Ban on direct shipments could put wineries over a barrel

LANSING – When Donald Coe purchased his Leelanau County property, it was classified a "dormant farm," a house and field that had been inactive for years.

Since starting a vineyard and winery business on site, Coe is now the successful owner of Black Star Farms, which hosts about 50,000 wine tourists a year, some of whom, he said, are unable to find his wines at home.

"It's very, very difficult to find access to our wines, even down- state," said Coe.

Wine producers on the Leelanau and Old Mission peninsulas often rely on Michigan's law that allows direct shipment of alcohol within the state to customers who are not able to purchase their wines through retail. This practice has suddenly landed them in the center of a political controversy.

A legal case involving the state legislation and Detroit-area wine educators over direct shipment was recently settled by the U.S. Supreme Court on May 16. The Court said that Michigan's laws were discriminatory to out-of-state wine producers, who could not by-pass a wholesaler and sell direct to Michigan consumers, as in-state producers could.

The ruling gave the state 25 days to change the law. Since then, the Michigan Liquor Control Commission (MLCC), who enforces alcohol-related laws for the state, has introduced a concern that direct shipment and sale of alcohol could contribute to underage drinking.

"The Commission believes that the court was not advising that any particular manner of regulation be required, only that whatever approach is used should be applied to all in an even-handed manner," said MLCC Chair Nida Samona. "The issue of alcohol falling into the hands of underage persons remains a significant concern. Ultimately, it is the Michigan Legislature who will have the final say in this matter."

So far, legislation has come down hard against direct shipments. Rep. Chris Ward, R-Brighton, has introduced a bill calling for a ban on all direct shipments of alcohol both inside and outside the state.

"We are supportive of the bill," said Michael Lashbrook, President of the Michigan Beer and Wine Wholesalers Association (MBWWA). "If you expand Internet sales, it's setting a very dangerous precedent. We can't rely on a delivery company to make sure the deliveries are done properly; there's no license for them to get."

Lashbrook also believes alcohol shipments both inside and outside of Michigan need more regulation.

But Mark Johnson, owner of Chateau Chantal on Old Mission Peninsula, said Michigan has a very fine system when it comes to regulating the direct shipping of Michigan wine.

"There's a lot more control than an in-store sale," said Johnson. "It requires us to get all the customer's contact information and keep it on file in writing, an adult signature is required at the time of delivery and that signature is also kept on file."

Johnson, Coe and others have formed an organization dedicated to defending the right to ship wine in Michigan. "Wine Michigan" is attempting to persuade legislation to enforce limits on direct shipment, rather that banning it altogether.

Two bills introduced in late June by Rep. Kevin Elsenheimer, R-Bellaire, and Sen. Michelle McManus, R-Lake Leelanau, would do just that. The house and senate bills would permit direct shipping specifically for the purposes of wine and require a limit on the amount to 24 cases of wine at a time. It would also require a wine producer to get permission from the MLCC to sell direct. The bills would apply to wine producers both inside and outside the state.

Coe said that the eight percent loss in sales from direct shipping could make a considerable impact on all area wineries.

"This is a life or death issue for small agri-businesses and rural businesses," said Coe. "For us, that eight percent is the difference between a profit and a loss."

With wholesaler distributors becoming more and more consolidated, it's harder for small wineries to get distributed, said Coe.

"Four (wineries) are scheduled to open within a year. Five just opened now, half have distribution," he added. "We went the first two years without a distributor, so we could get to know the industry ourselves."

Lashbrook said the state could lose $500 million in tax revenue if direct shipping is expanded for all types of alcohol.

"The state loses 76 cents on every dollar in state money for every bottle of liquor shipped direct," he said. "The issue can be broader than just wine."

Coe estimates that the average wine tourist spends about $138 a day visiting wine country. "In Leelanau County, wine has been the only investment in agriculture in the last 10 years," he said. BN