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New York pulls the cork

Published:  23 July, 2008

Residents of New York state will soon be able to buy wine direct from their favourite producers across America.

Governor George Pataki signed legislation on 13 July that opens New York - the second-largest wine market in the country - to direct interstate shipping starting in mid-August.

The action follows a US Supreme Court decision in May striking down laws in both New York and Michigan that had permitted direct-to-consumer sales for wineries located within these states, but which denied the same market access to out-of-state producers (see Harpers 10 June and 20 May).

A direct sales channel into the Empire State is welcome news for many smaller American wineries that find it difficult to obtain listings with wholesale distributors, the traditional and most significant route to market. Most of our wineries are family-owned businesses that have a tough time getting major-market distributors to carry their brands,' said Ted Farthing of the Oregon Wine Advocacy Council. We applaud New York's decision. The economic impact for many smaller wineries could be substantial.'

It also expands the potential market for New York's own wineries, which have largely been limited to local sales. According to Jim Trezise, president of the New York Wine & Grape Foundation, the new law transforms the industry from a local curiosity into a national player'. With more than 200 wineries, New York is the third-largest producer in America, behind California and Washington.

Despite this liberalisation, many analysts say that the high cost of shipping single cases will effectively limit direct sales to high-end wines, and the vast majority of brands will continue to be sold through established wholesale distributors.

That is, unless one retail giant wins the legal challenge it has pending. Costco is asking a federal district court to rule against the distribution system administered by Washington state, which permits wineries and breweries within Washington to sell directly to in-state retailers, while denying the same access to producers located outside the state.

If Costco wins, the ruling could initiate direct sales between wineries and retailers, and that could mean fundamental change for the business of wine in America.

On the same day that New York approved the free flow of wine across its borders, Governor Jodi Rell of neighbouring Connecticut endorsed a law to permit direct shipping in that state, starting on 1 October. Meanwhile, the state of Louisiana moved to prohibit the direct sale of wine to its residents. Wineries in Louisiana had previously shipped directly to in-state consumers, although out-of-state wineries were forced to use intermediary distributors. Governor Kathleen Blanco said last week that the recent US Supreme Court ruling left her no choice but to implement a total ban on direct sales, which goes into effect immediately.