Liquor stores, wineries face off

Scott Osborn, the proprietor of Fox Run Vineyards in the Finger Lakes region, is shocked at the vitriol that has been hurled against him and his staff since he testified two weeks ago in favor of legislation that would allow grocery stores to sell wine in New York.

Sure, it was a bold move to go up against his liquor store vendors. They are a powerful lobby that has held sway over Albany lawmakers on the issue of expanding the sale of wine to outlets like Whole Foods or 7-Eleven.

He just didn't expect the phone calls and e-mails from liquor store owners threatening to remove his wine from their shelves and destroy his business.

“I'm shocked at how vicious they were,” says Mr. Osborn.

Rising tensions

Gov. David Paterson included the wine proposal in the state budget late last year in an effort to help close the deficit—New York would receive millions in revenues from licensing fees in thousands of groceries. Since then, the proposal has unleashed a war between liquor store owners and New York wineries and supermarkets, many of which support a change in the law.

The fight has become personal. Mr. Osborn recalls one especially nasty e-mail: “Thanks for trying to put me out of business,” it said. “I used to like pushing your wines but now just looking at them makes me want to puke. I'll never sell any of your wines ever again!”

Another winemaker, Doug Miles of Miles Wine Cellars in the Finger Lakes region, was told that his products would be “blacklisted.”

Both vineyards are suffering. Mr. Miles says his sales to liquor stores have declined 70% this month after a gain in January. Similarly, Fox Run's sales are declining in February.

Now, the office of state Attorney General Andrew Cuomo is reviewing the issue, a spokesman says.

But the battle lines are drawn.

Over the past several weeks, the state's 2,500 liquor stores have formed a coalition, The Last Store on Main St., to block the legislation. Meanwhile, some 15 supermarkets, including Wegmans and Whole Foods, as well as winemakers and trade organizations, have formed their own group to spread the word about the proposal's merits.

A spokesman for the coalition denied that owners were strong-arming winemakers. “We value the relationship we have with the wineries,” he says, “and we'll continue to value that partnership.” He cited the support of 60 New York wineries that are opposed to the legislation, arguing that grocery stores would not promote locally made wines.

Liquor stores maintain that the legislation would shutter nearly half the stores in the state, representing some 4,000 jobs, and would result in an increase in underage drinking.

Hefty licensing fees

The State Division of the Budget estimates that the new policy would generate $155 million in revenues from licensing fees. Advocates say it would also make shopping for wine more convenient, giving New Yorkers greater access. And it would give some 255 wineries in the state an opportunity to expand their business and hire more workers.

It has been a long-simmering issue in New York, one of only 15 states that prohibit wine sales in supermarkets. But grocery stores have never managed to get the matter into the governor's budget, though it is still early in the legislative process.

The New York Farm Group, a trade organization, has long advocated wider distribution of wine in the state. “Liquor stores are declining in numbers, and winemakers are increasing,” says Julie Suarez, director of policy for the farm group. “If liquor stores don't expand their business, we have to open the market for the wineries.”

Of course, the threat is real for the liquor stores, too. One of the owners who complained to Mr. Osborn after his testimony, Gail Brophy of Purdy's Liquor Store in Saratoga, says, “I know my business will be hurt drastically if wine goes in the grocery stores.” But she adds that she has not removed Fox Run wines from her shelves. In the end, “I do what's good for my business,” she says.

NYS WINE STATS

* 255 wineries
* 2,500 liquor stores
* 46th in the nation in wine retailers per capita
* Proposed legislation would expand outlets to 19,000