The real threat to Michigan wineries comes from out-of-state

Aug. 10, 2005

Considering his position as a paid spokesperson for a northern Michigan winery, Rick Coates’ biased, misleading commentary on the Internet alcohol sales/direct shipment debate is certainly understandable, yet still unacceptable (“Grapes of Wrath,” July 17, 2005). His slanted interpretation of the legislative response to the recent U.S. Supreme Court decision fails to acknowledge the very real threat to Michigan businesses -- including Michigan wineries -- and to the state budget if we open the doors to a flood of out-of-state alcohol vendors.
To fully understand where we are headed, we must clarify where we have been on this issue. Michigan’s wholesalers have long supported Michigan’s wineries‘ right to sell their product. They supported the initial law that carved out a special exemption on shipping for in-state wineries, they spent more than a quarter of a million dollars defending this special exemption in the courts, and they even finance the Michigan Grape & Wine Council through wholesaler licensing fees. Even the proposed prohibition on Internet and mail order alcohol sales and direct shipment would allow wineries to sell their wine at the winery premises, at properly licensed tasting rooms and at restaurants located on or adjacent to the winery premises.
Specialty wine producers are not the only businesses with a stake in the outcome of this issue. Distributors -- such as myself -- provide a number of good-paying jobs for our community, including drivers, warehouse workers and administrative staff. Around the state, distributors employ more than 5,000 people, with wages and benefits exceeding $240 million. Statewide, distributor businesses’ sales exceed $1.5 billion, we pay more than $11 million in SBT, property taxes and fees, and we contribute another $4 million to local charities and community events.

POTENTIAL LOSSES
Any direct shipment from out-of-state companies is also a lost sale to one of the 8,000-9,000 Michigan retailers. We estimate -- conservatively -- that Michigan retailers could lose millions of dollars in sales in a single year. That drop in sales threatens thousands of jobs supported by the current distribution industry, as well as the related businesses throughout the state. Are these jobs any less valuable than the winery positions many imply are in jeopardy with a ban on Internet and mail order sales? Of course not.
These jobs, tax revenues and contributions are just as valuable to the families and communities that rely on them as wine producer jobs and economic contributions. And let’s not fool ourselves -- distributor jobs and these vital revenues are absolutely in jeopardy if alcohol producers are allowed to circumvent our proven three-tier alcohol distribution system and avoid Michigan’s sales and excise taxes.
The legislation still allows Michigan wineries to sell to consumers on their winery premises, at tasting rooms separate from their winery premises, at restaurants on their licensed premises (HB 4959, section 113) and through licensed wholesalers and retailers. In fact, as Mr. Coates himself even noted, these sales through distributors and retailers represent the vast majority of the Michigan wine currently sold in the state.

UNENFORCEABLE
In addition to these economic concerns, the compromise solutions being discussed will ultimately prove to be unenforceable because the Supreme Court declared our past efforts to carve out special exemptions for wineries illegal and the other options rely on enforcement mechanisms that have been proven ineffective through past law enforcement stings.
Just last month, the Ingham County Sheriff’s department supervised a sting in which an underage MSU student ordered vodka online and had it delivered to her doorstep — where the delivery driver allowed her 18- year-old sister to sign for the package. Similar stings have taken place across Michigan and in other parts of the country, including several in Florida, Washington and Massachusetts. Governor Jennifer Granholm made cracking down on Internet alcohol sales a priority when her office conducted a series of stings while she was Michigan Attorney General.
Prohibiting Internet alcohol sales and direct shipments of all alcohol is the only responsible option at our disposal. No one truly benefits from the shrill, accusatory rhetoric such as that being purported by the wineries. Our past support of the wineries should not be dismissed and the seriousness of the policy choices facing us deserves an honest discussion about our options.