New laws to ease marketing of Washington wines

Producers, distributors and retailers of Washington wines have a little bit more regulatory breathing room with the passage of some new laws by the Legislature this year.

Laws that go into effect July 26 will help create better marketing opportunities for Washington wineries, said Marty Clubb, president of the Washington Wine Institute and owner/managing winemaker of L'Ecole No. 41 near Walla Walla.

The two major bills, SB 5834 and HB 2040, create a number of changes in regulation in the wine and brewery industries.

Clubb said two of the most significant changes for smaller wineries allow them to give away promotional items of nominal value to retailers and let producers, distributors and retailers invest in each other's business.

"If you marry someone who owns a restaurant, you can own a winery," he said as an example.

Jean Leonard, executive director of the institute, said that change should encourage more investment in the state's wine industry.

The institute's mission is to lobby on behalf of the wine industry on regulatory and legislative issues.

The law prohibiting the players from different parts of the industry from having a financial interest in areas other than their own dates back to Prohibition and is in place in most states, said Rick Garza, deputy director of the Washington State Liquor Control Board. The law was designed to prevent a monopoly by one brewer or distiller over the whole industry.

But the laws, referred to as tied house law, have been tweaked many times over the years. This year's law takes the large step of allowing full and partial financial interests between producers, distributors and retailers, he said.

The new law requires different business entities to be created so a new restaurant couldn't open under the same corporate entity as a winery, he said.

Making sure a winery doesn't exert too much influence on a restaurant's wine list and other issues of undue influence will be on the board's radar in the coming year.

"The idea there is ... that people within the tiers are making independent decisions," Garza said.

A complaint process will be in place to handle concerns. If a winery has partial interest in a restaurant chain, it can't tell the restaurant to stop carrying other wines, Garza said as an example.

Another change allows wineries more storage space. An Eastern Washington winery, for example, now can have a storage facility in Western Washington for easier distribution, Leonard said.

And in an age of increasing use of technology, retailers such as restaurants now can pay wineries by using electronic funds transfers. Before, those transactions had to be paid in cash, she said.

"It's a huge step forward in a continuing process of improving our liquor laws," Leonard said.

Another bill, HB 1812, establishes stricter requirements for wines whose labels use Washington state's name. At least 95 percent of the grapes used to make the wine must be grown in state.

"The Washington wine industry is all about quality and integrity. If the wine label says Washington on the front, it's got to be 95 percent Washington wine," Leonard said.

Bill Nelson, president of the national association WineAmerica, said he thinks the 95 percent requirement is an important step for the state.

"It is providing for the first time in the state of Washington a stronger standard than the federal requirement," he said.

The new laws build on legislation passed in previous years.

Last year, for example, it became legal for wineries to sell wine by the glass at secondary tasting room locations, and bonded wine warehouses now can ship directly to consumers, according to the institute.

Two years ago, rules were changed to allow wineries to ship wine to retailers using carriers such as UPS.

The changes are significant from an economic development point of view, Garza said.

"Why would we want a law that gets in the way of creating jobs or allowing people to create businesses in the state?" he said.

Nearly 600 wineries call the state home and most of them are small, Clubb said.

The liquor control board will use the time before the legislation takes effect to make rules, addressing issues such as the meaning of "nominal" in reference to items -- such as coasters and corkscrews -- that wineries can give to retailers, Garza said.

Promotional items can't be given to consumers, he added.

The issue of winery and brewery regulation was in the spotlight a few years ago as a result of a federal lawsuit Costco filed against some of the state's regulations pertaining to the three-tier system. The case mostly focused on wine pricing issues.

"(The Costco case) really got a lot of focus on alcohol and wine regulation," Clubb said.

Garza said he wasn't aware of any negative effect from past regulation changes in the wine industry.

"I'm comfortable we're moving in the right direction," he said, adding that any unforeseen problems can be taken back to the Legislature.

"We have a lot of challenges left, but I feel like the momentum is moving so strongly in our favor," Clubb said.