By Elizabeth Hans McCrone
With the election dust settling, wine industry officials are working to refocus their efforts on a host of regulations, laws and policies certain to affect the wine business at both state and federal levels for years to come.
Two people presenting at the North Coast Wine Industry Expo (WIN Expo) December 1, 2016 were uniquely qualified to discuss the presidential regime change and its far-reaching impacts on wine, as well as the future of California’s estimated 5,400 licensed wineries.
Edgar “Pete” Downs is the Acting President of the Family Winemakers of California, a grassroots trade organization that advocates for small and family-owned wineries throughout the state on a broad range of issues including legislation, regulation, and fair business practices.
Downs will be addressing three key areas coming down the pike for vintners in the country’s most populated state: invasive species, labor availability and costs and the right to farm without undue restrictions.
The glassy-winged sharpshooter and the spread of Pierce’s disease continues to be a threat for California’s vineyards, even though the state and federal government have spent millions to control the spread of the destructive insect for more than a decade.
When the sharpshooter was first identified as a serious problem, the federal government contributed $25 million toward eradication efforts in Kern County, CA, where the outbreak was widespread. Southern California’s Temecula wine region had entire vineyards destroyed by Pierce’s disease in the late 1990’s.
Other species Downs believes to be of ongoing concern include mealybugs, the light brown apple moth (LBAM) and the brown marmorated stink bug (BMSB).
Down focuses on three stages of pest control practices that are essential to effective pest management: quarantine, research and control or elimination.
“The first step is always to quarantine an area,” Downs notes. “The second is to understand how the organism operates. If you can keep it contained and begin to understand how it works, you can then work on control and eradication.”
Labor availability and costs
When Governor Jerry Brown signed AB 1066 on September 12, 2016, he gave the green light to a state law that raises overtime wages for agricultural workers, phased in over a four-year period. The law requires time-and-a-half pay for more than eight hours of work per day or 40 hours a week. Farm workers are currently paid overtime if they work more than 10 hours a day or 60 hours a week.
Downs predicts the law will cause labor costs for wine grape growers to rise from its current rate of 49 percent to at least 62 percent.
“When you grow a crop like grapes, it’s not like other employment. Within a six to eight week period, everything has to be harvested,” Downs points out. “That’s why the difference between eight and ten hours (a day) is a very big deal.”
Right to farm without undue restrictions
Downs reports that one of the biggest issues confronting the industry right now is restrictions on the number and types of events that wineries are allowed to conduct, especially throughout California’s North Coast.
While Downs is sympathetic to the complaints from local residents about the noise and traffic congestion winery events can generate, he recognizes that many small-operation wineries without other distribution channels rely heavily on them for access to their customer base.
“A lot of my members make 5,000 cases or less and need to sell DTC to get that affiliation with their customers,” Downs explains. “Wineries have been there forever. Then people, who don’t understand agriculture, buy a piece of property nearby. It creates a tension between agriculture and residents. That tension is increasing.”
Jim Trezise is the President of the New York Wine and Grape Foundation. He also serves on the executive committee of WineAmerica, the National Association of American Wineries that has been advocating for the U.S. wine industry in Washington D.C. since it was founded in 1978.
Trezise says federal excise taxes, navigating through a new administration; immigration reform and music licensing issues are key priorities for the industry in the months ahead.
Federal Excise Tax Reduction
A major bill to reduce federal excise taxes on wine, beer, and spirits has already garnered 52 co-sponsors in the Senate, and 250 in the House. Known as the Craft Beverage Modernization and Tax Reform Act, the bill, introduced by Oregon Senator Ron Wyden, has become a legislative priority and may well be acted by the end of this year or when the new Congress convenes in January.
Trezise calls the legislation “a major opportunity to reduce taxes for wineries all across the country,” and is a great example of how collaboration among beverage categories can bring dramatic results.
Navigating the New Administration
The regime change in Washington means a host of other personnel changes within agencies that help shape the business climate for wine interests in America, such as the USDA, the Treasury Department (TTB) and the U.S. Department of Labor.
Trezise says lobbying activity and decision-making have pretty much been put on hold in the Capitol until the necessary staffing is in place to create the new administration.
“Once that happens,” Trezise explains, “we need to go find out who the decision-makers are, when we can meet with them and begin educating them about our issues.”
Trezise predicts the new administration will provide both “opportunities or challenges or both” for the industry going forward. He notes that effective advocacy will continue to be critical to relationship building and to the success of grassroots collaboration efforts for all wine regions throughout the country.
According to WineAmerica, the nation’s wine industry requires affordable and reliable agricultural labor to continue to produce quality wines that meet consumer expectations. Many winery operations depend on the availability of foreign migrant workers, but the laws and work visa programs currently in place are woefully inadequate to address the critical labor shortage facing viticulture and other winery practices.
Trezise calls effective immigration reform “desperately needed” to address current workforce demands and the future needs of an industry that is rurally based, seasonally active, with perishable products employing migratory workers. Trezise lists this as one of the industry’s top priorities for the incoming administration.
One of the more pressing issues facing wineries today is the licensing requirements from Performing Rights Organizations (PROs) like Broadcast Music, Inc. (BMI), American Society of Composers, Authors and Publishers (ASCAP) and the Society of European Stage Authors and Composers (SESAC).
Under federal copyright law, in order to play copyrighted music at their facilities in any capacity, wineries are required to have a license so the original writers and musicians are guaranteed royalties for their work.
While this requirement is reasonable, in the past PROs have been accused by wineries and other businesses of using confusing and even “strong arm tactics” to enforce the regulations, which have often been arbitrary and unclear.
Trezise credits Tara Good of WineAmerica for taking the lead on seeking more transparency, professionalism, and fairness from the PROs and believes inroads have been made in a more positive direction as a result.