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Jul 2010

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Beneath The Surface Of Wine Selling Debate, Intimidation and Threats

Money, corporate interests collide as liquor stores hit winery owners in support of measure

Mon, 01 Mar 2010 15:25:00

Shortly after she declared her support for selling wine in supermarkets last year, Susan Hayes, the owner of Miles Wine Cellars, a winery near Seneca Lake, received an e-mail from a liquor store owner in Rochester.

“The liquor store association is going to list on their website ALL the wineries that are on our side,” wrote Jim Lepore, the owner of Chili Liquor. “I feel sorry for those that are not. Most stores are not going to support those not on our list.”

Hayes took that to mean she was on a blacklist.

“It was an organized boycott,” she said. “The few wineries that would come forward and say that we wanted it, we did have quite a bit of backlash from the liquor store industry.”

For years, liquor stores in New York have gone to great lengths to prevent the legalization of wine sales in supermarkets, an idea first floated in the 1970s by Gov. Hugh Carey. They have forged winning coalitions with high-powered lobbyists and multinational distribution companies, and used glitzy PR campaigns to put the smaller mom-and-pop stores front and center.

But they have also traditionally maintained a unified front with the state’s wineries, which depend on liquor stores for most of their business. The partnership dates back to 1974, when the wineries fought to change the state’s liquor laws to allow grape growers to sell wine on their premises. Liquor stores supported that effort.

In the years since, the idea has bubbled up occasionally, prompting big lobbying spending and major campaign donations from both sides.

Once Gov. David Paterson revived the wine-in-groceries bill as a way to generate tax revenue, cracks in the alliance between liquor stores and wineries began to show. And the few winery owners who have come out in favor of the bill say they have been subject to a coordinated campaign of threats and intimidation that endanger their livelihoods.

“What’s being proposed is the break-up of a monopoly,” said Scott Osborn, the owner of Fox Run Vineyards in Penn Yan and perhaps the most visible of the winery owners who support the bill. “The people who are part of that, they don’t want to give that up.”

Osborn said that his wines have been taken off the shelves by dozens of liquor stores across the state, costing him as much as $60,000 in business. The backlash has also had a psychological impact—sheriffs’ deputies had to guard his winery last year after some of the angrier liquor store owners hinted that they might seek retribution.

Michael McKeon, a spokesman for The Last Store on Main Street, the industry coalition that opposes the bill, dismissed Hayes’ and Osborn’s complaints as “crocodile tears,” trumped up by corporate supermarket chains to distract from the merits of the issue.

“That’s a joke,” McKeon said. “It is an insult to the intellect of 100 winery owners. If you don’t agree with me, it must be because you’ve been intimidated.”

Hayes, Osborn and the few other winery owners who received similar threats forwarded them last year to the attorney general’s office, which conducted a cursory review, according to people who were interviewed by investigators. Nothing has been heard from the attorney general for months. Criminal action, Hayes and others now believe, is unlikely.

But a review of dozens of e-mails and other correspondence submitted by winery owners to the attorney general’s office last year suggests that, at the minimum, many liquor store owners have been angered and even hurt by what they see as a betrayal by their former allies. And in many cases, they have sought revenge.

The financial leverage that liquor store owners wield over wineries is just one of a number of factors that have kept state lawmakers from legalizing wine sales in grocery stores.

Major distribution companies, for example, have quietly spent millions on a coordinated lobbying and PR campaign to prevent the bill from becoming law. Diageo, the largest distributor in the world, even threw a party for the New York State Liquor Store Association, a coalition of upstate liquor stores, at the Turning Stone Casino in Verona earlier this year.

The distributors stand to lose money if supermarkets are allowed to sell wine, because the influx of demand would push prices down. And as an olive branch to liquor stores, Paterson’s bill would also allow them to form co-ops and buy wine at discount prices.

The wine industry is pushing back. They too are backed by moneyed interests like supermarket chains Wegmans and Whole Foods, they are planning million-dollar ad buys in anticipation of the next round of budget negotiations, and have already poured millions into a coordinated lobbying effort, according to state records. This year, they have taken a page out of the liquor stores’ playbook, forming a new coalition called New Yorkers for Economic Growth and Open Markets, and hiring Yoswein New York to lobby and BerlinRosen to handle communications.

The threats by liquor stores have been an important PR tool, silencing winery owners—which are also mostly small, family-run businesses—and allowing liquor stores to claim the mom-and-pop mantle.

“There is an underlying fear from wineries based, basically, on what’s happened to me,” Osborn said. “They look at that and go, ‘Oh my god, I’m going to keep my mouth shut.’”

   

 

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