Pressing Washington's Wine Industry into the Twenty-First Century: Rethinking What It Means to Be a Winery

Article excerpt

Abstract: Washington's wine industry is growing, and the ways in which Washington winemakers craft and sell their product are changing. Traditional "brick and mortar" wineries coexist with so-called "virtual wineries," which typically purchase grapes from growers and contract with other wineries or custom crush facilities to access winemaking equipment. The virtual winery is an incubator model and contributes to the rich diversity of Washington's wine industry. Washington's current winery licensing statute, RCW 66.24.170, does not clearly apply to virtual wineries because it links the concept of a winery with a particular physical location and fails to delineate exactly what types of winemaking activities licensees must engage in. This statutory ambiguity causes confusion for winemakers and regulators. House Bill 1641, introduced in January 2011, seeks to remedy the confusion by dividing the current winery licensing statute into two classes: one for traditional wineries, and one for virtual wineries. The latter would be licensed not as producers of wine but as retailers. While well-intentioned, House Bill 1641 could negatively impact Washington's wine industry by limiting virtual wineries' access to consumers via interstate direct shipment. Unlike licensed wine producers, wine retailers presently lack Commerce Clause protection from state laws discriminating against direct shipment of out-of-state wine. Thus, this Comment argues that Washington should follow the example of Oregon and enact legislation amending RCW 66.24. 170 to clearly license virtual wineries as producers.

INTRODUCTION

Like fights about most regulation, those about wine rules are about economic interests. And, as in fights about most product regulation, the overlooked constituencies are consumers and mom-and-pop businesses.1

Washington is home to a robust and growing wine industry. In 2010, Washington grape growers produced 160,000 tons of more than thirty wine grape varietale, a record high.2 These 160,000 tons of grapes yielded approximately twelve million cases of wine.3 According to the Washington Wine Commission, the total statewide economic impact of Washington's wine industry is $3 billion.4 The Washington wine industry has undoubtedly come a long way since its humble origins at Fort Vancouver in 1825.5 The coming of age of Washington's wine industry manifests itself not only in sheer numbers but also in the changing ways that Washington winemakers craft, market, and deliver their product to consumers.

Many people may associate winemaking with a villa or château set against a hillside lined with row upon row of lush vines, a barn or cellar housing stacked barrels of aging wine, and an on-site tasting room. While this traditional "estate" or "brick and mortar" model still exists in Washington today, it is not the only model. Of the total 120,000 tons of Washington grapes crushed in 2006, only 35,275 were estate grown - the rest were either purchased or custom crushed.6 These figures indicate that not all Washington winemakers grow and crush the grapes they produce. Rather, some winemakers purchase grapes from growers and crush them at their own facility.7 So-called "virtual wineries" purchase grapes and arrange to have them crushed at someone else's facility.8 The latter production model has gained recent popularity among Washington's smaller, start-up wine operations.9

The rapid growth in the American wine industry over the past four decades10 has sparked increased competition, prompting wineries to develop new methods of reaching and retaining consumers.11 According to the Federal Trade Commission (FTC), American wine consumers increasingly desire "individualistic, hand-crafted wines."12 The FTC links this shift in consumer preferences with the emergence of more and more small wineries.13 However, small, start-up wineries face greater difficulty finding distributors than do their established, large-scale counterparts.14 As a result, many small wineries rely in part on direct-toconsumer sales, including through internet-based wine clubs and other forms of e-commerce. …

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