New York sobers up
In the immediate days after the Supreme Court’s May 16 decision on direct wine shipments, New York wineries oddly embraced the decision to open the state up to competition. Governor Pataki assumed the most bullish tone saying “By permitting the interstate shipment of wine in New York, we will allow New York’s wineries to grow even more by opening the doors to new markets across the country that were previously closed to them.”
I expressed skepticism about this argument saying:
Shipments to consumers in New York from New York wineries are bound to decline. The small section of the population that currently orders directly from wineries will likely celebrate the diversity of being able to order from California, Oregon and Washington instead. So they [the wineries] are betting on increased demand from out of state buyers, seemingly a risky proposal.
This is one case where I would love to have been proven wrong. Unfortunately a story in today’s Newsday reflects the current situation:
When state legislators and Gov. George Pataki this summer approved a law permitting direct consumer shipments of wine into and out of New York for the first time, winery owners like Charles Massoud of Paumanok Vineyards raised a glass in celebration.
The party didn’t last long.
Today, Massoud professes the sobering conclusion that the law may be reducing his wine shipments while increasing his shipping and office costs.
“In the end, we are worse off today than we were prior to the bill being passed,” he said with an air of defeat at his Aquebogue tasting room yesterday.
Massoud, and perhaps others, are caught in a trap of stagnating orders and increasing costs. He admits in the story that he has sent only 20 cases of wine to other states. And in-state shippers are now required to get a signature for all wine orders, similar to out-of-state shippers. This has eaten into their lucrative Wine Club business since people must now be home to sign and it has imposed an additional $2,400 paperwork on the winery. Given that the case prices of wine at the winery range from around $200 to $400, the additional cost of paperwork should be fairly easy to digest.
It’s not as if the paperwork was unforeseen and some in the industry, such as Willy Frank of Chateau Frank and Dr. Frank’s Vinifera Wine Cellars, were also skeptical when Pataki signed the bill.
It is a tough new era for New York wineries, one of opportunity as well as competition. Those that succeed will be the ones that pursue quality winemaking, have easy access to capital, or have a loyal customer following. I can’t imagine these changes single-handedly bankrupting many of the states 219 wineries–if anything, it could ween them off the high-margins of direct selling that developed in the decades before May and back toward more traditional channels of selling wine. The winds of competition can be cold and quality is the best strategy for success.
Technorati tags: wine | food & drink |New York
