June 25, 2007
Local wineries prosper despite state regs
By Adam Smartschan
Double-digit growth is common at area's vintners
For a guy who makes a living producing wine, Nate Benjamin sure runs a lot.
If he's late to a meeting, Benjamin - the owner of Obadiah McIntyre Farm Winery at Charlton Orchards - sprints. If a customer is waiting on a case of plum wine, as one was one sunny Friday last month, he practically bounds to get enough bottles labeled and boxed to make the sale.
Sure, wine is a sipping drink; as much a universal symbol of luxurious relaxation as anything. But even with sales increasing in the midst of a nationwide wine boom, the region's producers face difficult decisions and an oft-hostile regulatory climate.
No matter how nice a glass is, making wine is often anything but relaxing. And the people who make it, like Benjamin, have to be fast on their feet to stay in the business.
Vineyards' delight
The U.S. wine market is better than it's ever been. Dollar sales grew 22 percent between Jan. 2005 and Jan. 2007. Meanwhile, case sales increased 9 percent. Constellation Brands, one of the largest publicly traded U.S. wine companies, reported sales of $6.4 billion for the year ending Feb. 28, 2007, up 78 percent from $3.6 billion in 2003.
Likewise, the industry is growing in the state. Kip Kumler, the chairman of the months-old Massachusetts Farm-Winery and Growers Association, estimates the number of small wineries in the state has doubled in the last two to three years, to just shy of 30. And sales are up. Obadiah McIntyre experienced 100 percent growth each year from 2002 until 2005, and then in 2006 sales grew by "just" 60 percent. Bolton's Nashoba Valley Winery grew 12 percent last year and New Marlborough's Les Trois Emme has doubled bottle sales in each of its four selling seasons.
"As a generalization, everybody is making better wine today then they did five years ago," Kumler said.
Under pressure
Despite the eye-popping growth figures, small wineries face plenty of hurdles. The biggest is an amalgamation of rules and regulations so harrowing and complicated that even experts like Benjamin have trouble putting it in layman's terms.
In May 2005, the U.S. Supreme Court ruled that states that allowed in-state wineries to sell directly to consumers (the lifeblood of small vintners) needed to grant the same right to out-of-state sellers. Massachusetts, Benjamin said, responded by increasing regulation of its own producers.
"(Massachusetts is) a prohibitive state," he said. "Some people here still think of prohibition as something that should have stayed."
"Direct shipment" licenses, which allow wineries to sell directly to consumers in the state, are more difficult to obtain and more restrictive than they once were. And bigger wineries can't get one at all; a producer who makes more than 30,000 gallons a year must sell through a distributor or wholesaler.
In many parts of the country, including Massachusetts, wine wholesalers operate under the "three tier" system. In the system, a producer sells his wares to a wholesaler at one-third of the retail cost, and the middle-man resells the wine to a final seller at a 100 percent profit.
For small wineries, who often have trouble obtaining licenses to sell wine in states other than their own, the system makes the use of distributors (who specialize in opening new markets) a Faustian bargain. The wholesalers can ship wine cheaper and to more places than the producer itself, but pay the winemaker a much lower price per case than a consumer.
As the difficulties remain, so does the growth. None of the wineries reached by the Worcester Business Journal have experienced a slowdown this year, and all seemed optimistic about their future.
"It's an embryonic industry with very rapid growth," Kumler said.
But wineries' troubles aren't likely to go away as growth continues.
For a guy who makes a living producing wine, Nate Benjamin sure runs a lot.
If he's late to a meeting, Benjamin - the owner of Obadiah McIntyre Farm Winery at Charlton Orchards - sprints. If a customer is waiting on a case of plum wine, as one was one sunny Friday last month, he practically bounds to get enough bottles labeled and boxed to make the sale.
Sure, wine is a sipping drink; as much a universal symbol of luxurious relaxation as anything. But even with sales increasing in the midst of a nationwide wine boom, the region's producers face difficult decisions and an oft-hostile regulatory climate.
No matter how nice a glass is, making wine is often anything but relaxing. And the people who make it, like Benjamin, have to be fast on their feet to stay in the business.
Vineyards' delight
The U.S. wine market is better than it's ever been. Dollar sales grew 22 percent between Jan. 2005 and Jan. 2007. Meanwhile, case sales increased 9 percent. Constellation Brands, one of the largest publicly traded U.S. wine companies, reported sales of $6.4 billion for the year ending Feb. 28, 2007, up 78 percent from $3.6 billion in 2003.
Likewise, the industry is growing in the state. Kip Kumler, the chairman of the months-old Massachusetts Farm-Winery and Growers Association, estimates the number of small wineries in the state has doubled in the last two to three years, to just shy of 30. And sales are up. Obadiah McIntyre experienced 100 percent growth each year from 2002 until 2005, and then in 2006 sales grew by "just" 60 percent. Bolton's Nashoba Valley Winery grew 12 percent last year and New Marlborough's Les Trois Emme has doubled bottle sales in each of its four selling seasons.
"As a generalization, everybody is making better wine today then they did five years ago," Kumler said.
Under pressure
Despite the eye-popping growth figures, small wineries face plenty of hurdles. The biggest is an amalgamation of rules and regulations so harrowing and complicated that even experts like Benjamin have trouble putting it in layman's terms.
In May 2005, the U.S. Supreme Court ruled that states that allowed in-state wineries to sell directly to consumers (the lifeblood of small vintners) needed to grant the same right to out-of-state sellers. Massachusetts, Benjamin said, responded by increasing regulation of its own producers.
Nate Benjamin, owner of Obadiah McIntyre Farm Winery at Charlton Orchards.
"Direct shipment" licenses, which allow wineries to sell directly to consumers in the state, are more difficult to obtain and more restrictive than they once were. And bigger wineries can't get one at all; a producer who makes more than 30,000 gallons a year must sell through a distributor or wholesaler.
In many parts of the country, including Massachusetts, wine wholesalers operate under the "three tier" system. In the system, a producer sells his wares to a wholesaler at one-third of the retail cost, and the middle-man resells the wine to a final seller at a 100 percent profit.
For small wineries, who often have trouble obtaining licenses to sell wine in states other than their own, the system makes the use of distributors (who specialize in opening new markets) a Faustian bargain. The wholesalers can ship wine cheaper and to more places than the producer itself, but pay the winemaker a much lower price per case than a consumer.
As the difficulties remain, so does the growth. None of the wineries reached by the Worcester Business Journal have experienced a slowdown this year, and all seemed optimistic about their future.
"It's an embryonic industry with very rapid growth," Kumler said.
But wineries' troubles aren't likely to go away as growth continues.
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