Ruling Might Keep Sales of Illinois Wines Bottled Up

By Fuller, James | Daily Herald (Arlington Heights, IL), May 23, 2005 | Go to article overview
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Ruling Might Keep Sales of Illinois Wines Bottled Up

Fuller, James, Daily Herald (Arlington Heights, IL)

Byline: James Fuller Daily Herald Staff Writer

The fruit of Rudolph Valentino DiTommaso's labor might never pass the lips of wine lovers as close to home as Indiana.

DiTommaso runs his own wine label, Valentino Vineyards in Long Grove, with grapes first planted 10 years ago.

Countless wine aficionados have never known DiTommaso's vintage, nor those of more than 50 other small wineries in Illinois. Those wineries can't ship wine directly to customers in roughly half the nation's states, where wine import bans shut them out of the market.

Florida's law would slap DiTommaso with a felony if he mailed a bottle to his father, who lives there.

But Florida and other states must rethink those bans in the wake of a U.S. Supreme Court decision - a 5-4 ruling last week declaring interstate shipping bans unconstitutional in Michigan and New York.

Illinois wineries already have petitioned the federal courts to strike down Indiana's direct shipping ban.

Their dream is for an open market that intoxicates their bottom lines. But states could just as easily dash those hopes into sour grapes by ending all direct shipping, closing the market even more.

At least one key concern for states is a fear that direct shipping of alcohol is yet another catalyst for underage drinking.

'Low-level trade war'

States must treat in-state and out-of-state businesses the same, the court ruled.

"The current patchwork of laws - with some states banning direct shipments altogether, others doing so only for out-of-state wines and still others requiring reciprocity - is essentially the product of an ongoing, low-level trade war," Justice Anthony Kennedy wrote in the prevailing opinion.

Only four states consume more wine than Illinois, according to the Illinois Grape Growers & Vintners Association. For local consumers, the ruling may open up the wine market across the country to a war where only the strongest grapes survive. Better quality wine at lower prices with more labels to choose from could be the outcome.

As many as 50 decisions must happen before that, as states must rewrite laws to reflect the court's ruling.

Wine is a big-money business. Direct shipments of wine to consumers doubled from 1994 to 1999, according to the Federal Trade Commission. Direct shipping accounts for only 3 percent of all wine sales, but is worth $500 million a year. The growth is not from the Beringers and Gallos of the world. It's the little guys. There are more than 3,000 local wineries in the country now, three times the number 30 years ago, according to the National Association of American Wineries.

But wine wholesalers and distributors have consolidated, making it tough for wineries that don't produce massive quantities of well-known products to make it to store shelves.

Prohibition-era roots

Distributors, who some small vineyards blame for squeezing them out, became part of the mix when Prohibition ended. States still wanted to regulate alcohol, so a three-tier system was born.

It injects a distributor between alcohol producers and retailers. That helped calm the retail pressure of selling as much alcohol as possible to maximize profits.

Local wineries say the system works only for the Robert Mondavis of the world.

For instance, Galena Cellars, which operates a store in Geneva, can't pay distributors to ship their wine without charging an elite price.

Scott Lawlor, whose family owns Galena Cellars, said distributors and retailers each want such a large chunk of the pie that a $30 price tag would be the only way to turn a profit.

A $30 bottle of wine is too pricey for most consumers, especially the burgeoning twentysomething market, he added.

The Glunz Family Winery in Grayslake is benefiting from the youth movement, but not enough for distributors to carry their relatively few bottles of wine, General Manager Suzzie Glunz Holtgrieve said.

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Ruling Might Keep Sales of Illinois Wines Bottled Up


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