March 6th, 2006
Senate Bill 82, which prohibits direct shipments in Kentucky, passed the state Senate and now moves to the House. Winery owners claim that this bill would kill the Kentucky wine industry. A second bill in Kentucy that would allow small wineries to ship directly to retailers remains in House committee.
This article has some very interesting facts about the Kentucky wine industry.
In the late 1700s and early 1800s, Kentucky was the third largest grape producing state in the country. The Civil War and Prohibition slowed graped production significantly and farmers thus turned to tobacco as a cash crop. In the 1990s, tobacco production declined. The state Congress then moved in with statutes designed to bring back the wine industry that once flourished.
“Small wineries” in Kentucky are those that produce less than 50,000 gallons (roughly 21,000 cases). The Kentucky legislature created laws to help these small wineries get off the ground. Small wineries would get an exemption to distribute directly to retailers because distributors would not pick up their wine. SB 82 would change that.
According to Jeff Tatman of Felice Vineyards in Kentucky, “Unless you are producing 100,000 cases a year, the distributor doesn’t want to carry your product because you aren’t making them enough money. Even if they are forced to pick us up, they are not going to push us.” In 2004, the total production of Kentucky wineries was 96,000 gallons and “most winery operators in the state are only producing about 3,500 cases of wine a year”.
This seems like a Catch 22. Distributors are not interested in picking up your wine until you produce a certain volume – let’s say 20,000 cases rather than the 100,000 suggested by Tatman (which could very well be true in Kentucky) to be conservative. But under the proposed legislation, all Kentucky wineries must use a distributor. This doesn’t add up and the assertion that Kentucky wineries would be killed by this legislation seems all too valid.