In December of 2008, Governor David Paterson announced that New York 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 wine 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, especially during the current state and national economic meltdown politely called “a recession,” this still would mean that New York State’s excise tax on wine would be below the national median of 65 cents per gallon. So perhaps this tax increase, which will add about 20 cents to a bottle of wine, is 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. 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.
Paterson’s proposal to cut almost 70% 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 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).
Perhaps the most controversial of all the wine-related proposals made by the governor in his budget speech 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 Governor 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, not just one. 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. What impact will this have on our local and regional economy? How many Hudson Valley wine shops will close? How many people will lose their businesses, their jobs, and their medical insurance? How many will have to enroll in publically-funded Medicaid to provide health care for themselves and their families? How many people will lose their homes or will be unable to pay rent? Does the increase in licensing fees and a bit of customer convenience justify such possible economic pain and real human suffering?
How will large supermarkets, which are allowed to sell beer 24 hours a day, now conform to state, local and regional wine laws (i.e., in Ulster County wine can be sold until 9 pm; in Dutchess County, until 7pm)? How can a 16 year old supermarket cashier actually sell a bottle of wine to a customer, when the minimum age for working in a wine shop is 18? Will supermarkets be held to the same strict standard as wine shop owners are when it comes to the letter of the State liquor laws? Last December, a wine shop in the Rochester suburb of Henrietta was fined $10,000 for selling wine gift bags. The law, according to the State Liquor Authority: ok to give the gift bag away, but selling the bag constitutes “a separate business.” Using that definition, isn’t selling lamb chops in the same store you sell wine a separate business?
In researching this article, I tried to interview, via e-mail, representatives of supermarket chains and specialty shops, but they declined to formally participate. However, in an article that appeared in December of 2008 in the Poughkeepsie Journal, Jeanne Colleluori, who is a spokeswoman for Wegman’s supermarkets, which are based in Rochester, said, "We have supported this idea for decades because we believe it's a great service to the customers." As for official word from the State Liquor Authority, in the same article SLA 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.
“85% of our business is wine,” according to Carol Matthews, proprietor of Hurley Ridge Wine and Spirits in West Hurley, just two miles outside of Woodstock, who has been a wine retailer for 35 years. Hurley Ridge, my “local,” is a small shop with an excellent selection of wines, and great customer service, but Carol 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% from 2007; the holiday season down about 2.5%. If the law changes, I expect to lose 30-35% of my business, and that’s just not sustainable.”
With a total staff of four (all women and all customer service-oriented), Carol 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.”
“There’s no doubt that our customers like coming here for the great selection and great customer service – service makes such a big difference – but convenience may be perceived by many as just as important. 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.”
Carol Matthews’ insights are echoed by Tim Sweeney, proprietor of Stone Ridge Wine & Spirits. Tim and his wife Laurel opened their store in Stone Ridge fourteen years ago, and maintain a lovely shop, where service and selection are paramount to the customer experience.
According to Tim, “I see no positive opportunities for small business in this proposal; it’s unfair and predatory. 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 much as some shops, but it will certainly have an impact on our bottom line.”
Paterson’s proposal is, no surprise, Topic A among wine retailers; it has yet to hold a prominent place in customer consciousness, but Tim has noticed that “everyone who’s discussed this with me is not in favor of it. The general consensus is that this is just another way to take business away from Main Street and bolster the ‘Big Box’ mentality” (author’s note: the largest wine retailer in the United States is Costco; Wal-Mart is second).
Tim continues: “What is particularly devastating is that there is no give and take with this proposal. 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.”
Tim points out that he doesn’t think implementation of a new law is inevitable. “As store owners, there is already a movement afoot to work in concert through lobbying channels to have the proposal removed.” Indeed, just as I was completing this article, a trade organization, “Last Store on Main Street” was formed, with a public website dedicated to defeating Governor Paterson’s proposal: www.lastmainstreet.com
The Marino family owns Mid Valley Wine & Liquor in Newburgh, NY, and have been wine merchants for 51 years. In an interview, Robert Marino, Jr. expressed his concerns about Paterson’s proposal.
“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. 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 from 20% to 40%, 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, Robert 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.”
Tim Buzinski and Mei Ying So are the proprietors of Artisan Wine Shop in Beacon. The couple opened their shop in August of 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 delicious food that they prepare (under New York State law, food cannot be sold in a wine shop, but it can be given away).
Tim and Mei Ying seem hopeful that if they continue to do the things they do well they will be able to keep and grow their business. At the same time, they are quite concerned about the impact of Governor Paterson’s proposal on their business and their lives, both as wine merchants and as involved citizens of the Hudson Valley and New York State.
“Our current strategy will probably remain the same regardless of changes in the law. We will focus on hand-selling most wines and intensive customer service, finding value for our customers in lesser-known regions, grape varieties, and producers. We will continue our community involvement and working with local charities as we continue our focus on wine education and weekly tastings.
“It seems that the state is attempting to legislate without getting feedback from the people who are already in the trenches, the thousands of people whose lives these laws will affect. 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 – perhaps a simple on line survey – would at least make us feel that we matter.”
