The Gov signs wine shipping bill; opens some doors, closes others

Bill Daley reports in The Stew that Governor Blagojevich signed HB429 into law yesterday. Starting next June, Illinois residents will be allowed to purchase and ship up to 12 cases of wine directly from Illinois vineyards and out of state wineries. This is in compliance with the 2005 Supreme Court ruling on Granholm vs. Heald which determined that states must allow all wineries to direct ship to their residents, regardless of their location, or none at all. Wineries within the state may not have preferential treatment.

So this is mostly good news. Mostly. Unfortunately, the big lobby groups also included a few humdinger restrictions on other wine purchase and sales laws. As of next June, no Illinois resident may purchase wine from an out of state retailer. We have lots of nice wine shops in Chicago, so that may not effect us city dwellers too much, but lots of other Illinois folk will be shut out of wine.com and online purchase sites they have come to rely on. Likewise, we’ll all have to do without online purchases from cool sites like winewoot.com and most of the online wine auction sites like winebid.com unless they open an official office in Illinois.

The one thing I haven’t seen spelled out in the bill is whether Illinois residents can recieve wine shipments from out of state retailers as gifts. In the past, laws like this outlawed any resident from recieving a wine shipment from out of state, no matter who paid for it. While this doesn’t seem like a big deal, it could be a huge problem for corporate and personal gifts. If you do business with a company in New York and look forward to a bottle of cult Cabernet in your Dean & Deluca gift basket every December, you’ll be out of luck. You’ll probably get a nice bottle of olive oil and vinegar instead. If your sister in California wants to send you a bottle of Champagne to celebrate your birthday, she can’t do it from her local store. She’ll have to call an Illinois store that offers shipping. Or she’ll send cupcakes.

 You see where I’m going with this. Once thoughtful gift givers are told by their local retailer that they can’t ship wine to Illinois, most people will just give up and send something else. No New York wine shop when presented with a giant corporate gift order is going to offer up, “Oh we can’t ship to Illinois, but just call Sam’s in Chicago, they’ll deliver for you!”. Yeah, they love referring huge orders to their competition.

Not only that, the Supreme Court decision was all about striking down discrimination in interstate commerce. This part of the new law is the same crap only now it applys to wine retailers instead of wineries. I have to believe the law will get overturned, if someone has the motivation, money, and power to challenge it. But the Illinois beer and liquor distribution lobby is huge and very well funded. They really don’t like the idea of anyone buying any kind of booze directly and skipping their involvement/charges in the process.

A few big Illinois wineries are going to give it a shot, though. The other part of the bill that indirectly sticks it to consumers is that the largest Illinois wineries will now be forced to sell all of their goods through a distributor. In the past, Lynfred Winery in Roselle has sold wine directly to the pizza joint next store and simply walked the new cases over when they ran out. Now, they’ll have to pay a distributor to take possession of the wine and deliver it…next door. And that gruelling task will not be free, so folks will be paying a higher price for their glass of Lynfred American Zinfandel with their pie.  Any midwestern winery that hopes to make a profit depends on direct sales and usually income from a B&B, restaurant, or other tourist related business to get by. Lynfred operates two retail shops for their wines called Tasting deVine in Naperville and Wheaton to make purchasing their wines easier for suburban folk. They will now be required to have a distributor deliver their own wine… to their own stores. Its discriminatory, in my opinion, not to mention hella-lame.

I interviewed Lynfred’s Marketing Manager, Christina, a few weeks ago and got even more info on how this law “doesn’t allow Iliinois wineries to grow.” More on that tomorrow…

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9 Comments

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9 responses to “The Gov signs wine shipping bill; opens some doors, closes others

  1. Abbie

    Hey Christine! Could you clarify for me… I will be able to purchase up to 12 cases of wine a year from anywhere in the country and have it shipped to my home. But I can’t buy wine from winebid.com or any other sites like that? I am totally confused by these new laws.

    Thanks
    Abbie

  2. You can buy up to 12 cases a year directly from a winery and have it shipped to your home. So – you could order 6 cases direct from Robert Mondavi Winery in Napa Valley and/or 6 cases from Blue Sky Winery in downstate Illinois.

    BUT – as of June 2008, you could not order even a bottle of Robert Mondavi or Blue Sky or any other wine from winebid.com or a retailer like Zachy’s in NY.

    DIRECT PURCHASE FROM A WINERY =OK
    PURCHASE FROM OUT OF STATE RETAILER= ILLEGAL

  3. Douglas

    Here’s a simple question for you Wine Diva. It’s a simple question, but maybe it has a very, very complicated answer.

    Exactly what does a wine/liquor distributor do, and tell me exactly what he/she/they contributes to society?

    I am not being cute here; I have been following the tortured path of HB429 for almost a year now, and for the life of me, I do not understand why we have/need “distributors” in the first place. I hope you can enlighten me!

    Douglas

  4. The distributors are part of the Federal three-tier distribution system that was put into place after Prohibition was repealed to govern the distribution of liquor. They’re essentially the middle man in all this. Producers cannot sell their product directly to retailers, with certain exemptions (brewpubs and tasting rooms come to mind).

    What this law effectively does is cut out the out-of-state retailers while maintaining Illinois’ compliance with Granholm v. Heald, allowing the distributors to increase their revenue since out-of-state wineries that don’t qualify for the direct sales permit will have to find distribution to do business in Illinois (wineries with an annual production of under 25,000 gallons may sell directly with the purchase of a direct sales permit).

    Never mind that, despite the current disparity in case differential between in-state and out-of-state wineries, Illinois is considered a “reciprocal state”: no restrictions are in place preventing out-of-state wineries from reaching customers in Illinois directly. Critics of the bill argue, and I tend to agree, that by shutting out out-of-state retailers and wine clubs, HB 429 is a violation of Granholm, and Tom Wark, Executive Director of the Specialty Wine Retailers Association, has long threatened to challenge HB 429 in court if it ever passed. You look at the details of this legislation, and it’s a pretty ingenuous move on the part of the distributor lobby.

  5. Hey Chuck! Thanks for your post and more info on the case. I’m a fan of your site.

    Douglas: Distributors are a “middle man” between wineries and retailers/restaurants. In my opinion, they do provide a very necessary service for many people in the industry. Distributors do the following (as well as many other services):

    Buy wines from importers and domestic wineries to sell in the local market.

    Pick up those wines and transport them to the local market.

    Employ sales people to represent the wines and provide customer service.

    Warehouse large quantities of the wines for the local market.

    Handle all legal paperwork involved in these transactions.

    Realistically, most restaurants and retailers need these services. Your corner pizza joint doesn’t have the ability to drive to California or New York to pick up wines once a week. And there are some terrific salespeople in the biz that I have come to rely on for quality information and recommendations. In Christina’s words, (marketing manager for Lynfred), “its all about CostCo.” I have to agree.

    Large retailers like CostCo, Target, Albertson’s/Jewel, Sam’s Club, Safeway etc. could easily truck the goods to their locations. At this level, purcshases and price negotiations could be made directly with the winery and savings passed on to the consumer.

    This scares the bejezus out of the distribution lobby. If grocery chains and big box stores bought their mainstream beer, wine, and spirits direct – distributors would be hit hard financially. It would mean a ton of job cuts and total restructuring of the industry.

    There is another thought that it would upset the marketplace pricing so much that most consumers would buy all of their wine from big retailers and boutique shops would go out of business. This would eventually limit the selection of wines in any community to what large stores choose to sell. In other words, finding a decent Rias Baixas or any Brunello di Montalcino would be a challenge.

    IMHO – the distribution industry needs a huge overhall and retailers and chain restaurants should have the right to purchase directly. As the times change, businesses need to adapt and the distribution part of the liquor industry doesn’t need the protectionism its getting from laws like these.

  6. Christine, we cannot thank you enough for sharing this injustice with your readers!

  7. mel

    FWIW,
    Winebid.com has an IL office and will be able to sell wines (won at auction) to IL residents. IIRC Wine.com (G3) was set up in such a way that an in-state
    retailer was included in the transaction so they (wine.com) could sell wine in all states. If you go to the site, they require you to choose your state and then you can shop from that inventory.

  8. Leslie Clem

    Why are we moving backwards, this is outrageous!
    Because of NAFTA we can buy all our goods from overseas, but we may not buy all the wine we want from any state within our own country. Some people have waited on lists for a very long time to be able to secure certain wines each year. Their local distributor probably only distibutes such wines to resturants. This is communism. We need rid of this governor, and we need to fight for our rights

    Leslie

  9. After reading this article,I want to go out to see the movie with my boy firend.
    Goodbye and Good Luck.

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