A Wine Fine : Tough Laws on Direct Sales Worry Smaller Vineyards

Ship some wine, do some time.

That’s what wags are saying about a law enacted last month in Florida making it illegal for California wineries and retailers to ship directly to residents of that state.

Florida, the nation’s third-largest wine market, thus joined Georgia and Kentucky in cracking down on untaxed shipments of alcoholic beverages, with threats of steep fines and multiyear jail terms for offenders.

Felony laws and other restrictions could stifle business for hundreds of small to mid-size commercial wineries in California, said Steve Gross, director of state government relations at the Wine Institute, a San Francisco trade group. Many wineries depend on word of mouth from out-of-town visitors who flock to their tasting rooms, then return home and order wines by phone or over the Internet.

“People come here as tourists and would like to get the products at home,” Gross said. “Now they can’t.”

(Some states do allow limited shipping privileges. California has reciprocal arrangements with 11 states, including Oregon and Washington, that permit the shipment of small quantities of wine to adults in those states and likewise permit wineries in those states to send to customers in the Golden State. Taxes are collected in the seller’s state.)

Florida’s new law so rankled Bill MacIver, co-owner of Matanzas Creek Winery in Sonoma County, that he launched an informal boycott of Florida orange juice. Family Winemakers of California, an influential 300-member trade organization, chose not to endorse that action, but it urged members not to participate in charity or wine trade events in the “felony states.”

The crackdowns are occurring amid a proliferation of online wine-buying clubs and catalog operations that make it possible for customers to get hard-to-find cabernets and chardonnays shipped to their doors. States fear that the trend will result in lost tax revenues and that sales to minors could escalate. Minnesota, for one, will soon prohibit buying or selling alcoholic beverages over the Internet.

For smaller wineries, direct sales are often the only avenue besides restaurants for getting their products to the public. Consolidation among the nation’s wholesalers has made it difficult for smaller producers to find distribution, because the few remaining wholesalers tend to play it safe by dealing only with high-volume brands.

Frustrated Florida fans have bemoaned the new rules to Deborah Cahn, owner and general manager of Navarro Vineyards, 25 miles west of Ukiah in Mendocino County. “I tell them to pick up our wines [on their visits to] California,” she said, “but I’m essentially losing them as customers.”

Wine Institute lobbyists have high hopes that a compromise reached with wholesalers, retailers and regulators in Louisiana will serve as a model for other states looking to curb direct shipments. Under that law, signed last week by Gov. M.J. “Mike” Foster Jr., an out-of-state licensee with the proper permit may ship 60 bottles to any Louisiana adult during a 12-month period. The licensee must file an annual report of what items were shipped and pay excise and sales taxes.

Bunches of Grapes

All those plantings of merlot and zinfandel grapes in recent years are propelling California’s 1997 harvest into the record books. The state Department of Food and Agriculture projects that wine grape production will reach a record 2.7 million tons, up 21% from last year. That’s 170 pounds for every person living in California.

Thanks to arid ripening weather, growers expect good quality. But James Laube, senior editor at the Wine Spectator, a glossy magazine for wine enthusiasts, noted that “it’s premature to assess the overall quality, because the grapes haven’t been picked.”

Reaping IPOs

As that harvest is coming in, Beringer Wine Estates in St. Helena could very well launch an initial public offering of stock. Wine Business Insider reports that Beringer, which owns half a dozen major brands, will hire Goldman, Sachs & Co. and Hambrecht & Quist as underwriters. Newsletter sources said the offering could draw about $100 million. A Beringer executive wouldn’t comment.

Wall Street is being lured by the heady success of a handful of publicly held wine companies, including Robert Mondavi Winery, which launched in 1993 at $13.50 a share and has traded as high as $47. Scheid Vineyards Inc., with offices in Marina del Rey, this month issued a prospectus for an IPO at $9 to $10 a share. Scheid, which would be the first independent grower to go public, runs vineyards in Monterey and San Benito counties. Underwriters for the 2-million-share offering, expected in late July, are Cruttenden Roth in Irvine and New York’s Laidlaw Equities Inc. and Rodman & Renshaw Inc.

Martha Groves can be reached by fax at (213) 237-7837 or by e-mail at martha.groves@latimes.com