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Profits Pouring In for Sierra Vintners

Thanks in part to a recent Supreme Court ruling that has led to the liberalization of shipping laws in many states, small wineries in the foothills are enjoying increased sales.

October 16, 2005|Jerry Hirsch | Times Staff Writer

PLACERVILLE, Calif. — Houston wine lover Ron Nichely is so partial to Boeger Winery's offerings that family visits to nearby Stockton find him cramming his luggage with bottles. His "personal best": two cases of wine into one bulging suitcase.

But on Monday, Nichely tried something new. He simply called the small winery and ordered a case of its well-regarded Tempranillo for $14 a bottle, aided by a recent U.S. Supreme Court decision and a change in Texas law allowing consumers to buy directly from out-of-state wineries.

"I prefer to get all my wines direct from the winery," said Nichely, an engineer in the oil industry. "That way I know how it was stored and when it was shipped."

That's what vintner Greg Boeger likes to hear.

Boeger makes as much profit in a single direct sale as he does peddling two bottles of wine through a distributor. By keeping his tasting room open late on Fridays in the summer, aggressively pitching his wine club and direct shipments, Boeger is now moving 56% of the 18,000 cases of wine he makes each year straight to consumers.

"More direct sales is what this is all about," Boeger said, describing a business model that is typical among the 700 California wineries selling 5,000 or fewer cases of wine annually.

That strategy has turned into an art form here in the Sierra foothills, an area known for its scorching summer temperatures and the abandoned gold mines and historic markers that seem to dot every other mile of Highway 49, which runs like a spine through the wine-making region that includes Amador, Calaveras and El Dorado counties. It is about the last corner of wine country where oenophiles can wander into a tasting room, meet the winemaker and sample the vintages without paying a fee.

"If you can sell every drop of what you make out to the tasting-room door, through your wine club or by direct shipping, you will be king," said Scott Klann, winemaker at Twisted Oak Winery, a small producer in the Calaveras County hamlet of Vallecito.

Thanks in part to the U.S. Supreme Court ruling in May, wineries such as Boeger and Twisted Oak are getting a better shot at wine lovers. The court struck down New York and Michigan laws that let local wineries ship directly to the public but prohibited out-of-state vintners from doing the same.

The ruling has led to a liberalization of wine shipping laws in New York, Connecticut and several other large markets, allowing small wineries to make an end run around distributors.

All told, 30 states, accounting for 68% of the nation's $23-billion retail wine market, now allow individuals to place orders with wineries. That's up from 26 states, or about 50% of the market, at the start of the year, according to Free the Grapes, a Napa-based wine-shipping advocacy group.

Already, the Sierra foothills wineries are seeing an increase in business from the gradual liberalization of the shipping rules.

Boeger Winery is on track to ship $65,000 worth of wine to out-of-state consumers this year, 30% ahead of last year.

Shipping companies such as FedEx Corp. are starting to supply small wineries with marketing materials such as "Swirl, Sniff, Sip and Ship!" signs to remind tasting-room visitors that they can probably send any purchases home. But increasing direct sales isn't as simple as just taking down someone's credit card number.

Distributors don't want to lose market share -- even a small amount -- to the small wineries pursuing the direct-sales strategy, said Barbara Insel, managing director for research at MKF Group, a St. Helena, Calif., wine consulting firm. They have used their political clout to get complicated compliance procedures written into legislation by states legalizing wine shipments to consumers.

"There's all sorts of paperwork, the wineries have to collect and keep track of taxes, they have to keep statistics on how much they ship to a customer, and in some states they are going to have to buy special permits that won't be worth the cost unless they are selling a lot of wine there," Insel said. "But if they can conquer those hurdles, this is going to mean a lot of money to a lot of people."

Wine industry analysts believe that direct consumer sales through wine clubs, tasting rooms and phone and Internet orders account for as much as 3% of California's $15-billion wine industry.

At least 65% of sales at small wineries in the Sierra foothills are direct to consumers, Insel estimated.

Finding ways to bypass the wholesale channel is especially important to the wineries in the Sierra foothills, where vintners can't slap Napa or Sonoma on their label and expect the wine to sell.

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