Liquor wholesalers keep wine bill bottled up in committee

By TIM TALLEY

Published: March 2, 2008

OKLAHOMA CITY (AP) _ Oklahoma wine makers fear their fledgling industry is doomed to wither on the vine unless they win the right to distribute their products to package liquor stores and restaurants without using a wholesaler.

But legislation that would set a statewide vote of the people on whether to do just that has been bottled up in a state House committee for much of the past year while wholesalers and wine producers haggle over details that opponents say threaten to undermine Oklahoma's three-tiered system of alcohol distribution.

Lobbyists for wholesalers and the Oklahoma Grape Growers and Wine Makers Association have met repeatedly with House leaders — including Republican House Speaker Chris Benge — over the past month to negotiate a compromise that would grant self-distribution to wine makers without threatening the system that has been in place since voters repealed prohibition in 1959. The measure, passed by the Senate last year, is finally scheduled to be heard by the House Rules Committee this week.

The bill would order a statewide referendum on a constitutional amendment to permit Oklahoma wineries as well as wineries in other states to sell up to 10,000 gallons of wine a year directly to package stores and restaurants, more than many of the wine maker group's 55 family farm operations produce.

Oklahoma wineries were given that right in 2000 when voters approved a statewide referendum that gave small wineries the right to sell directly to retail establishments. The measure passed in all 77 counties with 78 percent of the vote.

The law was challenged by liquor wholesalers who said it discriminated against out-of-state wineries who were not allowed to sell directly to liquor stores or restaurants in Oklahoma. A federal judge struck it down in 2006.

"We just want to get back to where we were," said James McSpadden, who represents wine growers. "This would provide cheaper Oklahoma wine for consumers, which would make Oklahoma wine more successful in the marketplace."

Under the current system, McSpadden said, an Oklahoma wine maker who wants to sell a case of wine to a local liquor store must transport the wine to a liquor warehouse in Oklahoma City or Tulsa, where it has to sit for 24 hours before it can be trucked back to the liquor store in the winery's hometown.

"It's absurd," McSpadden said. "When we have to sell to a wholesaler, we have absolutely absurd drive times."

Many Oklahoma wineries grow grapes, make their own wine and operate small restaurants on their own property. But under current law, wine makers must sell and ship their wine to a warehouse which then sells and ships the wine back to the restaurant after a markup in price of about 20 percent, McSpadden said.

State wines can still be marketed in Oklahoma at special events like state and county fairs.

Gary Butler, past president of the wine makers organization and operator of the Summerside Vineyards & Winery in Vinita, said he has struggled to get bottles of his winery's Cabernets and Rieslings in local liquor stores since self-distribution ended.

"It's a little frustrating," Butler said. "The liquor stores are calling and the wholesalers are not carrying it. They're geared for big operations. The small wineries fall through the crack."

House Democratic Leader Danny Morgan of Prague, author of the wine bill, said it is only intended to bring wineries back to where they were before self-distribution was ruled unconstitutional.

"These is merely trying to help our local wineries try to get their product in the marketplace in a cost effective manner," Morgan said.

"I've really had some difficulty since we lost self-distribution," Butler said. "It's definitely not working."

A spokesman for liquor wholesalers, former state Republican Party leader Chad Alexander, said wholesalers fear self-distribution by wine makers will erode the three-tiered system of producer, wholesaler and retailer that has defined alcohol distribution in Oklahoma for almost 50 years.

"That's always been the concern," Alexander said. "If we have a self-distribution law, it affects everybody."

If state lawmakers alter part of the distribution system then other parts might also be changed or become ineffective, he said.

"We need to do it in a careful, responsible manner," Alexander said. "This is about the regulations of alcohol. That's the thing that got everybody concerned."

Morgan said the statewide referendum that allowed wineries to self-distribute in 2000 was proposed because wholesalers did not carry products from small Oklahoma wineries and when they did they added a substantial surcharge, making locally produced wines noncompetitive.

"When those wineries were allowed to self-distribute, I didn't see any erosion in what the wholesalers are trying to do," he said.

McSpadden said wine makers have agreed to many wholesaler demands for changes to the wine bill including prohibiting co-ops from self distribution, elimination of Internet sales and direct-to-consumer shipping and requiring wineries to distribute their own products, not those of others.

The measure also includes stiff penalties on any winery that exceeds the 10,000-gallon limit, including a $10,000 fine per infraction and elimination of self-distribution rights for three years after the second infraction.

"We've been working this bill hard," McSpadden said. But the level of support it will receive is hard to predict, he said.

Butler said changes are needed to help Oklahoma wineries become as successful as those in nearby states like Texas, whose wine industry generates $1 billion a year.

"People are interested in buying wines that are grown locally," Butler said. "But there are some flaws in the system for the small winery."

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