Posted: Apr 12, 2019
It’s one of a handful of states that restrict what you can order from out-of-state. Now wine lovers are fighting back.
Rodney Glockner loves a fine wine. But to get a case from his favorite vintner, the 73-year-old first has it shipped to North Carolina, where his son repackages the bottles and sends them to him in New Jersey.
Sound strange? New Jersey, along with Ohio, bans larger wineries from shipping their products directly to residents. They’re among 11 states with restrictions on out-of-state wine retailers. But wine makers and wine lovers are pushing back, urging legislators to lift what they consider anachronistic laws and let the vino flow.
In 2018, the volume of direct-to-consumer wine shipments in the U.S. rose 8.9 percent, to 6.3 million cases, according to an annual report by Sovos ShipCompliant. Wines priced $100 or above saw an 18 percent increase in shipping, while wines under $30 delivered direct-to-consumers climbed 6 percent. But such good news for the industry may be short-lived, as the report also said the flow of wine via e-commerce was beginning to slow.
Wine industry groups have been pushing to open additional markets and lift various restrictions in states such as Rhode Island, Delaware, and Indiana. For wine enthusiasts in New Jersey and Ohio, the bans limit them to ordering from just a few out-of-state wineries that altogether produce less than 5 percent of the wine consumed in the U.S. This is according to Free the Grapes, an industry group formed in 1998 to push legislators to allow direct shipping from wineries to consumers.
Forty years ago, almost all states banned direct winery-to-consumer shipments. Today, only five do, and some consider it a felony. In New Jersey, then-Governor Chris Christie loosened the cork a bit in 2012 by signing a law allowing out-of-state shipments—but only from smaller wineries. The so-called “capacity cap” was born.
“It makes no sense at all,’’ says Dennis Cakebread, whose family has been operating Cakebread Cellars in Rutherford, Calif., since 1973. “We have a lot of people who live in New Jersey who have their wines shipped to New York, to their office, to their brother-in-law,” he said. “You scratch your head and realize that New Jersey is missing it.”
Cakebread, with more than 1,600 acres throughout Napa Valley, surpasses the Garden State’s cap. Its Dancing Bear Ranch Bordeaux Blend—which costs about $200 a bottle—is one of Vivino’s top 15 red wines this year, but New Jerseyans can buy it only in a liquor store (if they can find it) or have it shipped to a state that doesn’t ban direct sales.
So why, in some parts of America, is it so difficult to get a Napa chardonnay or cabernet shipped to your door?
The answer dates to 1933, when Prohibition was repealed and states were given the authority to make their own rules regarding the sale of alcohol. The result was a patchwork of laws that, as with those governing so many other industries, were ill-suited for the advent of e-commerce.
For years, wineries sold their products via wholesalers and retailers. Then came the opportunity for consumers to buy wines they fell in love with on business trips or on vacation—and to get it right from the source, rather than begging a local liquor store to stock it.
Over the years, winery groups and consumers have challenged these restrictions, filing lawsuits and lobbying lawmakers. In 2005, the U.S. Supreme Court ruled that laws in New York and Michigan banning direct-to-customer shipments of wine from out-of-state wineries were unconstitutional. That decision cracked open the door to shipping wine across across borders.
In January, the Supreme Court heard arguments in a lawsuit challenging Tennessee’s alcohol laws, which impose residency requirements on people seeking a retail liquor license. Associate Justice Brett Kavanaugh was among the skeptics, saying the text of the 21st Amendment, which repealed Prohibition, “does not support” rules designed to protect local liquor retailers from out-of-state competition.
The high court is set to rule in the case by the end of June. Its decision—and reasoning—could affect future rulings on other state alcoholic-beverage prohibitions.
In New Jersey, where a bill that would eliminate the capacity cap is pending, the state would gain about $4 million a year in fees and taxes, according to research conducted in 2015 by the Eagleton Center for Public Interest Polling at Rutgers University. The study was done on behalf of the San Francisco-based Wine Institute, which represents California wineries.
Sure, that’s pocket change for a state that collects more than $30 billion in annual taxes. But the legislation is more about consumer access than revenue, backers say. “This is about freedom of choice and a consumer-empowerment issue,” said Andrew Zwicker, a New Jersey lawmaker co-sponsoring a bill. “That’s what drives me more than the economics.”
The legislation pending in Trenton, however, is fiercely opposed by the New Jersey Liquor Store Alliance, which warns it could result in less choice, less access, and higher prices. However, Maryland’s experience runs counter to the industry group’s logic. In 2011, Maryland enacted a law allowing direct wine shipments. A state report issued a year later found “a measurable impact on product availability and consumer choice” and “minimal to no impact” on wholesalers located in the state.
Since New Jersey’s direct-to-consumer capacity ban was enacted, many out-of-state wineries have stopped working with liquor stores and other retail outlets, says Paul Santelle, executive director of the alliance and owner of a liquor store in Perth Amboy. Consumers who used to be able to find fine out-of-state wines in local stores can no longer do so.
“We had all this consumer choice,” said Santelle. “This is killing the fine wine business for average consumers that, for special occasions, want to buy that one good bottle.”
Years ago, when direct sales were banned in New Jersey, Santelle and others worked to build relationships with out-of-state wineries so they could sell their bottles to Garden State drinkers. “I met these people in the ‘80s when they couldn’t sell their wines,” says Santelle, 60. “It’s kind of a slap in the face that the fine wine business has disappeared for me and others in New Jersey.”
Glockner, the New Jersey wine lover, said he gets about four to five shipments a year from Daou Winery & Vineyards in Paso Robles, Calif. He’s a proprietary member, which means he gets access to wine that isn’t sold anywhere else. Daou’s Patrimony 2015 Cabernet Sauvignon, which goes for about $275 a bottle, had a 97-point rating from Wine Enthusiast Magazine.
Daou, though, can’t ship to New Jersey because its operation is too big. Glockner either picks up the wine when visiting his son or pays him to send it to him from North Carolina. The former strategy comes with an additional cost, however: A few bottles are lost to his daughter-in-law, Glockner says.
By Stacie Sherman
April 12, 2019
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