A New Era for Finger Lakes Wines

Governor Pataki at Lamoreaux Landing Wine Cellars.

On July 13, on a sun-drenched afternoon at Lamoreaux Land­ing Wine Cellars overlooking the east side of Seneca Lake, Governor George Pataki signed a law allowing direct interstate shipment of wine to consumers in and out of New York State. With a stroke of the pen, he propelled the New York wine industry into a new era, transforming it from a local curiosity into a national player in the world of wine.

In 1976, the Farm Winery Act catalyzed an initial growth spurt of the New York wine industry by allowing direct sales to visitors at winery tasting rooms. This new law expands direct sales to a national level, finally allowing millions of consumers from other states to buy New York wines. It is the latest example of market-oriented public policy which has made the wine industry the fastest growing industry in New York State’s two largest economic sectors of agriculture and tourism.

The New York wine industry dates back over 175 years to 1829, but the major growth has been in recent years. In 1975, New York State had 19 wineries. Today there are 219 – more than 10 times the ’75 number. In 1985, there were 63 wineries, so nearly 75 percent of today’s New York wineries have opened in the past 20 years. In the decade of the 1990s, 63 new wineries were created – the same number as in the first four years of this decade. In other words, the growth rate has more than doubled.

The new direct-shipment law will accelerate that growth by expanding sales opportunities, enhancing New York’s reputation as a world-class wine region, and giving investors confidence that the state government values this industry and wants to see it grow.

Some historical perspective may help to explain why. The Farm Winery Act of 1976 essentially made it economically feasible to operate a small winery in New York State, primarily by allowing direct sales to consumers at the winery. Previously, wineries had to sell their product at half price to wholesalers, who then sold it with a mark-up to restaurants and retail wine shops, who in turn marked it up before selling it to consumers. For a small winery, this just did not work economically.

In 1984 and 1985, a comprehensive package of laws boosted growth even more. The sales of wine coolers in grocery stores and liquor stores helped New York’s struggling grape growers. A major winery deregulation law eliminated burdensome and unnecessary restrictions, and created many new direct sales opportunities for wineries. Sampling of New York wines was allowed in liquor stores, and the New York Wine & Grape Foundation was created to stimulate industry development through major research and promotion programs.

The new direct-shipment law expands marketing opportunities to most states in the country. Each year, millions of tourists visit winery tasting rooms, and often want to order more wine over the phone or Internet after they’ve returned home. New York residents could do so, but out-of-state consumers could not, due to an antiquated and restrictive law.

It took a 15-year, David-versus-Goliath struggle against wealthy and politically powerful opposition to change the law. A landmark decision by the United States Supreme Court in mid-May finally tipped the scales and put New York’s government on notice that its law was unconstitutional and had to be changed.

There was a choice: No one ships, or everyone ships. Either the state government denies New York wineries the intrastate shipping right they have had for decades; or, in addition to maintaining that right, they also let out-of-state wineries ship to New York consumers, and let New York wineries ship to consumers in other states. In other words, no trade or free trade.

The law goes into effect on August 12, but it will still take some time for New York wineries to fully benefit. For each state they want to ship into, they will have to comply with various licensing and regulatory requirements. Just like growing grapes or making wine, nothing is as simple as it looks in this industry.

Once everything is in place and becomes routine, it is likely that wineries committed to direct interstate shipment could boost their sales by 10 percent to 20 percent per year. Already, many have computerized databases of thousands of out-of-state consumers who have visited their wineries and want to buy their wines.

Besides increasing sales, this law will multiply New York’s reputation as one of the world’s premier wine regions. New York wines routinely win Double Gold and Gold medals, and often “Best of Show,” at international wine competitions, mostly held in California. Many of the judges are prominent wine writers who know and love New York wines, especially Finger Lakes Rieslings, but couldn’t write about them because their readers couldn’t buy them. This will soon change.

The strategic goal of the New York Wine & Grape Foundation is “To have the New York grape and wine recognized as a world leader in quality, productivity and social responsibility.” This new law is a major step in that direction.

It is also a major step toward economic development in the Finger Lakes region. The wine industry is a major catalyst for economic growth in the agriculture, manufacturing and tourism industries, bringing benefits to many businesses in these sectors as well as to local tax coffers. Wine industry growth means more investment, real estate transactions, farm equipment, construction, tanks and barrels, bottles and labels, advertising and promotion, and more tourists eating at restaurants, staying at hotels and bed & breakfasts, buying gas and patronizing gift shops. It means more jobs everywhere.

Wine is the locomotive pulling the train of economic development. All aboard!

The New York Wine & Grape Foundation is located in Penn Yan.

by Jim Trezise, President, New York Wine & Grape Foundation

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