wine laws and legal
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Week7_LawsandLegalNomenclature_D2L.pptxLaws and Legal Nomenclature Week 7
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Week 7: Terms to know
Three-tier system of alcohol distribution
Tied house law
Direct-to-Consumer (DTC) wine distribution
Control state vs. License state
MLCC (Michigan Liquor Control Commission)’s role
Nine classes of wine (standards of identity)
Wine labeling requirements
PART TWO
PART
ONE
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Alcohol Distribution
Three-tier system of alcohol distribution
Tied house law
Three-Tier System
Tier one
Tier two
Tier three
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Background of Three-Tier Distribution Laws
Source of image: britannica.com
Alcohol regulation by state governments after Repeal of prohibition
https://www.britannica.com/event/Prohibition-United-States-history-1920-1933
https://www.reviewofreligions.org/12519/why-alcohol-is-prohibited-in-islam/
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Three-Tier System
A three-tier system after repeal of Prohibition in 1933,
Wine, beer, and spirits made by licensed producers must first be sold to licensed wholesalers, (e.g., distributors)
Then, distributors sell it to licensed retailers before being sold to consumers
Tier one
Tier two
Tier three
Consumers can purchase wines from wineries directly, depending on their licenses.
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Three-Tier System (cont’d): Tied house
Intent of the three-tier system?
Avoid a tied house
Ensuring producers could not run their own bars or retail establishments and limit consumer choice by exclusively serving their own drinks
A tied house encouraged intemperate alcohol consumption (typically not permitted in U.S)
In Britain, tied houses are permitted.
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Violation of Three-Tier System: Example
Fines for violating the three-tier system can be quite severe.
Cross-ownership by a shareholder is prohibited.
$500,000 fine plus no operation for a month by New York State Liquor Authority
(Citation: Food and Drink International, 2018)
Variations of Tied-House / Three-Tier Distribution Laws (cont’d)
The tied-house and distribution laws vary greatly across states
State of Washington eliminated the three-tier system.
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Tier one
Tier two (distributors)
Tier three
Distributors’ arguments with regards to three-tiered system
protects consumers
provides them with more options
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Southern Glazer’s Wine and Spirits - Florida, Oregon, South Carolina, Indiana, Kentucky, and Washington
Direct-to-Consumer Wine Distribution
Variations of Tied-House / Three-Tier Distribution Laws (cont’d)
Variations: Winery Direct Shipping Laws in the U.S.
In Utah, direct-to-consumer (DTC) wine shipping is prohibited.
In Michigan, DTC wine is permitted if wineries have direct shipper license.
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States open for DTC Shipping
Check out this article about DTC!
https://digiday.com/retail/direct-consumer-coming-alcoho l-industry/
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Direct-to-Consumer (DTC) Wine Market
Reduced # distributors over years
Increased # of wineries in the U.S.
Over 50% since 2009
Direct-to-consumer (DTC) increasingly important:
More than $ 3 billion on DTC wine shipments
Wineries shipped over 6 million cases of wine
Wineries on-site sales
No state may prevent wineries from shipping purchases in the case of on-site sales
Many of states do not allow buyers to have wine shipped from retailers in OTHER STATES.
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Michigan’s DTC: Interstate wine shipping?
Prior to 2005: Only granted in-state wineries DTC privileges
2005 Supreme Court case Granholm v. Heald
Change of DTC to both in-state and out-of-state producers identically.
In 2017, A bill signed by former Gov. Snyder prohibiting out-of-state retailer shipping
A court battle
Update?
Michigan’s DTC: Interstate wine shipping? (cont’d)
A federal judge in Michigan
“the state’s prohibition
on direct-to-consumer
wine shipping from
out-of-state retailer
is unconstitutional.”
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Michigan’s DTC: Interstate wine shipping? (cont’d)
Wine Spectator, Oct 2018)
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Alcohol Distribution:
License
vs
control state
License state or control state?
Who distributes
Competitive model or control model?
What prices
License state vs Control State
Citation: National Alcohol Beverage Control Association
32 license states
Permit the private sector to distribute and sell alcoholic beverage
18 control states (including Michigan)
Manage the sale and distribution of alcohol
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Limits on Alcohol Availability
For NEW on-premise licenses, they require prior approval by a city government.
De facto control of the number of liquor licenses sits with the local government (also control hours of operation).
MLCC (Michigan Liquor Control Commission) defines:
Alcoholic liquor as any beverage that contains 0.5 percent or more alcohol by volume.
Sales of alcoholic beverages
the exchange, barter, furnishing, or giving away of alcoholic beverages.
Occur when owning an alcoholic beverage moves from a representative of the establishment to a consumer
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Under MLCC Law
Illegal to sell alcohol to anyone less than 21 years of age
Illegal for a person less than 18 years of age to sell or serve alcoholic beverages
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We covered Alcohol Responsibility (Week 2)
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Under MLCC Law (cont’d)
Serving alcohol safely!!!
Dram shop laws
- Liable for intoxicated adults and minors: criminal penalties and civil liabilities
- All liquor licensees (MI) must establish to the MLCC that they have at least $50,000 available to cover such potential financial liabilities.
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Taxation of Alcoholic Beverages
Control through taxation
General fund
Earmark
Directed to alcohol-related use?
MI law:
55 percent of all retail liquor license fees be allocated to the local law enforcement agencies
This is the last slide of Week 7 PART ONE!
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Michigan’s Three-Tier System for Alcohol Distribution: OPTIONAL Video Resource (about 10 mins)
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Labeling – Week 7 Part II
Classes of wine / standards of identity for Wine
Minimum/mandatory wine label requirements
Non-mandatory labeling language with legal implications
Laws and Legal Nomenclature Week 7: Part TWO
HB 409 Introduction to Wine
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Labeling
Classes of wine / standards of identity for Wine
Minimum/mandatory wine label requirements
Non-mandatory labeling language with legal implications
Labeling Wine a “Local” Issue
Different labels for the same wine in different countries
The local marketing and labeling laws dictate the content
Required health risk statements in the US
A global issue: wine labeling
Sparkling wines not produced in the Champagne region should not have the word “champagne” on the label.
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BATF TTB
TTB controls and enforces alcohol labeling
- TTB approves the use of new terminology or new label.
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Classes of Wine / Standards of Identity
Class
1: Grape Wine
2: Sparkling Grape Wine
3. Carbonated Grape Wine
4: Citrus Wine
5: Fruit Wine
Class
6: Wine from other agricultural products
7: Aperitif Wine
8: Imitation and Substandard or other than standard wine
9: Retsina Wine
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Class 1: Grape Wine
Normal alcoholic fermentation of the juice of sound, ripe grapes.
With or without the addition of pure condensed grape must
With or without added grape brandy or alcohol.
Table Wine: No more than 14% alcohol by volume
Designations such as light, white, red, sweet
Natural: Wine NOT containing added brandy or alcohol
Dessert Wine: 14%-24% alcohol
Allowed subcategories
Sherry
Marsala
Port
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Class 2: Sparkling Grape Wine
Sparkling Wine : A grape wine made effervescent with carbon dioxide from a secondary fermentation in a closed container, tank, or bottle
Champagne
Wine with the secondary fermentation in a bottle no larger than 1 gallon; must be stylistically similar to French Champagne
Only sparkling wine from the champagne region can label itself as “Champagne” according to the 2006 US/EU wine agreement**
Crémant: lower pressure sparkling wine;
Sparkling wine made according to Champagne method, but produced beyond the Champagne region.
** The terms Chablis, Burgundy, Champagne, Rhine, and Sauterne are only permitted used on labels that were approved prior to 2006.
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Class 2: Sparkling Grape Wine (cont’d)
Champagne Style/Champagne Type
With the added designation of bulk process (charmat method), fermented outside the bottle, not bottle fermented, etc.
Stylistically similar to French Champagne, but not made using the Champagne Method
Crackling Wine Petillant Wine Frizzante Wine Crémant Wine
less carbonation than normal
If made in containers larger than 1 gallon, must state “bulk process”
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Class 3: Carbonated Grape Wine
Wine made effervescent with carbon dioxide NOT from secondary fermentation of the wine within a closed container, tank or bottle
Mechanically carbonated
May be sold as
Carbonated Red (White/Rose) Wine
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Class 4: Citrus Wine
By the normal alcoholic fermentation of the juice of sound, ripe citrus fruit
Class 5: Fruit Wine
By the normal alcoholic fermentation of the juice of sound, ripe fruit
Berry wine from berries
Fruit wine wholly from one kind of fruit:
Peach Wine, or Blackberry Wine
Perry: fruit wine made from the fruit juice of pears; it does not taste like a wine.
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Class 6: Wine from other agricultural products
by the normal alcoholic fermentation of sound fermentable agricultural products
Wine derived wholly from one kind of agricultural product shall, except sake be designated by the word “wine” qualified by the name of such agricultural product
e.g., “honey wine” and “dried blackberry wine”
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Class 7: Aperitif Wine
An alcoholic content of not less than 15 percent by volume
Containing added brandy or alcohol, flavored with herbs and other natural aromatic flavoring materials,
With or without the addition of caramel for coloring purposes
Possessing the taste, aroma, and characteristics generally attributed to aperitif wine
Vermouth: A type of aperitif wine compounded from grape wine, having the taste, aroma, and characteristics generally attributed to vermouth
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Class 8: Imitation and Substandard or other than standard wine
Just know that this category exists.
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Class 9: Retsina Wine
Retsina is a grape table wine fermented or flavored with resin
Common in Greece
Resin of the Pinus Halepensis wine is added to the must
Pungent flavor!
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Minimum Label Requirements
(Citation: Napa Valley Vintners)
Minimum Label Requirements
Brand name (or name of winery) is required
If no “brand”, typically the bottler’s name is considered the brand.
Foreign brand or trade names are not permitted on domestically produced wine
Class, type, or other designation
The Place of Origin (Appellation)
At least 75% of the wine produced from grapes grown in the place named
Varietal designation
- A wine where that one variety dominates the contents (75% >)
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Minimum Label Requirements
Alcohol content
If more than 14%, alcohol content is required.
Must include percent by volume of alcohol
If a blend of USA and foreign wine, the exact percentage of each
Name and address of producer/bottler, and importer if imported
Can be labeled “table wine” if content between 7% and 14%
Dessert wine if over 14% (up to 24%)
Wines that contain 14% ABV are allowed a tolerance of +/ - 1.5 percent ABV
- A tolerance of +/- 1 percent ABV if wines of 14% ABV or higher
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Minimum Label Requirements
Declaration of sulfites
If 10 or more parts per million (PPM)
Check out Lisa Gross’ Honors Project Video Presentation (on D2L)
Standard of Fill
Wine bottles should indicate their net volume.
3 L, 1.5L, 750 mL, 500 mL, 375 mL, 187 mL or 50 mL
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A few other labeling issues with legal implications
Varietal Labels
If used, must also list appellation (origin)
75% minimum of the varietal (Prior to 1983 only 51% was required); The 75% must come from the stated appellation
If more than one varietal, must list proportions
If multi-appellation, must list proportions
A European wine label will not specify the varieties used to make the wine.
States may have stricter legislation: Oregon requires 90% for all except Cabernet Sauvignon.
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Estate bottled
From a specified appellation
The winery lies within the appellation
All grapes (100%) came from land owned by the winery
Performed all winemaking steps
The wine never left the winery before being bottled
“Produced or made by” . . .
Minimum 75% of the wine must be made by the winery
If the name of a vineyard, orchard, farm or ranch is used on a wine label, but the label does not claim to be an estate bottled wine:
- Minimum 95% of the wine must be produced from primary winemaking material grown on same
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Appellation of Origin
Appellation : Broad or narrow
Political Designation
Minimum 75% of wine must come from the designation
Approved Viticultural Area (AVA)
Defined by the Alcohol and Tobacco Tax and Trade Bureau.
History, climate, soil types, water quality/quantity
Minimum 85% of wine must come from the AVA
The American Viticultural Area system, in contrast to the European appellation systems, does NOT impose viticultural or oenological standards on the grape grower or the winemaker.
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Vintage Wine
Made from grapes harvested in a specified year
Labeled with a recognized viticultural area (appellation of origin)
at least 95% of the wine must have been derived from grapes harvested in the year specified.
85% applied if the wine is labeled with an appellation of origin other than the country or viticultural area
Ice wine and Icebox wine
Only regulated in Canada, Germany (Eiswein) and Austria
grapes naturally freeze on the vine once they have been subjected to temperatures of
-8 °C (17 °F) or colder in Canada and
-7 °C (19 °F) or colder in Germany.
No requirement for American winemakers
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End of Laws and Legal Nomenclature
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Direct-to-Consumer (DTC) Wine Market
Reduced # distributors over years
Increased # of wineries in the U.S.
Over 50% since 2009
(Total Number of Wineries in the U.S. from 2009 to 2019 by Wines & Vines)
Direct-to-consumer (DTC) increasingly important:
Direct-to-consumer (DTC) increasingly important:
Harder for wineries (especially small wineries) to gain entry into any given state’s three-tier system
Fewer distributors
More winemakers/producers
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Video Resource – 4 mins
Note that is published in 2017! Any update?
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Alcohol Distribution: License vs control state
License state or control state?
Who distributes
Competitive model or control model?
What prices
Can the distributor transfer the “right to represent” as if a commodity?
