Creek, we sold 28 different wines direct last year (different wines, not different vintages).  That would require a $5600 investment, adding $1866 to the already-considerable annual $1295 cost of permit and reporting.

Death by 1000 Cuts (NJ)

  • New Jersey grudgingly entered the ranks of direct shipping wineries with the passage of a bill in 2012. So far, only a tiny fraction of the nearly 10,000 American wineries have done so. Why would only 237 wineries have received a permit, in the country's fifth-largest wine market? Let us count the ways:
    • The permit (a sliding scale, but for us $938) is the country's most expensive and the are 24 reports to submit annually
    • There is a significant bond wineries have to post
    • There are registration fees of $150 per partner per year, an issue for a winery like ours owned by two families, each with several owners
    • Receiving a permit means that we have established a nexus with the state of NJ and are liable for paying an annual corporate income tax of at least $500
    • There's a capacity cap to ship that we fall under, but many wineries don't
    • And the coup de grace is that anyone who owns at least 10% of the winery must satisfy the same laws that govern the ownership of a liquor store or liquor wholesaler in the state, which precludes foreign residency.

About to join tier II (MA)

Absolute prohibition (AL, AR, KY, MS, OK, PA, UT)

  • The good: most of the states that don't allow the shipping of wine in any situation are among the smallest wine markets in the country.  Other than Pennsylvania, the six prohibition states combine to make up just 3.3% of the American wine market.
  • The bad: Pennsylvania is the country's 6th-largest state and 10th-largest wine market
  • The good: it seems like there is momentum building to finally get Pennsylvania's direct shipping laws changed. Given the challenges now (you can technically ship, but only to a state store, and only if no other vintage of that wine is in the state store system, and the recipient has to come to the state store to pick up and pay all the taxes) welcoming Pennsylvania to the post-Granholm world would be a huge boon for all wineries in 2015.

Weekly Roundup for December 6th: When We Got Wet, Learned How to Drink, and Chose Wine over Beer

Our biggest story over the last week has been rain.  We've received measurable amounts each day since last Sunday, totaling 3.6 inches at our weather station out here.  Even better, that rain has come spread out, with five different days producing between 0.48 inches and 1.19 inches.  The distributed nature of the rainfall has meant that it's all soaked in and we're seeing virtually no runoff.  And after a break this weekend, there's more rain on the horizon for late next week.  In this week's weekly roundup, we start with a look at our recent rain, and move back in time from there.

Our Rain, In Perspective
CA Precipitation vs Normal 4nov-4dec14

  • Despite the wet week, the Central Coast is only slightly above historical norms for this time of year, according to an interesting piece by SpaceRef, which used NASA data to plot California's rainfall from space.  The above graphic, showing average daily precipitation compared to normal for the Nov 4-Dec 4 period, is just one cool map in the article. Read more »

The Origins of Human Alcohol Consumption, Revealed

  • According to a new study published this week in the Proceedings of the National Academy of Sciences, our ability (relatively unique to humans and other great apes) to digest ethanol came about 10 million years before we started to produce it ourselves.  The genetic mutation allowed us to derive more nutrition from the fallen fruit our ancestors were scavenging off forest floors at the time. Read more »

Celebrating Repeal Day: December 5th

  • 81 years ago on Friday, the ratification of the 21st Amendment ended Prohibition and re-legalized the sale of alcohol in the United States.  I quite enjoyed George Yatchisin's exploration of California's Wine History on KCET, which looks at how the vineyards that survived prohibition did so, and some of the repercussions we're still feeling today.

Beauty Shot of the Week: Castoro's Rainbow

Castoro rainbow

  • One consequence of this week's rain was widespread rainbows.  I tried but failed to take some good shots out at Tablas Creek, but this photo from Castoro Cellars' Facebook page is spectacular.  If you don't follow them already on social media, you should: their photography is consistently beautiful. I particularly love this time of year, with the hillsides turning greener by the day and the air soft and cool. If you haven't been out to Paso in the winter, it's wonderful, and wonderfully different from summer's stark, crisp precision.

Food for Thought (Beverage for Thought?): a Growing Trend Toward Wine and Away from Beer

  • Wine preferenceThe Washington Post published an interesting article comparing the changes since 1992 of Americans' preferences between beer, wine, and hard alcohol.  I think that the headline ("The Great Beer Abandonment") overstates the case a bit, but the trends for wine (right) are clearly healthy.  Not only are young people preferring wine more than the previous generation did, but each generation's wine preference continues to grow steadily as its members move through their 30's, 40's and 50's.
  • Those continued trends are why I've thought that some of the recent hand-wringing within the wine industry about the rise of craft beer is misplaced.  In fact, I'd think that for a craft winery (the term doesn't really exist, but should) seeing craft beer's increasing importance in the market would be encouraging, as younger consumers who are exposed to the creativity and individuality of craft beers would already have much of the vocabulary to understand wine.  This idea probably deserves a full blog post.  Stay tuned.
  • Finally in this vein, I found the snapshot of the current American wine consumer, published this week by Wine Business Monthly, worthwhile reading.  It showed the growth of (but still relatively small penetration of) social media in wine purchase decision-making, the continued popularity of grapes we don't think much about like White Zin and Pinot Grigio, and the relative unimportance to consumers of wineries' environmental practices.  A good reminder of the work there still is to do! Read more »

Weekly Roundup for November 16th, 2014: AVAs, Local Achievements, Veterans Day, Direct Shipping and Uncovering the Obscure

Last week, we debuted the Weekly Roundup, news from around the wine community that we thought worth sharing with you.  It's an admittedly eclectic mix, but we feel each thing that we've chosen warrants few minutes of your time.  It's also a work in progress, so please share in the comments what you like, and what you'd like to see different.  This week's list:

Some Great Press for Paso Robles and our new AVAs

  • The Tasting Panel's Anthony Dias Blue visited Paso recently, just before Sunset's Savor the Central Coast in September. His article concludes with an exciting evaluation of our great town: "this sleepy region, once home to a few obscure, under-the-radar wineries, has transformed itself into the most exciting wine region in California".  The article also recommends wines from 15 top Paso Robles wineries, including our 2011 Esprit de Tablas Blanc and 2012 Mourvedre. Read more »
  • On of our favorite blogs for the week came from Wine Spectator editor Mitch Frank, whose piece Wine Can Be So Complicated — And That's OK was a notably thoughtful musing set against the background of the recent approval of 11 new AVAs here in Paso Robles.  His conclusion -- that "while wineries, and journalists, need to work hard to make wine inviting for newcomers, that doesn't mean erasing what makes wine like few other beverages—it comes from someplace specific" sums up our thoughts pretty well.  I'm quoted in the article, and submitted a comment with a few more of my thoughts on the subject. Read more »

Something from Tablas Creek

  • RZH in the Navy It was fun on Veterans Day to see the tributes to the many veterans in the wine community flowing through our social media feeds (for the intersection of the #wine and #veteransday hashtags on Twitter, check out this link).  We posted this 1944 Navy photo of Robert Haas, all of 17 years old at the time.  A sincere thank you to him and to all the many veterans and servicemembers, current and past, who have impacted our lives so substantially.

A Glimpse Behind the Scenes into the Business of Wine

  • Wine marketer, expert blogger and consumer advocate Tom Wark was interviewed by ReasonTV, and the 3-minute video that resulted is posted on YouTube.  I spend a fair amount of time trying to shine some light on some of the more convoluted and counterintuitive laws that govern how wine is sold around the United States in my Legislation and Regulation series.  Tom's opening salvo: that "the only way to get them to begin to be repealed and reformed is to bring them to light" is absolutely spot on. Watch the interview »

Some Landmarks from our Neighbors

Paso Robles Beautiful

Cass - fall foliage

  • We've been posting lots of photos of our fall foliage.  The photo above, which our friends at Cass Winery posted on their Facebook page, is one of the most impressive we've seen.  Too good not to share!

Food for Thought (Beverage for Thought?)

  • We'll conclude this week with an article by Lettie Teague in the Wall Street Journal, entitled Dark Horse Wines: Great Finds in Odd Places.  As a winery who chose what was, at the time, an odd place (Paso Robles) to make odd wines (southern Rhone-style blends), we find comfort in her conclusion that because gatekeepers will naturally tend toward the conservative, "wine drinkers themselves must ultimately be the ones to pursue the unexpected, to eschew the tried-and-true".  She also suggests 5 wines, including one (a Pinot Noir from South Africa) imported by Vineyard Brands.  Read more »

Are direct-to-consumer sales really failing to lift the wine industry?

Last month I was surprised to read a headline on the industry portal Wine Industry Network titled Direct to Consumer Sales Fails to Lift the Wine Industry.  As a winery whose business model works only because of direct sales, I was curious to learn more about what the author Brian Rosen, consultant and former proprietor of Sam's Wine & Spirits, meant by the headline.  I posted my thoughts on Twitter:

Direct sales tweets 1

After which, he and I shot a few tweets back and forth, elaborating our positions:

Direct sales tweets 2

Brian's article was particularly interesting to me because it plays against the dominant narrative right now, that direct sales are on an inexorable rise, and that wineries should do everything that they can to make sure they're well positioned in this channel. What's more, that dominant narrative certainly jibes with our own experience here at Tablas Creek.  When we started, we believed that we would sell all our production through the wholesale channel.  Between the reputation of Beaucastel and the marketing muscle of Vineyard Brands, we thought that we could focus on grapegrowing and winemaking and the rest would take care of itself.

Five years of experience taught us that our initial expectations were unrealistic, and we made the decision in 2002 to take a much more active role in our marketing and sales.  We opened our tasting room, started our wine club, began participating in a wider array of events, worked harder and more closely with our distributor partners, and started participating more consistently in the promotional efforts of the regional and varietal organizations to which we belonged.  Little by little, we clawed our way out of what was a dangerous period when we were bleeding cash each year and became profitable.

In the steepest period of this climb, where we went from selling just under 4000 cases of wine in 2001 (all in wholesale) to nearly 20,000 cases of wine in 2007 (split between wholesale and direct) we saw significant growth in all our channels.  Our wholesale sales increased more than 250% over that period, to some 11,000 cases.  Our direct sales grew from nothing to some 9,000 cases.  But each year, as we looked at our financial reports, it became clear that our growing wholesale sales, far from driving our profitability, were only about a 50/50 bet to cover the cost of selling our wine in this channel.  As a company, all the profit that hit our bottom line came from the direct sales.

The greater profitability of direct sales should be intuitive, but it's likely even more important to wineries than you think.  Most wineries aim to achieve the same price out in the wholesale market and in their direct sales.  For product destined for the wholesale market, wineries back out the expected wholesaler and retailer markups, leading to a wholesale sell price half of full retail price.  Given that the cost of producing a wine is likely half or more of the wholesale sell price, the profit of selling a case direct isn't double that of selling it in the wholesale market; it is several times greater.  It is this disparity that means that a winery can offer good discounts to its wine club members and still come out far ahead. 

Further increasing the relative attractiveness of direct sales is that most wineries find, as we have, that the mix they sell direct skews toward their higher-end wines, while the mix that sells in wholesale skews toward wines that are less expensive, both because the wholesale market is naturally more price-competitive and because of the practical limit on wholesale price for wines that restaurants can pour by the glass.  When we did the math we realized that 75% of our revenue was coming from the 45% of our wine we sold direct, while just 25% of our revenue came from the 55% of the wine sold through the wholesale channel.  In simpler terms, we sold our average direct case for three and a half times what we sold our average wholesale case for.

OK, that was a lot of background.  But it gives you what you need to understand why I took objection when I read in Brian's piece, "I can tell you with 100% certainty that the DTC movement is not what you think it is and will not provide the added revenue that wineries around the globe are seeking."

The crucial question, and one that Brian himself addresses later in the article, is which wineries will benefit from direct-to-consumer sales, and which won't.  A winery's direct sales is limited naturally by its cachet, its tasting room traffic, and its perception of scarcity.  Even with high traffic, high cachet, and the perception of scarcity, there are only a handful of wineries selling more than 25,000 cases direct.  And most wineries' direct customers are far fewer than that; even established wineries I speak to around Paso Robles typically count a few thousand wine club members.  So,  imagine the challenge that faces a winery making a million cases a year, trying to have direct sales matter on the bottom line.  Even if they are able to build up to 25,000 direct cases per year (likely difficult given the challenge of creating the perception of scarcity) and able to sell those direct cases for 3.5 times what they sold their wholesale cases for, the direct sales channel would account for just 8.2% of the company's revenue.

Yet direct-to-consumer wine sales have grown to a $1.58 billion dollar industry: nearly the size of the total of wine sales to restaurants (some $1.8 billion last year).  It's still dwarfed by the $7.34 billion in retail wine sales, but it's growing.  So, is DTC important to wineries, or not?  It depends on your size.  Most wineries are small; by the Wine institute's estimate, 90% of wineries produce fewer than 50,000 cases, with three-quarters producing fewer than 5,000 cases.  Every one of those wineries should be looking to consumer-direct sales to make their business viable.  But most of the wine produced in America is produced by large wineries; estimates are that the three largest wine conglomerates produce half the wine sold in America each year.  And the twenty largest firms account for 90% of the market. For them, as the math showed above, direct sales are not going to make a significant difference in profitability.

If you're the average bottle of American wine, produced by one of the big companies in lots of tens or hundreds of thousands of cases, you're not likely looking at a future that involves transport via UPS or FedEx.  But if you're an average winery, producing a few thousand cases of wine a year, you should be focusing on selling a high percentage of however many bottles you produce directly.

Three final notes.  First, why, if they'll never notice it on their bottom lines, do the big wine companies still have tasting rooms and wine clubs?  I think (and based on the effort put into their direct sales by many of these large wineries, they agree) that it's valuable marketing: each direct relationship that a winery maintains is going to have a positive ripple effect as that customer communicates his or her enthusiasm to friends, and will support the work of distribution in a way similar to -- yet more profitable than -- advertising.

Second, you may be wondering why a relatively small winery like us bothers with wholesale sales at all.  Like a large winery with its direct sales, we think of it as powerful marketing, for which we get some revenue to offset the costs.  Having wine in great restaurants and wine shops means that customers don't have to come to us to discover us, and we have literally thousands of wine-savvy professionals around the country telling our story.  If we can get all this at something close to break-even, it's a big asset.

And third, if 90%+ of wineries rely on consumer-direct sales for their livelihood, why did Brian say that it won't provide the revenue wineries are seeking?  I think that there are two reasons.  First, Brian comes from a retail perspective.  The regulatory environment still makes it much more difficult for retailers to ship around the country than it does wineries.  And retailers are all competing to sell wines their competitors can buy at more or less the same price they can.  This level playing field, the regulatory patchwork, and the high cost of expedited shipping on a perishable, heavy item like a bottle of wine all combine to shield smaller local retailers from competition.  Will this equilibrium last forever?  Probably not. Given that Amazon is on their third foray into trying to sell wine, the e-commerce giants must see some potential here.  And here is an important area that I agree with Brian: whether you're a retailer or a supplier, Amazon and its ilk are likely to be neither savior nor apocalypse in the near term.

But all that's beside the point to a small or medium-size winery.  If that's who you are, you likely already know that direct-to-consumer sales isn't just your future.  It's your present, too.


Our crazy state alcohol laws: a farce in nine acts

You probably don't need me to tell you our alcohol laws are often crazy. But, well, our alcohol laws are crazy, particularly if you look at the state and local level.  The national level, for what little it has to do with alcohol, tends to be positive, like the Granholm v. Heald decision that helped reduce protectionism and create a more level playing field for American wineries.  State alcohol laws shelter behind the 21st Amendment's protection -- written in the aftermath of prohibition -- that gives them broad leeway to write laws to suit their local mores about alcohol.  Of course, that protection, which was intended to allow states or counties to remain alcohol-free, has allowed powerful constituencies to write protections for themselves into their state's alcohol legislation. The results can be frustrating, infuriating, unexpected and even funny.  Here are a few favorites:

  • Minimum markup laws.  In Ohio, retailers and wholesalers are required by law to mark up wine a minimum amount: 33% at the wholesale level, and either 40% (on cases) or 50% (on individual bottles) at retail.  Written into the law is a remarkable justification: "to prevent abuses caused by the disorderly and unregulated sale of wine ... prevent aggressive sales practices that improperly stimulate purchase and consumption ... discourage intemperate consumption of alcoholic beverages ... eliminate discriminatory sales practices that threaten the survival of wholesale distributors and retail permit holders". The admission at the end is breathtakingly honest: that "the survival of wholesale distributors and retail permit holders" is a goal of the legislation.  Typically, price competition -- the foundation of the capitalist system -- is protected, not labeled a "discriminatory sales practice".
  • Price posting. Many states require that wine wholesalers post the price at which they're offering their products, and then enforce with varying degrees of rigor that no customer is given preferential treatment. In New York, for example, you are required to post the price that any licensee will pay for your wines.  You are allowed (expected) to offer a better price if someone buys 2 or 3 or 5 cases than if they buy just one. In Oregon, wholesalers are required to post prices per bottle, and are not allowed to offer discounts on quantity (or to charge extra to deliver purchases of just a few bottles).  On the other hand, they're also not allowed to extend credit, so they receive payment at the time of delivery.  That helps with the cash flow problems created by all the tiny deliveries!
  • Franchise laws.  In some twenty states (AR, CT, DE, GA, ID, KS, MA, ME, MI, MO, MT, NC, NM, NJ, NV, OH, TN, VA, VT, and WI) once you've chosen a distributor to represent you, you cannot leave that distributor and move to another even if they perform badly, lose their key personnel, or are purchased by another firm. There are in some cases exceptions to these franchise laws -- or review boards to which you can appeal with cause -- but in every case, it tilts the balance of the playing field even further toward the state-licensed distributor.  I wrote about this at length last year in the article the costs of state alcohol franchise laws.
  • The Johnstown Flood Tax.  In Pennsylvania, which sells all its wine and liquor through state-run stores, all alcohol sales are assessed an 18% tax earmarked to pay for repairs from the Johnstown Flood.  Which happened in 1936.
  • Wet, dry and damp counties.  In Texas, like much of the south and midwest, there are counties that are "wet", where alcohol may be sold.  There are counties that are "dry", where it may not be sold.  But there are also quite a few counties where wine may only be sold if it is 14% alcohol or less.  I remember doing a presentation to our sales team there and having many of the reps making notes on which of our wines they could sell, and which they couldn't because those wines were on the wrong side of the 14% law.
  • State control.  In Wyoming, you are not allowed to sell a wine without being with a state-licensed broker.  And by sell, I mean talk about.  You aren't really selling the wine anyway; the state of Wyoming is the only licensed wholesaler.  But their job pretty much stops at warehousing and delivery.  If you want to help convince the local retailers and restaurants that they should ask the state of Wyoming to deliver your wine, you'd better be with someone with a license.  Same thing in a few other states.  Want to pour wine at a festival in Maine?  You'd better get the state license.
  • Direct shipping protectionism.  The arcane barriers to direct shipping, nearly all erected to protect wholesalers but couched in language about encouraging responsible alcohol consumption or ensuring the collection of tax revenue, could fill a post by themselves.  There are still roughly a dozen states that effectively prohibit all wine being shipped in, but (like with dry counties) that's a choice. The ones that get me are the inexplicable ones, like Maine not allowing us to ship half-bottles there (minimum size: 750ml). Or states like Rhode Island, South Dakota, Arizona and Delaware that allow us to ship wine if the customer makes an in-person purchase here, but not if they pick up their phone and call us, or want to order online.  Or those with bizarre or minimal limits per month or year, like South Dakota's limit of 5 bottles per shipment, Texas's limit of 46 bottles per individual per calendar month, or Wyoming's limit of 2 cases per household per year.  Or (and this starts to go from ridiculous to serious) those with capacity caps, the distributor lobby's wedge issue of choice at the moment. Arizona decided that wineries that produce fewer than 20,000 gallons per year -- conveniently, just above the size of Arizona's largest winery -- can ship to consumers, while larger wineries like us can't. These encroachments and others like them will get increasingly onerous unless people stand up. Free the Grapes is a great place to start.
  • Sampling restrictions.  In Vermont, you are not allowed to sample multiple accounts on a single bottle of wine.  In fact, you are not allowed to bring a sample of wine into a licensed establishment.  If you, as a winery or distributor representative, want to show a wine to an account, you have to convince the account to buy the wine from the warehouse, then you have to buy it from the establishment, open it and taste it with the proprietor, and then repeat the same process at each stop in your work day.  You can imagine how well this works.
  • Massachusetts.  Finally, we'll devote a paragraph to the Commonwealth of Massachusetts, which passed a direct shipping law so obviously anticompetitive -- the sponsors explained in the legislature, during the debate about the law that the law's limits were set so as to allow all the in-state wineries to ship to consumers while prohibiting as many out-of-state wineries as possible -- that a federal court declared it unconstitutional. Of course, this declaration was moot, because the law also contained a clause making the common carrier (think UPS or FedEx) liable if they delivered a shipment to a consumer in excess of the 26 cases/household/year aggregate limit.  Think about this.  The carrier is supposed to know whether or not this customer has bought more than the aggregate limit already that year, that could have been delivered by another carrier.  Even before the law was invalidated, both UPS and FedEx announced that they wouldn't accept any shipment bound for the state, and now, four years later, nothing has changed, though there's a glimmer of hope, as the Massachusetts House of Representatives passed a budget that includes reasonable wine shipping provisions.  It's now awaiting action at the state Senate.  If you live there, or know any wine lovers who do, there's a template at Free the Grapes that will help you ask them to move it forward.

Perhaps the most surprising thing from my perspective is the degree to which the restaurants, retailers and consumers in these different states accept the status quo.  Nearly all of these laws enrich some entrenched interest at the expense of the consumer.  Wineries, restaurants and retailers are often collateral damage.  As much fun as this craziness can be, I, for one, would like to order a little sanity.  But I'm not holding my breath.


Celebrating 11 New AVA's in Paso Robles

At long last, nearly seven years after it was submitted to the TTB (the Tax and Trade Bureau -- the office of the federal government that oversees wine regulation) we received news this week that the petition from the Paso Robles wine community to establish eleven American Viticultural Areas (AVA's) within the current Paso Robles AVA has been published for comments.  This is the critical step called a "notice of proposed rulemaking" at which the TTB (tasked, among its many other responsibilities, with protecting the public from misleading or confusing information about wine) has reviewed all the geological, climatological and historical information presented in the petitions and determined that they pass muster.  It doesn't mean that the region can start using them on wine labels this week, but it's an important validation of the proposed AVA's and boundaries, and the last step before final approval.  The map, as published for review, is below.  Click on the image for a larger version or here for the official PDF: 

Paso Proposed AVA Map

Over the next 120 days, interested parties (which, in this case, means pretty much anyone) can submit a comment at the TTB Web site in support of or in opposition to the plan.  I'm hopeful that with all the hard science that went into the petitions, and the broad cross-section of the Paso Robles wine community that was involved in their submission, approval will be relatively straightforward.  The Paso Robles AVA Committee included 59 different grower and winery members -- including Tablas Creek -- from every one of the proposed AVA's. 

For the Paso Robles region, the publication for review of our AVA petition is an important and necessary milestone. Paso Robles is currently the largest un-subdivided AVA within California at approximately 614,000 acres. By contrast, the Napa Valley appellation (which includes sixteen AVA's delineated within its bounds) is roughly one-third the area at 225,000 acres. When the Paso Robles AVA was first proposed and approved back in 1983 it contained only five bonded wineries and less than 5000 planted acres of vineyard.  Big swaths of the AVA, including the area out near us, were largely untouched by grapevines.  In the last thirty years, Paso Robles has grown to encompass some 280 wineries and 32,000 vineyard acres.  This vineyard acreage is spread over a sprawling district roughly 42 miles east to west and 32 miles north to south.  Average rainfall varies from more than 30 inches a year in extreme western sections (like where Tablas Creek is) to less than 10 inches in areas farther east.  Elevations range from 700 feet to more than 2400 feet.  Soils differ dramatically in different parts of the AVA, from the highly calcareous hills out near us to sand, loam and alluvial soils in the Estrella River basin.  The warmest parts of the AVA accumulate roughly 20% more heat (measured by growing degree degree days) than the coolest; the average year-to-date degree days in the Templeton Gap since 1997 is 2498, while in Shandon far out east it's 2956.  This difference in temperatures is enough to make the cooler parts of the AVA a Winkler Region II in the commonly used scale of heat summation developed at UC Davis, while the warmest sections are a Winkler Region IV.  This is the equivalent difference between regions like Bordeaux or Alsace (both Winkler II areas) and Jumilla or Priorat (both Winkler IV areas). 

[A quick aside. The southern Rhone is classified as a Winkler III region... and the fact that our proposed Adelaida District is a transitional Winkler II/III jibes with our experience that the same grapes ripen here slightly later than they do at Beaucastel.]

Our region's diversity was well noted in the TTB's ruling.  In addition to the longhand descriptions of each region's soils, climate and topography, the TTB included side-by-side comparative charts -- unique, in my experience of AVA approvals -- that detailed why each new AVA was worthy of being distinguished from its neighbors.  I can't imagine anyone reading these petitions and concluding that there wasn't grounds for subdivision.

All this is not to say that Paso Robles doesn't share some important factors, and one important hurdle that the petitions had to clear was demonstrating that the region enjoyed sufficient macro-level similarity to remain an AVA.  The TTB's ruling recognized several characteristics that the entire region shares, including the 40-50 degree diurnal temperature variation, the relatively warm climate with limited incursion of marine air, and the moderate rainfall, less than the slopes of the coastal mountains but more than the arid Central Valley to our east. 

The AVA system is so powerful exactly because it has the flexibility to recognize macro-level similarities as well as important micro-level distinctiveness.  Think of France: that Burgundy shares overarching characteristics doesn't mean it's of no value to distinguish Chambertin from Meursault, or Chassagne-Montrachet from Volnay.  The appellation system, at its best, gives consumers both a broad-level understanding of what grapes will grow best and what character they should expect from the region's soils and climate. 

One risk in the creation of new AVA's within an existing one is that the existing AVA -- into the marketing of which the local wineries have invested enormous amounts of time and money -- will lose much of its significance as many wineries abandon that appellation name to make a name for their new, smaller one.  Happily, Paso Robles won't lose its identity -- or the accumulated marketing capital we've all built over the last three decades -- thanks to a conjunctive labeling law passed by the California assembly with the encouragement of the Paso Robles Wine Country Alliance in 2007. Conjunctive labeling means that wineries who choose to use one of the new AVA's will also be required to use "Paso Robles" as significantly.  This law was modeled on one passed for the Napa Valley in 1990 that has been widely credited with helping maintain Napa as the most powerful brand in American wine. 

The continued presence of Paso Robles on wine labels does not diminish the impact of having the different AVA's approved. These new AVA's will be a powerful tool for wineries to explain why certain grapes are particularly well suited to certain parts of the appellation, and why some wines show the characteristics they do while other wines, from the same or similar grapes, show differently. Ultimately, the new AVA's will allow these newly created sub-regions to develop identities for themselves with a clarity impossible in a single large AVA.

It's worth pointing out that no one needs to use the new AVA's.  Wineries who wish to continue to use only the Paso Robles AVA are welcome to.  And many will likely choose to do so as the new AVA's build their reputation in the market.  Not all the AVA's have a critical mass of established wineries, and it seems likely that a handful of the new AVA's will receive market recognition first, while the reputation of others will take time to build.  But I believe that it will be several of the currently less-developed areas that will benefit most in the long term, through the ability to identify successful winemaking models and build an identity of their own.  We shall see; having a newly recognized AVA is not a guarantee of market success, just a chance to make a name for yourself.  The cream will rise to the top, and consumers will benefit.