Wine-By-Mail Coming to Maryland?
The Baltimore Sun staff writer in a piece entitled "Wine-By-Mail Coming to Maryland?" sumarizes the comptrollers report on the effects of wine shipping in Maryland.
Survey released as lawmakers say direct shipment more likely
By Scott Calvert
The Baltimore Sun
December 21, 2010
Comptroller Peter Franchot released Tuesday a long-awaited report that wine enthusiasts hope will clear the way for legislation allowing wine-by-mail sales in Maryland.
The report, ordered by state legislators, offered a detailed look at how 37 states and the District of Columbia have drafted and implemented laws permitting direct shipment of alcoholic beverages. It contains no overall policy recommendation, and Franchot emphasized that it was "a starting point for legislative debate."
But direct-shipment supporters pointed to its main findings as bolstering their case.
Mike Hyatt, owner of Wells Discount Liquors on York Road, said he would welcome the change, scoffing at the notion that it would cut into his wine sales.
"Anything that promotes the wine business has got to be a very good thing long term for everyone," Hyatt said. "I think the amount of business done that way will be very small, and I think it will be with boutique wineries that are not currently represented by a wholesaler."
Del. Tom Hucker, who has sponsored direct-shipment bills and plans to do so again, said the report should advance the cause of greater consumer choice.
"The comptroller's report pushes the process forward by raising visibility, and my understanding is it demolishes a lot of myths the industry has been spreading against direct-ship bills for many years," said Hucker, a Montgomery County Democrat.
For example, the report disputes the liquor industry's contention that direct shipment would make it easier for minors to obtain wine. "There is no evidence that underage drinking has increased or decreased as a result of direct wine shipment," it concludes.
And the report suggests that Maryland liquor wholesalers and retailers would see little economic pinch if state residents could have wine shipped directly to their homes.
"Direct wine shipment by out-of-state wineries to Maryland consumers would not have an overall negative effect on in-state licensees," the report states, "because purchases from wineries are primarily motivated by 'availability.'"
The report addresses both in-state and out-of-state wineries but pays particular attention to those outside Maryland because they aren't known to state tax officials.
Liquor industry lobbyist J. Steven Wise said his members remain opposed to such legislation, but he added that they had not had a chance to review Franchot's report or to speak with elected officials.
"We'll be doing all that," said Wise, who represents Maryland's Licensed Beverage Association, a group of retailers. "I would say our position will evolve between now and during the legislative session, based on this new information and the political landscape."
Franchot's report comes amid growing signs that key lawmakers are working toward making direct wine sales legal in Maryland and ending years of debate over the issue.
State Sen. Joan Carter Conway, who chairs the Senate committee that oversees the issue, has said that legislation allowing Marylanders to receive shipments of wine at home would likely pass. Her counterpart in the House, Del. Dereck E. Davis, says he hopes to persuade colleagues to pass a bill in the session that begins next month.
Davis, a Prince George's County Democrat, said he was not surprised by the report's broad findings and that he was confident of crafting an "effective compromise that allows this issue to move forward."
Hucker said direct shipment would not harm wine retailers and wholesalers because consumers would largely use it to buy wines not available in stores. "None of us go online and pay shipping costs to order a product at a premium cost that you can buy around the corner," he said.
Last year, wine-by-mail supporters came up short at the General Assembly. A group called Marylanders for Better Beer and Wine Laws led the push for a change in state law. It bumped up against the state's powerful liquor lobby, which has sought to protect the highly regulated system of alcohol distribution.
Wise saw some positive aspects of the report, including a suggestion to limit each adult to a dozen 9-liter cases per year. "Would that lessen the impact? Yes," Wise said.
Wise also appreciated that the report frowned on the idea of letting out-of-state retailers — as opposed to wineries — ship wine directly to consumers.
The report says shipments from wineries would be considered "exceptions" to Maryland's alcoholic beverage regulatory system. But because shipments by out-of-state retailers would be "integral" to that three-tier system — producer, wholesaler and retailer — it says "allowing direct wine shipment from out-of-state retailers is incompatible with existing alcoholic beverage laws in Maryland."
At a news conference in Annapolis, Franchot said, "It's crucial to the passage of this bill that we not open up all of our wonderful Maryland retail establishments to just incredibly aggressive marketing by out-of-state retailers that are undercutting them on price. That is not a good component."
All sides in the debate have said they were awaiting Franchot's report summarizing best practices in other states and examining the history of alcohol sales in the United States and Maryland. Virginia is among the states that allow wine shipments to customers.
Small vineyards say they need direct shipment because they produce only a few thousand cases a year and rely on consumers willing to travel to their wineries in areas outside population centers.
In states such as Virginia, the ability to ship directly has led to growing customer demand, wine producers say. Chrysalis Vineyards in Middleburg, for example, estimates that one-third of the bottles it produces are mailed directly to customers, the vast majority of them in Virginia.
But lobbyists for the liquor industry have tried hard to protect Maryland's decades-old system of alcohol regulation. Under those rules, wineries sell to about two dozen Maryland licensed wholesalers, which then supply bars and retailers. Direct shipment would circumvent that arrangement.
Some retailers have joined wineries in pushing for a change in state law.
Mitch Pressman, owner of Chesapeake Wine Co. in Canton, said he disagrees with the liquor lobby's long-standing opposition. In fact, he said, he would go further than Franchot's guidelines and support letting out-of-state retailers ship directly to consumers.
"While a lot of retailers are afraid of the competition, I welcome the competition," Pressman said. "More availability creates more interest in wine drinkers."
Pressman said he's forming a group, the Wine Merchants Association, to advocate for a more open consumer market.
"I have no delusions about being able to carry everything everybody wants," Pressman said, noting that his store carries 600 labels out of some 40,000 available in Maryland alone. And there are tens of thousands of wines that no store in the state carries. "Why should that mean the consumer is limited by what's available in the state of Maryland?"
During the news conference, Franchot said "a lot of this opposition traditionally over the years has been somewhat emotional." And he recalled the many pleas he's gotten from state residents clamoring for direct shipment.
"I've had countless numbers of people in the Washington area come up to me and say, 'I'm sick of breaking the law and having wine sent to my law firm in Washington. … Why don't you open this up?'"
Franchot said while he personally supports a direct-sale law, the report was not meant to dictate state policy. Maryland lawmakers, he said, "wanted the facts, and that's what we're presenting today."