 by Steven Kolpan Issue 45 (March-May 09) [Copyright © 2009, The Valley Table] In December 2008, New York Governor David Paterson announced that the state faces a deficit of more than $9 billion in the coming fiscal year, and perhaps as much as $16 billion for the 2010-2011 fiscal year. He outlined some proposals for both saving money and generating revenue, including some programs that would directly impact the wine industry, wine retailers and consumers of New York State. First, Paterson proposed a near tripling of the excise tax on wine, from the current 18.5 cents per gallon to 51 cents per gallon. (As painful as any new taxes are, this still would mean that New York State's excise tax on wine would be below the national median of 65 cents per gallon.) This tax increase, which will add about 20 cents to a bottle of wine, is perhaps understandable, maybe even a good idea, if it helps to prop up the state's revenue stream. Next, the governor proposed a devastating blow to the New York State Wine & Grape Foundation, which promotes New York State wines www.newyorkwines.org). Representing an industry that generates well in excess of $3.5 billion, the Foundation has a total current budget of $3.8 million. Of that total, $2.8 million is provided by taxpayers ($1 million from the governor's executive budget and $1.8 million from the state legislature). The other million dollars is provided by the private sector, including wineries and wine-related businesses. Perhaps the most controversial of all the wine-related proposals made by the governor is the idea that New York State will be able to raise millions of dollars in licensing fees by allowing wine to be sold by any store that now holds a license to sell beer. This would mean that supermarkets, convenience stores, specialty food stores--even gas stations with beer licenses--would be able to sell wine in New York State. There are 19,000 possible venues that could take advantage of this change in the law, which is far more dramatic than it appears at first glance. Currently, wine and liquor stores in New York State are limited to holding one license per owner. Store owners (who, under state law can't sell beer or food) cannot open two shops, much less a chain of stores. If Paterson's proposal is approved by the state legislature, this would mean that supermarkets that already sell beer will be able to sell wine. So, chains such as A&P, Stop&Shop, Hannaford, Whole Foods, etc. will be able to sell wine in each of their stores in New York State. Certainly, this will lead to a windfall of license fees for the state, and many consumers might applaud the convenience of being able to pick up a bottle or two of wine for dinner in the same store that they purchase their food. But let's dig a little deeper. Does the increase in licensing revenue and a bit of customer convenience justify the possible negative results? What impact will this have on our local and regional economy if wine shops close, people lose their businesses, their jobs and their medical insurance? And will supermarkets be held to the same strict standards as wine shop owners are when it comes to the letter of the liquor laws? How, then, can 16-year-old supermarket cashiers sell wine when the minimum age for working in a wine shop is 18? Last December, a wine shop in the Rochester suburb of Henrietta was fined $10,000 for selling wine gift bags--the law says it's OK to give a gift bag away, but selling it constitutes "a separate business." Isn't selling lamb chops along with a bottle of merlot "a separate business?" In a December 2008 article in the Poughkeepsie Journal, Jeanne Colleluori, a spokesperson for Wegman's supermarkets, based in Rochester, said, "We have supported this idea for decades because we believe it's a great service to the customers." In the same article, State Liquor Authority Commissioner Noreen Healey stated that wine/liquor retailers wouldn't be adversely affected by Paterson's proposal because they'd still be the only stores in the state selling hard liquor. That may come as news to some wine shop owners. "Eighty-five percent of our business is wine," retorts Carol Matthews, proprietor of Hurley Ridge Wine and Spirits in West Hurley, just two miles outside of Woodstock. A wine retailer for 35 years, Matthews is worried that adoption of the governor's proposal may lead to the collapse of her business. "New York is only one of 15 states where you can't buy wine in supermarkets, so perhaps change is inevitable, but not now, not in this economy. I've been 'lucky,' and I guess I should be thankful. Business in 2008 was only off 9 percent from 2007; the holiday season was down about 2.5 percent. If the law changes, I expect to lose 30 to 35 percent of my business, and that's just not sustainable. Our customers are still buying, but they are downscaling their purchases because of the economy. If that pattern persists, it's just too easy to pick up a mass-market inexpensive wine in a supermarket instead of making a separate trip to our store." With a total staff of four (all women), Matthews fears that what the governor is after amounts to "a quick fix, but with a lasting negative impact of businesses closing and people losing their jobs. The idea of having to lay off any of our people is heartbreaking to me; they all need their jobs--and I need mine, too." Matthews' insights are echoed by Tim Sweeney, proprietor of Stone Ridge Wine & Spirits. Tim and his wife, Laurel, opened their store in Stone Ridge 14 years ago, and maintain a shop where service and selection are paramount. "I see no positive opportunities for small business in this proposal; it's unfair and predatory," Sweeney says. "Not only will it be a blow to thousands of stores, it's being done without any consideration to possible expansion or growth. I've built and grown a fine wine shop with an eye on small, esoteric wineries that provide affordable wines for all consumers. Because we are a wine destination, I feel it will not impact us as much as some shops, but it will certainly have an impact on our bottom line. The general consensus is that this is just another way to take business away from Main Street and bolster the 'Big Box' mentality." (FYI: The largest wine retailer in the United States is Costco; Wal-Mart is second). "What is particularly devastating is that there is no give and take with this proposal," Sweeney continues. "We are still limited to one store per owner and are not allowed to add any additional products to help increase our revenue stream. Allow owners to have multiple licenses. I'm always working on ideas to expand my customer base, but this proposal will put store owners in a position of just trying to maintain market share rather than expanding. The governor could not have picked a worse economic time to propose this. We are all feeling the crunch." The Marino family owns MidValley Wine & Liquor in Newburgh, and have been wine merchants for 51 years. Robert Marino, Jr., also is concerned about Paterson's proposal. One of the larger wine retailers in the valley, Mid Valley employs some 30 people. "We think that his proposal is likely to be implemented as a minor part of an overall push to solve some of the state's budget shortfall," Marino says. "The number cited as a potential increase in revenue--about $100 million in licensing fees--will be offset by an increase in unemployment, business failures and bankruptcies. For us, I would project a drop in sales of from 20 to 40 percent, largely from reduced sales of national wine brands. We expect that most new outlets will focus on a few dozen labels to a few hundred labels depending on available space and perceived customer demand." To be successful and to expand his business, Marino looks to continuing emphasis on customer service. "We feel that we provide good, even superior customer service today. In addition to having a knowledgeable and helpful staff, we continue to formally train our staff, offer in-store tastings to customers, and provide our customers with educational opportunities through wine courses. We see these activities as helpful in retaining our customer base, but we are aware that many of our present customers don't participate in these special offerings. Part of our plan is to largely rely on Internet activity to acquire new customers who will hopefully replace those we lose to other types of outlets." Directly across the Hudson, Tim Buzinski and Mei Ying So are the proprietors of Artisan Wine Shop in Beacon. The couple opened the shop in August 2006, and have worked hard to develop a local and regional customer base. Both graduates of The Culinary Institute of America, their in-store tastings often feature food they prepare (under New York State law, food cannot be sold in a wine shop, but it can be given away). The couple seems hopeful they will be able to keep and grow their business. At the same time, they are quite concerned about the impact of Paterson's proposal on their business and their lives as wine merchants and as involved citizens. "Our current strategy will probably remain the same regardless of changes in the law," Buzinski notes. "It seems that the state is attempting to legislate without getting feedback from the thousands of people whose lives these laws will affect." Simply put, Buzinski emphasizes, "We'd like to be considered as part of the proposal--the state should be getting knowledge and feedback from the people who live with these laws day to day. More communication would at least make us feel that we matter." Whether the governor's plan will become law is still up in the air as of February. The legislature is slated to decide the issue as part of the state budget process that is suppposed to be adopted by April 1. A trade coalition, Last Store on Main Street, has been formed to defeat the wine proposal. The group's website is www.laststoreonmainstreet.com. In my opinion.... Governor Paterson's proposal to cut almost 70 percent of the Wine & Grape Foundation's total budget seems penny-wise and pound-foolish. New York State has long struggled to grow and improve its wine industry, and its the Wine & Grape Foundation, under the dynamic leadership of executive director Jim Tresize, has done a good job of promoting wine and encouraging wine-related businesses (restaurants and lodging, for example). Also, about $1 million of the Foundation's annual budget is granted to Cornell University for important wine-based research as part of the university's agricultural extension program. Researchers share their work with grape growers and wine makers throughout New York State. In light of its dramatic multiplier effect on the state's economy, support of the Wine & Grape Foundation seems like a no-brainer public investment for a governor who has claimed that he wants to take an active role in revitalizing the depressed economy of upstate New York (the Finger Lakes region produces more far more wine than all other wine regions in New York State combined). --SK |
