Wine drinkers defiant about bans

How much does Eric Scholl enjoy wine?  He proposed to his wife in California's Napa Valley. Then the happy couple picked out pinot noir and sparkling wine to serve at their wedding.

And then they had to get it home to Tulsa, Okla. Luckily, his bride's mother lived across the border in Springfield, Mo., where she could receive wine shipments. Scholl subsequently had other wines shipped to her home and picked them up on visits to Missouri.

"The only problem was, my mother-in-law has since moved to Tulsa," he says.

Frankly, Scholl would rather shop at his local wine store.  He gets a 10 percent discount on cases, and it's far easier than flying to California or driving to Dallas. But he can't find what he wants locally, and Oklahoma law bars him from receiving wine by mail.

Despite the law, he signed up for wineries' mailing lists in 1991 and regularly received two bottles each month until the state warned the wineries to stop shipping to him.

"I knew you weren't supposed to do that," he says. "I went ahead and signed up anyway."

Scholl and other wine connoisseurs will be watching Tuesday when the U.S. Supreme Court considers whether to overturn some bans on direct shipping.

Many wine lovers in the 24 states that effectively prohibit wine shipments directly to consumers consider themselves otherwise law-abiding citizens willing to flout what they see as Prohibition writ small. Their story is an example of how underground economies flourish.

Prior to the late 1990s, wineries and collectors often note, states prohibiting wine shipments often looked the other way when it came to small orders. But the advent of Internet wine sales drove collectors online, where they hoped to get their favorite wines and circumvent the limitations of a sales system that sets specific roles for liquor producers, distributors and retailers. This boom in interstate wine sales unsettled liquor wholesalers, who voiced their concerns and persuaded many state officials to crack down.

"The more you make these things draconian, the more you invite getting an underground market going and the more you get them outside the regulatory and taxation system entirely," says Daniel McFadden, a Nobel-winning Berkeley economist and a grape grower.

'A clandestine economy'
Consider the case of one 64-year-old Ann Arbor, Mich., lawyer who regularly receives wine at his home from boutique California wineries, usually highly rated, small-batch wines that simply can't be found in Michigan.  He discussed his shipping habits provided his name not be used.

The wineries avoid trouble by sending their cases to third-party shipping companies in California, which then send the wine on to Michigan without labeling it as such. The goal is to minimize any one party's liability.

The lawyer, a conservative Republican who has petitioned Republican state attorney general Mike Cox to change the laws, blames distributors for forcing him to skirt state liquor laws.

"It's kind of a clandestine economy that goes on out there," he says. "There's lots and lots of people that do this."

Such as Doug Ackley, a software specialist at Kansas State University who has regularly visited California wine country for 25 years. He has persuaded some wineries to ship him bottles he can't find back in Manhattan, Kan. — one in Mendocino routes cases through a third-party shipper that charges an extra $50 — but it's hit or miss.

"As far as I know, nobody's gone to jail yet from wine they shipped to me, but there are some that say no and we just go on," he says.

Winemakers are equally frustrated.  Earl Jones, owner of Abacela Vineyards and Winery, in Roseburg, Ore., recalls the young woman who wandered into his tasting room, tried six wines, then ordered a case of each.  He balked when she gave her address.

"I said, 'Oh, that's a felony state.' She said, 'Don't worry about it.' I said, 'I have to worry about it,'" Jones recalls.

The woman instructed him to use her name in both the shipping and return addresses, and then offered a word of reassurance. "She said, 'I know the attorney general in my state; I'm his physician, and if there's a fine, I'll ensure it gets paid and I'll send him a bottle of wine.'"

Jones shipped the wine.

Fighting for shelf space
While small operations account for the vast majority of the nation's 3,700 wineries, large wineries with broad access to national distribution and marketing channels sell most of the nation's inventory.

Wholesalers insist the consumer ultimately controls what appears on their local store shelves, and point to the diversity of wine available in major markets like New York. "If there's a marketplace for your wine, you will get to your consumers," says Karen Gravois of the Wine and Spirits Wholesalers of America.

Wine sales rely on networks of customers built over years, if not decades, which is why most wineries still rely on wholesalers even though direct sales net them twice the revenue per bottle what they could get from a wholesaler. Still, most would rather let distributors do the work.

"The truth is, I suck at selling wine," says Brian Loring, whose Lompoc, Calif., Loring Wine Co. produces just under 5,000 cases of high-end pinot noir.

Loring, whose wines have near-cult status among some drinkers, estimates he could grow his customer base by 60 percent if laws change. In states that permit shipping, he has seen direct sales spur additional demand from distributors.

Free trade in California
The California system draws praise from both wineries and distributors. It has champions like Fred Reno, president of the $150 million Henry Wine Group, which sells wholesale to retailers and restaurants in six states and Washington, D.C.

Reno believes wineries should be free to sell their products however they like: "I just have this strong philosophical belief that a producer should be able to sell wine to anybody at any time, any way they want, under legal parameters, of course."

Part of his perspective comes from having been on the other end of the phone. He struggled to build a national brand for Napa's William Hill Winery. Then he took a job with the prestigious Sonoma-Cutrer winery and suddenly found himself a popular guy among wholesalers: "The week before, they wouldn't return my call."

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Most states don't share this view. Liquor wholesalers have fiercely lobbied state legislatures to uphold the rigid rules of the Prohibition-era system.

Wholesalers insist these rules are the best way to ensure public safety, and pose no threat to the wine industry's rapid expansion.

There isn't much chance of a backlash against wholesalers. Retailers are beholden to them, and they rarely deal directly with consumers. Should the Supreme Court side with winemakers, Reno believes direct wine shipments will drive down prices, force wineries to sharpen marketing plans and improve the diversity of wines offered nationwide.

Meantime, he insists, "The consumer is the one who's getting the short end of the stick."

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