Issue link: http://read.dmtmag.com/i/561374
1 4 V I N E YA R D & W I N E RY M A N A G E M E N T | S e p t - O c t 2 015 w w w. v w m m e d i a . c o m which 35,000 were sold through direct-to-consumer channels. "I think The Wine Group saw what the potential was in the brand, and they could leverage it with their clout and power in the marketplace much more than we could," Ben- ziger said. "We had good growth, b u t t h e m a r g i n s c o n t i n u e d t o shrink, and so we had to continue to grow, grow, grow, grow." In a press release announcing the B.R. Cohn sale, Bruce Cohn stated, "It looks like we are at the end of the era of family-owned wineries. It is becoming increas- ingly difficult to compete and grow in this new environment … where bigger entities with more resources are taking over." Established, independent winer- ies have become especially attrac- tive to larger buyers in recent years, noted Robert Nicholson, principal at Healdsburg-based Inter- national Wine Associates, mergers and acquisitions advisors to the global wine industry. "As distribu- tors consolidate and their portfolios increase in size, the larger strategic wine companies are gaining more effective access to retail and res- taurants," he said. "Those inde- pendent wineries with a unique geographic or varietal positioning flourish. Other wineries that lack a distinguishing point of difference are finding it more costly and more difficult to achieve their goals." On July 6, Pennsylvania came as close as it ever has to privatizing the state's wine and spirits retail and wholesale monopoly when both houses of the legislature sent a privatization plan to the gover- nor's desk. D e m o c r a t i c G o v. To m Wo l f vetoed the bill, saying it was not a "responsible means" of overhauling Pennsylvania's liquor system. How- ever, he coyly left the door open to changes in the current system and continued negotiations as the state faces a budget feud. The move pushed privatization near the fore- front, giving advocates a boost and creating a new sense of inevitability. The bill would have created a three-tier system, selling retail and wholesale licenses, in a complete and total privatization. It would have given privately owned beer retail- ers (called "distributors" in Penn- sylvania) and other licensees, such as restaurants and hotels, the first crack at 1,200 licenses that would allow them to sell wine and spirits. With that plan nixed, Wolf and supporters of the current system call for "modernization" of the state system of 600-plus wine and spirits stores operated by the Pennsylvania Liquor Control Board (PLCB). Wineries looking for a key to the Keystone State should not be too encouraged – yet. "This means the status quo continues," said Michael Kaiser of WineAmerica, a lobbying and trade group based in Washington, D.C., who also serves on the board of Free the Grapes. Neither group has taken an official position on Pennsylvania's privatization, but they monitor changes closely with an eye toward expanding direct-to- consumer shipping. "I can't see any kind of shipping bill getting through without privati- zation. They will forever be linked," Kaiser said. "So any winery looking to break into Pennsylvania as a new market will still have to try to work with the PLCB." For at least 20 years, polls have shown a majority of Pennsylvania citizens want the state government out of the wine and spirits busi- ness. Governors on both sides have championed privatization: Demo- crat Milton Shapp in the 1970s, Republicans Dick Thornburgh in the '80s and Tom Ridge in the '90s. Each came up against the political marriage of social conservatives and pro-union liberals. P o l i t i c a l t e n d e n c i e s h a v e changed. Today's elected Repub- lican is more likely to be a limited- government fiscal conservative, embodied by privatization champi- on and Speaker of the House Mike Turzai. While union enrollment has waned, its influence has not. Exist- ing trade and government unions have viewed the state store jobs, about 3,500 of them represented by the United Food & Commercial Workers Union Local 1776, as a line in the sand. "The old paradigm of social con- servative and union liberal has dis- sipated," said Matt Brouillette, president and CEO of conserva- tive think tank The Commonwealth Foundation, based in Harrisburg, Pa. "But all unions – government and non-government – are circling the wagons, and as a collective force remain powerful and support- ive of the state monopoly." Yet popular support for privati- Pennsylvania Gov. Tom Wolf vetoed the state's liquor privatization bill, but is calling for modernization of the current system. Pennsylvania Privatization Vetoed BY DAVID FALCHEK