Grapes Of Wrath

These days, creating a bottle of fine cabernet is the easy part for many small wineries. The hard part? Finding a way to get their wines into consumers' glasses.

The problem, say many, is obscure laws dating back to the Prohibition era that restrict wine and other alcoholic beverages from entering states except through official channels such as private distributors or a government authority. In recent years, a major consolidation of liquor distributors and retail channels has caused the pipeline to consumers to shrink, squeezing small wineries and wine retailers out. Seeing no other choice, some have turned to direct shipping to reach customers.

"Small wineries and retailers see the existing wholesale distribution network as anti-competitive and anti-consumer," says Rich Cartiere, editor of Wine Business Publications in Sonoma, California.

Yet with illegal shipments reaching a record $1 billion last year, says Cartiere, distributors and major wine retailers in several states are pressuring authorities to crack down. That's what happened in a Florida lawsuit filed in U.S. district court recently. Two of the seven small wine retailers named in the suit have already settled out of court. But others, like Ronald Loutherback, owner of three Wine Club premium wine shops throughout California, aren't ready to give up so easily.

Loutherback has established a fund to fight the suit, calling on his many business contacts and sending letters to catalog retailers and small wineries explaining his situation. So far, the response has been overwhelmingly supportive. Says Loutherback, "Most are eager and are coming to me with support." -H.P.

This article was originally published in the July 1996 print edition of Entrepreneur with the headline: Grapes Of Wrath.