One of Governor David Paterson’s proposals for reducing New York State’s budget deficit—allowing grocery stores to start selling wine in exchange for a franchise fee—is upsetting some local wineries and liquor stores while delighting supermarkets and the Long Island Farm Bureau.
The governor’s plan anticipates that the licensing program could bring $105 million into the state coffers during its first year and $54 million the next. Advocates say the plan will increase the number of wine consumers in the state and benefit its wine and grape industry. Critics are worried it will drive liquor stores out of business and benefit out-of-state wines and foreign imports at the expense of fine Long Island wines.
“We’re not overjoyed with it,” said Steven Ciuffo, general sales manager for Duck Walk Vineyards in Water Mill, of the governor’s proposal. Mr. Ciuffo said the law would benefit California wines and low-end imports, while generating no new wine drinkers. “It spreads out the business we have.”
Duck Walk distributes to Florida, where supermarkets can carry wine, and there is tremendous competition to get on their shelves, Mr. Ciuffo said. A liquor store may carry seven to nine Duck Walk varieties, he said, but “in a grocery store, we’re lucky if we can get one.”
Thomas Cullen of King Kullen, which has 43 grocery stores on Long Island, including Hampton Bays and Bridgehampton, said he cannot speak for other grocery chains, but the Cullen family supermarkets will commit to carrying Long Island wines in support of the local wineries.
Bob Kern, general manager of Martha Clara Vineyards in Riverhead, said the vineyard does most of its business in its tasting room, so he is more concerned about the governor’s plan to raise the excise tax on wine.
“That would be like raising the cost of an American car,” he said. “People don’t have the money to buy it as it is. Wine is not a necessity.”
Under the governor’s budget, the tax on wine would increase from 18.9 cents per gallon to 51 cents, and the beer tax would rise from 11 cents per gallon to 24 cents. The budget estimates raising taxes on wine and beer will bring in $63 million annually.
New York is now only one of 15 states that does not allow supermarkets to carry wine.
Mr. Cullen, a former chairman of the Food Industry Alliance of New York State, pointed out that a 2004 Siena Research Institute poll, commissioned by the alliance, found that 71 percent of New York wine drinkers say they would like the opportunity to buy wine in grocery stores. King Kullen stores will also soon make a petition available for customers to encourage lawmakers to support allowing it, Mr. Cullen added.
“It’s something that we have supported for a very long time,” said Joseph Gergela, executive director of the Long Island Farm Bureau. He said selling wine in grocery stores will increase market share for Long Island and other New York wines.
Jose Collazo, manager of the Waldbaum’s in Southampton Village, said that grocery store does not have the space for a wine aisle. “We don’t have the real estate for it,” he said. And there is a liquor store across the street already, he pointed out.
Local liquor store owners this week expressed fear for their livelihood if the governor’s proposal is approved.
“It’s going to be the biggest upheaval since Prohibition,” predicted Jacques Franey of Domaine Franey Wines in East Hampton on Monday. “If this law goes into effect, it’s going to have a big impact on the business.”
Mr. Franey, who has also been a salesman in the New York area for a wine distributor, said “the small liquor stores are going to automatically go out of business overnight.”
If grocery stores are allowed to sell wine, Mr. Franey asked whether he would be allowed to sell food—liquor stores are now barred from selling food, beer and non-alcoholic beverages—as a way to make up for a loss of wine business to grocery stores. “Are they going to give us a chance to survive?”
“More than likely, I’ll be out of business,” said Scott McGregor, owner of Bays Liquors Inc. in Hampton Bays. He said 70 percent of his business is in wine sales, and the profit margin on liquor sales is slim.
Most liquor stores are mom-and-pop operations, including his, Mr. McGregor noted. “You’re putting a lot of families in trouble. I’d lose my home.”
“Of course they’re going to be concerned and rightly so,” Mr. Gergela said, “but I don’t believe that is going to happen.”
Mr. Cullen noted that in other states, liquor stores coexist with grocery stores that sell wine. But he admitted he expects that some New York liquor stores will struggle if the governor’s proposal passes. “I think the good ones will survive because they know their business,” he said.