Wineries seek state aid to compete

Some Arkansas winemakers say they're hoping for state aid to help deal with high startup costs and competition from cheap out-of-state grapes while they struggle to rebound from 2007's devastating harvest-killing freeze.

Some point to Missouri's promotion of its wine industry as a model. Others tout tax breaks for new vineyards.

But few are content to let their problems continue to ferment.

"I'd very much like to see the focus on the Arkansas wine industry, it's a dying industry I feel," said Audrey House, owner of Chateau Aux Arc in Altus, the center of the state's wine country.

Except for an occasional spike, the state's wine production has been in decline for many years. From grape harvests approaching and occasionally topping 10,000 tons in the 1970s and early 1980s, harvests have dipped to 2,220 tons in 2006 and just 500 tons in the freeze-year, 2007.

Arkansas has about 750 acres of commercial vineyards, a tiny bit of the 935,000 acres of vineyards nationwide. The state produced just 272,000 gallons of wine in the fiscal year that ended June 30. Americans drank 745 million gallons in 2007.

Even with the decline in the state's wine production, the winemakers don't agree on how to jump-start the industry.

House blames grape juice trucked in from out of state for depressing prices for grapes grown in Arkansas. She'd like to see the state enact a cap on out-of-state products for making wine - such as grape juice - similar to the 15 percent limit that Missouri imposes.

John Post's family owns Post Familie Vineyards in Altus, one of the largest wineries in the state, according to tax collections by the state Department of Finance and Administration, and he thinks a cap might be unconstitutional.

"We can't do anything to prohibit out-of-state wineries from doing business in our state," Post said, noting that a 2005 U.S. Supreme Court decision in the case of Granholm v. Heald ruled that it's unconstitutional for states to favor native wineries over those from other states.

Jim Anderson, executive director of the Missouri Wine and Grape Board, said in the 20-odd years since the cap has been in place, there has never been a constitutional challenge.

"We have different, more expensive licenses that wineries can buy if they want to bring in more from out of state," he said.

Other growers discounted the effect of out-of-state grapes on the state's wine industry. Post and another grower, Bob Cow- ie of Paris, said "rumors" about out-of-state grape juice flooding the market are likely the result of growers having to resort to bringing in grapes after a deep freeze around Easter in 2007 killed off much of the Arkansas crop, leading to the smallest harvest since 1949.

"We lost our entire grape crop in '07. We had to bring in fruit," Post said.

Post prefers that the state encourage more native grape production until the grapes can be harvested, although he says he's not sure what form of aid that might take.

"It's an expensive crop to plant. Your typical row crop might cost a couple hundred dollars per acre to plant. Wine grapes with the posts, the trellises and the drip irrigation can be up to $5,000," Post said.

Gov. Mike Beebe's spokesman Matt DeCample said that the governor's staff has had "informational" meetings with winemakers but hasn't committed to anything.

"We were glad to listen, but we didn't give any direct indication. We'll look for the proposals when they're out there in the session," he said.

Rep. John Paul Wells, D-Paris, who sponsored 2007 legislation that changed Arkansas law after Granholm v. Heald, said he hadn't been approached by any winemakers yet but would consider sponsoring a bill to help them.

"That 2007 frost was absolutely devastating," he said.

Of Arkansas' nine licensed wineries, five split state grants for native wine totaling $375,000 last year, according to state records. The grants pay $25,000 to any winery that is at least 5 years old. The rest is divvied up according to the proportion of taxes paid in the previous calendar year, said John Theis, assistant revenue director for the Finance and Administration Department.

State wineries pay the same tax per gallon that wholesalers do when they bring in out-of-state wine.

House said she wants a shift in perspective on Arkansas wine. Calling herself an "Arka-vore," House said the growing national movement toward consuming locally-grown produce, meat and dairy could extend to wine. It's better for the environment, she said, and will help create jobs and revenue in Arkansas.

"I've been growing grapes for 10 years, but I'm only 32," House said. "But if I don't start getting support on the state and local level, I'll have to [quit]."

Anderson said Missouri has emphasized the locally grown aspect of its wine to the state's benefit in recent years.

"People want to buy something local. And wine is one of those local products that comes from a specific region," Anderson said.

Cowie has been making wine in Paris since 1967. None of his seven children has followed him into the wine business in Arkansas, although one son is making wine in Florida.

"That cracks my soul," he said. "If you want to start a winery go to Missouri or Oklahoma. Harsh words, but this is my home state so I can say them."

State prohibitions on selling wine over the Internet have hurt his business, which is largely dependent on out-of-state tourists, Cowie said.

"Texans are my bread and butter," he said. "But I can't ship my wine to them."

Post said he's happy with the ban on Internet sales as his winery has a good relationship with distributors and is stocked in grocery stores. The status quo on interstate shipping is fine with him.

"My primary focus this session will be that no one messes with it," Post said.

Justin Morris, distinguished professor of food science at the University of Arkansas at Fayetteville, said the Arkansas wines are closely tied to tourism. And tourism is likely to take a big hit in the coming months of recession.

"They have some really good wines in their tanks down in Altus, but they've got to have tourists coming in there and buying," Morris said.

But the state's wine industry has always struggled to carve out a niche, Morris said.

"It's never been nice and calm. It's always been a survival type situation."