Not Saying Cheers.

Not all saying Cheers! to wine deal

Lynfred Winery, Galena Cellars oppose state plan

By John PattersonDaily Herald State Government Editor jopatterson@dailyherald.comPosted Wednesday, August 08, 2007
SPRINGFIELD – How wine is bought and sold in Illinois could change under a proposal lawmakers approved Tuesday and sent to Gov. Rod Blagojevich.

And while most Illinois wine makers appear to welcome the changes, some suburban wineries fear the changes could price them out of business.

The proposed law would limit to 12 cases a year the amount of wine someone could buy directly from a winery, whether the winery is in Illinois, California or anywhere else. The limit had been two cases per person per year.

And the law would prohibit wine purchases from out-of-state wine retailers, something critics said will restrict what wines Illinoisans have access to and likely result in higher prices.

Tom Wark, executive director of the California-based Specialty Wine Retailers Association, predicted the law will ultimately be declared unconstitutional and struck down.

The proposal is in response to a U.S. Supreme Court ruling that said states must treat out-of-state and in-state wineries the same.

The deal that cleared the Senate on Tuesday was viewed as preserving Illinois’ unique system of wine maker, distributor and retailer.

Some supporters said Illinois could ultimately see more wine business if out-of-state wine retailers decide to set up shop in Illinois to avoid the proposed law’s restrictions.

But some lawmakers said successful Illinois wineries would suffer as well and the new regulations would punish them for growing. As proposed, the largest Illinois wine producers would lose the ability to sell directly to restaurants and retailers and instead would have to enter into agreements with distributors.

Local wineries such as Galena Cellars in Geneva and Lynfred Winery in Roselle have said signing agreements with distributors could make their wines too expensive for the common connoisseur.

Distributors want a piece of the profit in exchange for carrying the relatively few bottles of wine small wineries create. That could ratchet wine prices up to $30 a bottle for companies like Galena Cellars and Lynfred Winery.

Both companies have about a year to strike a deal with a distributor to continue direct sales of their wines.

Fred Koehler, owner of Lynfred Winery, could not be reached for comment Tuesday, but he previously decried such severe direct shipping limits on his business as a possible kiss of death.

“It’d put us out of business,” Koehler said when such changes were first proposed in 2005. “That’s how serious it is. Why does the state want to put up more challenges for businesses when we’re an industry that’s trying to grow?”

Supporters said such provisions were necessary to show the proposed law didn’t unfairly target only out-of-state wineries.

There are nearly 70 wineries in Illinois. Most are represented by the Illinois Grape Growers and Vinters Association, which called the new law a victory for 95 percent of Illinois’ grape gurus.

David Stricklin, a consultant for the organization, said the vast majority of wineries in the state are much smaller than the Galena Cellars or Lynfred Winery operations. While those companies produce in excess of 85,000 gallons of wine a year, most other local growers fall below the 25,000-gallon mark.

That is now the threshold that triggers mandatory agreements with distributors to continue direct shipments of wine.

“This is a good bill for consumers, and will be a bill that furthers the dynamic growth in our industry,” Stricklin said. “For the bulk of wineries in Illinois, this is an extremely good result.”