Thursday, May 19, 2011

Wine & power

This article was printed from the Local Stories
section of the Sacramento News & Review, originally published May 19, 2011.
This article may be read online at:
Copyright ©2011 Chico Community Publishing, Inc.

Printed on 2011-05-19.

Wine & power

Just how influential is the wine-industry lobby in Sacramento?

By Anthony Pignataro

Photo Illustration By Miles Harley
There are no rolling hills, no neat rows of grapevines near a stately brick estate, but the yellow building on the corner of S Street and 29th is, in fact, a winery. The bar stools are hand-painted, the colorful paintings on the walls come from developmentally disabled artists, the ceiling beams are exposed and, yes, those are bicycle tires holding up one of the air ducts in the tasting room, but Revolution Wines is a functioning, 5,000-case-a-year winery. The grapes may come from Amador or other nearby vineyards, but the wine is made on site.
In many ways, the place is a radical departure from the cultured manors that most people associate with fine wine. But Revolution Wines is nonetheless an authentic, dues-paying member of that oldest of California winemaking traditions: the trade association.
“We’re a member of both the Wine Institute and Family Winemakers of California,” said Joe Genshlea, one of the owners. “We’re not a big player, and obviously have different needs … but we like to keep abreast of developments.”
Wine is so interwoven with social functions and fine dining that it’s hard to think of it as something political. It is elegant, distinguished; wine is class—the difference between a meal and a dining experience. Whether located in Napa, Paso Robles, El Dorado County or Sacramento, wineries are usually more like parks than places of business. We sip a dry merlot or a peppery zinfandel and imagine ourselves culturally sophisticated, but rarely stop to think about the hefty campaign contributions granted to politicians from wine lobbyist groups. We regard the rows of tangled vines spread across gently rolling hills, but rarely think of the fact that winemakers enjoy special privileges beyond that of the rest of the alcohol industry. We admire the attractive, stately label in a bottle we found at Trader Joe’s, but hardly ever ask what happens to legislation that affects the wineries in a negative way.
But make no mistake: Wine and power are undeniably intertwined in California.
The winemakers, sellers and grape growers that make up the industry are both beholden to political maneuvering and a significant legislative player. Nearly every county in the state has some hand in winemaking, which means nearly every state legislator must pay the industry heed.
Though there is some controversy over its relative power when measured against other interest groups, there is no denying that California’s wine industry is a significant force for all sorts of issues, some rather surprising.
“Wine has influence far beyond what it should,” said Michael Scippa, spokesman for the Marin Institute, a nonprofit organization that opposes beverage-industry interests. “It is unfortunate that they have so much influence.”
One small but notable example: Former Gov. Arnold Schwarzenegger, who declared September to be California Wine Month while in office, appeared along with his estranged wife, Maria Shriver, in a famous California tourism television ad called “You’ll Be Back.” The ad, sponsored by the California Travel and Tourism Commission as well as the Wine Institute, featured food and wine personalities from across California, as well as Schwarzenegger and Shriver seated in a sunny, open-air cafe with what appear to be four glasses of wine at the table.
Another example: Karen Ross, appointed secretary of the California Department of Food and Agriculture by Gov. Jerry Brown in January, is an ex-wine-industry lobbyist. From 1996 to 2009, Ross served as president of the Sacramento-based California Association of Winegrape Growers, one of the “Big Three” wine-industry associations. For much of that time—2001 to 2009—Ross also served on the California State Board of Food and Agriculture, a 15-member panel of governor appointees who advise the CDFA secretary. “The Governor’s appointment of Ross is very reassuring to the California winegrape industry,” said CAWG President John Aguirre said in a statement at the time of the appointment. Ross is a Democrat, but wine politics are largely bipartisan.
During the 2009-10 campaign, for instance, the San Francisco-based Wine Institute—another of the top three wine-industry groups—made more than $636,000 in political donations and expenditures through its political-action committee. Though the Institute gave the Democratic Party’s state central committee $52,960, they also donated $38,500 to the state Republican Party. Similarly, the Institute gave Brown’s campaign $36,900, but also donated $15,000 to Republican Meg Whitman. The Institute also donated hundreds of thousands of dollars in smaller contributions to Republican and Democratic legislators all across the state.
And that’s just the Wine Institute. As such, winemakers and grape growers have many friends in the state Capitol, and they appear to have very few enemies. In fact, Scippa of the Marin Institute said he could think of just one legislator—Democrat Assemblyman Jim Beall of San Jose—who didn’t take campaign contributions from wine or alcoholic-beverage interests. Beall would not consent to an interview on the politics of wine, but through a spokesman, released the following rather candid statement:
“I’m not working on any legislation in that area. When I do they win. I’m working on other issues now.”
Story of wine

Revolution Wines, a small winery and bistro in Midtown Sacramento, is the exception that proves the rule in a powerful industry that is mostly composed of multinational alcohol conglomerates such as the Foster’s Group in Australia (Beringer, Stone Cellars, Meridian) and E. & J. Gallo (Carlo Rossi, Twin Valley, Barefoot Cellars, Turning Leaf).
Photo By jerome love
Though California’s wine industry dates to 1933—the repeal of Prohibition—it wasn’t until many decades later that it really took off, that the public stopped thinking of California wines as something sweet that came in a jug and started viewing them as sophisticated varietals on par with anything produced in France or Italy. That was, at least at first, largely the work of a single man.
In the 1960s, historian Julia Flynn Siler wrote in her book The House of Mondavi, the nation “preferred Coca-Cola and cocktails.” But then Robert Mondavi opened his own namesake winery in Napa Valley. “He had tirelessly sermonized that food and wine were at the heart of the good life, that in an age of fast food, wine was a healthy and civilizing force with sacred traditions, and that Napa Valley wines belonged in the company of the world’s best,” Siler wrote. “Along the way, this son of an Italian peasant became the patriarch of America’s fine wine trade.”
By the time E. & J. Gallo wines famously trumped the best French wines at an annual exhibition in the 1970s, California wines had achieved worldwide fame. The statistics today about California’s wine industry—as put out by the Wine Institute—are staggering. There are nearly 3,000 bonded wineries throughout the state, up 268 percent over the last two decades, with 531,000 acres dedicated to wine grapes. In 2009, California wineries sold 197 million cases, totaling nearly $18 billion, with another 46 million cases sold to 125 nations. Put simply, three out of every five bottles of wine sold in the U.S. come from California.
“Wine is the number one finished agricultural product in retail value in the U.S.,” states one Wine Institute brochure, which goes so far as to say the wine industry is actually endemic to the state. “California’s high wine quality is tied directly to the state’s ideal climate, topography and soil for winegrapes, so the industry will always be based in California.”
And that translates into power.
And it didn’t take long for corporate America to notice.
Indeed, today the largest wineries are all owned by major corporations, some of which are located outside of California. Beringer, Stone Cellars and Meridian wines, for instance, are all owned by Foster’s Group in Australia, which also owns Foster’s Lager, Crown Lager and Skyy vodka. E. & J. Gallo is California-based, but the company also includes Carlo Rossi, Twin Valley, Barefoot Cellars and Turning Leaf wines, as well as Bartles & Jaymes wine coolers. Even Robert Mondavi winery itself is now part of Constellation Brands in New York, which also owns Woodbridge, Clos du Bois, Corona beer, Modelo Especial and Svedka vodka.
In marketing materials, the Marin Institute has noted, companies like Constellation Brands remain anonymous. The reason, the advocacy group noted in its 2009 report “The Myth of the Family Winery,” is simple: “Unlike beer or spirits, the wine industry has the unique opportunity to exploit the perception of small, local, family-owned wineries for all its members, including giant multinational alcohol conglomerates.”
Many of these conglomerates are themselves politically active. E. & J. Gallo made $327,216 in campaign expenditures during the 2009-10 campaign, according to the California secretary of state’s office. Constellation Brands weighed in with a further $126,868 in donations. And Diageo, an English firm that owns the Beaulieu, Sterling, Rosenblum and Chalone wineries (along with Guinness, Red Stripe, Baileys Irish Cream, Captain Morgan, Smirnoff and Jose Cuervo) made $289,117 in political expenditures. Like the Wine Institute, the money went to a variety of legislative candidates, irrespective of political affiliation.
But all that is largely invisible to wine consumers, who are, by the way, quite numerous. Approximately 20 million people visited California’s wineries last year. By comparison, nearly 16 million visited Disneyland in 2008.
That year, the Wine Institute celebrated its 75th anniversary. Founded less than a year after the end of Prohibition, the Institute is not shy about taking credit for such amazing tourism figures. In its 75th anniversary celebration brochure, for instance, the 1935 list in its timeline of notable Institute events is some tersely worded boosterism: “Wine Institute advocates legislation preserving sales at wineries, allowing for the winery retail sales and tourism.”
Wag the dog

Joe Genshlea, one of the owners of Revolution Wines, is represented in Sacramento’s halls of power by wine trade associations. But “we’re not a big player,” he says.
Photo By jerome love
For his $200 a year in dues, Genshlea and Revolution Wines get regular updates from the Wine Institute and Family Winemakers on pending legislation, both state and federal. “We’re not active members—we just pay our dues and get benefits,” he said. “They do a lot of work on state shipping laws, which is what the big names are interested in. We’re not really interested in shipping out of state. But two years ago the state changed the law, allowing you to pour wine by the glass in tasting rooms. You couldn’t do that before then. That was a huge benefit for us.”
Scippa of the Marin Institute calls the wine industry “the tail that wags the dog in terms of opposing progressive controls that would protect public health.” In the Marin Institute’s 2008 report “You Get What You Pay For,” the advocacy group details some of the power and influence of the alcohol lobby in state politics.
“Though it doesn’t grab many headlines, the alcohol lobby is one of California’s most potent political forces, spending millions each year to sway legislators on bills affecting the liquor, wine and beer businesses,” states the report. “Whether it’s staunchly opposing regulation of alcopops (flavored alcoholic malt beverage drinks promoted to young people), or fending off increased liquor excise taxes, or crafting measures to expand their marking opportunities, the beer, wine and liquor industry has a convincing track record—killing nearly 100 percent of the bills it opposes, and getting most of its supported measures passed.”
A year later, the Marin Institute’s report “The Myth of the Family Winery” went into even more detail. “Big Alcohol’s 2009 political contributions in California largely went to ‘Budget Reform Now,’ the California PAC supporting Governor Schwarzenegger’s final budget proposal and six related propositions intended to ward off the state’s fiscal crisis on the May ballot,” the report stated. “Six of the nine contributors to the PAC were from the wine industry. Constellation Brands, Diageo, Gallo, and the Wine Institute each contributed $100,000, Brown-Forman [which owns the Bonterra, Fetzer, Sonoma-Cutrer and Little Black Dress wineries] contributed $20,000, and the California Association of Winegrape Growers contributed $5,000. In all, wine-related contributions were nearly 75 percent of Big Alcohol contributions to Budget Reform Now in 2009.”
Looking over some of the industry’s public-relations materials, you’d think they’d almost take these statements as a compliment.
The Wine Institute, which represents more than 1,000 wineries, “opposes and defeats dozens of punitive tax increase proposals each year and has implemented positive changes to direct-to-consumer shipping in many states, and to many other domestic and international trade challenges,” says the Wine Institute’s 75th anniversary celebration booklet, which came out in 2009.
To do this, the Institute says it employs two in-house lobbyists in Sacramento as well as “more than 40 contract lobbyists who act on pending legislation in the 49 states outside of California.” Their California lobbyists, Michael Falasco and Timothy Schmelzer, who share an office on L Street near the Capitol, “work to defeat punitive taxes, remove trade barriers, limit bottle bills, defeat or repeal monopoly protection laws, and to expand and protect direct-to-consumer shipping laws.”
Wine Institute officials refused to grant SN&R access to their lobbyists. “We won’t allow an open-ended interview,” said spokeswoman Gladys Horiuchi. “We don’t want our competitors to know what we’re doing.”
This didn’t surprise one Capitol staffer who’s spent many years dealing with wine-industry issues. “Mike Falasco’s pretty tight-lipped,” said the staffer, who asked for anonymity because he’s not authorized to speak for his legislator. “They try to work behind the scenes.”
An online gift database at The Sacramento Bee shows 683 gifts to state legislators and their aides from the Wine Institute dating back to 2000. Many of the gifts are bottles of wine, but drinks at Chops and The Broiler show up rather often. On the first of the year, the Institute sponsors a reception at the Sutter Club for dozens of legislators of staffers—a kind of meet-and-greet between the Institute officials and friendly legislators.
“It was simply a goodwill reception,” said one Capitol staffer who attended the 2010 event. “There were a couple hundred people in the room. It’s a pain in the ass for a lot of people because you have to report it—some people say it’s not worth going. Believe me, a glass or two of wine and some cheese and crackers are not going to sway me.”
By contrast, the California Association of Winegrape Growers—which represents more than 60 percent of the growers of wine grapes in the state, and thus tends to pay closest attention to labor bills—has a large “grassroots advocacy system” at their disposal. “We get our growers to send letters directly to the governor,” said Sharlene Garcia, CAWG’s communications director. “Last year, on Sen. Darrell Steinberg’s card-check bill, a number of growers told their employees about it and they sent letters as well.”
Card check makes labor-friendly changes to the way collective-bargaining representatives are elected. “Of course we’re in opposition to it,” Garcia said. Garcia added that since Steinberg recently reintroduced his card-check bill, which failed last year, CAWG would once again “activate the system” and oppose it.
The Wine Institute may just employ two, but CAWG’s president, John Aguirre, is a registered lobbyist who works alongside the lobbying firm Gualco Group, which is under contract and also represents numerous special districts and municipalities throughout the state. And, of course, there are other wine lobbyists in Sacramento, too. Family Winemakers of California president Paul Kronenberg is also a registered lobbyist, and his organization also contracts with the firm Political Solutions, which also represents a host of big names like Starbucks, Honda and Nike. Even the relatively small Napa Valley Vintners Association, which advocates for Napa wineries alone, contracts with high-powered Platinum Advisors, one of the most powerful Sacramento lobbying firms, which represents such clients as the County of Orange, AT&T, ConocoPhillips, and the United Food and Commercial Workers Union.
The biggest brand owners also deploy platoons of lobbyists. According to the California secretary of state’s office, Diageo contracts with two Sacramento lobbying firms: Carter, Wetch & Associates, which represents a lot of unions, and Capitol Advocacy, which lobbies on behalf of trade associations, corporations and municipalities across the state.
Is there a nexus?

A giant alcohol conglomerate called Constellation Brands in New York owns a range of wineries and alcohol companies and labels, including Ravenswood, Clos du Bois, Svedka vodka, and Corona and Tsingtao beer.
Scippa of the Marin Institute described Falasco and other wine-industry lobbyists as being quite influential. “The wine industry played a very visible role in killing a bill in the last session,” he said. “They have a formidable, daily lobbying presence in Sacramento.”
The bill Scippa is referring to was Assembly Bill 1019, introduced by Assemblyman Beall and sponsored by the Marin Institute in February 2009 (Sen. Mark DeSaulnier, D-Concord also introduced an identical bill in the Senate). The bill would have allowed the Department of Alcoholic Beverage Control to collect a 5-cent-per-drink fee “from every person who is engaged in business in this state and sells alcoholic beverages for resale.” That’s all alcoholic beverages, including wine.
The money would have gone to fund alcohol-abuse treatment programs. It was exactly the sort of “punitive tax increase” wine lobby groups like CAWG and the Wine Institute opposed.
“Opponents from the wine industry refute that a nexus exists between winemakers and the abuse of wine by a few consumers and they cite studies that have substantiated the health benefits in wine,” stated a January 5, 2010 Assembly Committee on Health report on the bill. The report listed 55 opponents, including CAWG, the Wine Institute, Family Winemakers of California, Diageo, and a host of wineries and grape-grower associations. The bill died in committee shortly thereafter.
When asked why they would oppose such bills, Wine Institute spokeswoman Horiuchi said simply, “It proposed a taxlike fee on consumers of wine, beer and spirits.”
“No one binge-drinks wine,” said a third Capitol staffer with extensive experience dealing with the wine industry. “In moderation, wine is very good for you. It would have amounted to a 2,000 percent tax. It was a poorly written bill. Also, did we really want to make a guy’s six-pack of beer more expensive in a depressed economy?”
One legislative staffer who has dealt with wine-industry issues and who requested anonymity denied that the wine lobby held any special power. “I don’t consider them a power player,” the staffer said. “If anything, they don’t exert enough influence.”
But this is hard to reconcile with the actions of the wine lobby—and especially the Wine Institute—on a few other bills. In the fall of 2010, the wine industry began lobbying heavily against House Resolution 5034, the Comprehensive Alcohol Regulatory Effectiveness (CARE) Act, a federal bill that would have, among other things, hurt the wine industry’s special exemption from the so-called three-tier system.
For all of alcohol except wine, there are separate manufacturers, distributors and sellers. This breaking of the industry into three tiers was designed to make alcohol regulation easier and mob control of the industry much harder. But a U.S. Supreme Court decision back in 2005 ruled that wineries could bypass distributors and ship directly to consumers, though many states still bar interstate wine shipments. In any case, the CARE Act would have swung power back to wholesale distributors.
The Wine Institute mobilized its lobbyists in California and Washington itself. In August 2010, Senate Joint Resolution 34, sponsored by the Wine Institute and Family Winemakers of California, passed without opposition. The measure, which was heavily laden with glowing statistics on the state’s wine industry taken word for word from Wine Institute marketing brochures, urged “Congress to defeat H.R. 5034 in order to protect and preserve the ability of California wineries, and all wineries in the United States, to ship wine directly to consumers without discrimination between in-state and out-of-state wine producers.”
It was a nonbinding resolution, but people in Washington seemed to be listening. On September 29, 2010, attorney Tracy K. Genesen of Kirkland & Ellis, LLP, appearing on behalf of the Wine Institute, appeared before the House of Representatives Judiciary Committee. She told committee members that the CARE Act was “about protecting wholesalers from competition.”
“It is nothing less than a power grab designed to protect their market share,” she said.
They apparently agreed, because the committee took no further action on the CARE Act following the September 29 hearing.
Then there was state Assembly Bill 1649, signed into law by Gov. Schwarzenegger on August 13, 2010. This bill, introduced by Democratic Assemblyman Wesley Chesbro (who represents the winemaking areas of Mendocino) and once again sponsored by the Wine Institute and Family Winemakers, made it easier for licensed winegrowers “to produce spirits of wine (a byproduct of wine fermentation) under specified conditions without having to additionally obtain a distilled spirits manufacturer’s license,” according to the Senate Committee on Governmental Organization report on the bill. Like the nonbinding resolution above, A.B. 1649 passed without a single dissenting vote.
And then there was the wine lobby’s sizeable financial contributions to the fights over last year’s Proposition 26. That measure imposed a two-thirds legislative vote requirement for any new state fees.
“We believe Prop. 26 was a direct response to our attempt to pass alcohol mitigation fees,” said Scippa of the Marin Institute.
Of the $18.4 million taken in by Stop Hidden Taxes, the main campaign committee pushing for Prop. 26, $2.2 million came from wineries and wine-industry groups. The Wine Institute contributed slightly more than $300,000. Gallo gave $75,000 and Diageo contributed $25,000. It was money well spent—Prop. 26 passed by a fairly narrow margin, 52.5 percent to 47.5 percent.
“Essentially, the state constitution says taxes are levied with a two-thirds vote of the electorate, but legislators found a way to pass taxes with a simple majority by calling the tax increases ‘fees,’” the Wine Institute’s Horiuchi explained in an email to SN&R. “The passage of Prop. 26 ends these hidden taxes.”
A taste of stewardship

Michael Scippa of the Marin Institute believes the wine industry has too much influence in Sacramento and says it spends millions of dollars each year to sway legislators on bills affecting the liquor, wine and beer business.
photo courtesy of michael scippa
The wine industry is not, of course, all-powerful. For instance, on clean-air regulations, the staffer who insisted the wine industry wasn’t all that powerful noted that he’s seen them “lose a lot.”
“In oil production, storage tanks produce [volatile organic compounds],” which are heavily regulated, the staffer noted. “But wine also uses storage that don’t put out such emissions, yet they still have to pay fees. I’ve seen them lose a lot on these issues.”
Another Capitol staffer who used to work for a legislator who had many wineries as constituents said the wine industry, far from being a weakling on environmental issues, is “on the cutting edge of progressive agriculture and energy.
“The rate of adoption of solar panels by the wine industry is higher than others,” the staffer said. “And last year, during discussions of in-stream flow standards for Northern California, the Wine Institute and Trout Unlimited worked together and built bridges. It got very little press—when people do the right thing, it never gets love.”
There is also Water and Wine, a move set up early this year to balance Napa and Sonoma grape growers’ need for water with keeping fish populations in the streams healthy. “Nobody understands land stewardship better than grape growers,” reads a recent Water and Wine report put out by the group Trout Unlimited. “Trout Unlimited has worked with a number of growers and wineries to restore salmon and steelhead habitat in the heart of wine country. In Dry Creek Valley, Knights Valley, and other areas we have helped repair fish passage barriers, plant streamside vegetation, and restore stream channels.”
Along these lines, Horiuchi says the Wine Institute supports the pending state bill Senate Bill 370 from Sen. Sam Blakeslee, R-San Luis Obispo. That bill “allows wineries and other agricultural businesses that have multiple electricity meters on their contiguous property to size their solar-energy system to offset their aggregated electric load,” Horiuchi said. “This will allow these businesses to receive a more equitable benefit from the state’s net energy-metering law.” The Union of Concerned Scientists and the Sierra Club also like the bill, as do a host of solar-energy providers and wineries.
Horiuchi also says the Wine Institute opposes Senate President Pro Tem Darrell Steinberg’s Senate Bill 653, which would allow school districts to impose a variety of new taxes, including excise taxes on alcoholic beverages. “Counties already have ample taxing powers for parcel and sales taxes,” Horiuchi said.
The effectiveness of the Wine Institute’s lobbying on these bills remains to be seen.
Scippa and the Marin Institute are also watching the wine industry’s actions on two other pending state bills. The first is Assembly Bill 183, introduced by Assemblywoman Fiona Ma, D-San Francisco, which would ban alcohol sales in self-serve checkout lines. “It’s proven very easy for youth and already-inebriated adults to buy alcohol through these self-serve checkouts,” Scippa said. “You can’t buy spray paint this way, but you can buy alcohol.”
Assigned to the Appropriations Committee, this bill hasn’t yet come up for a hearing. So far, no alcohol industry group has weighed in on it.
Then there’s Senate Bill 39, introduced by Sen. Alex Padilla, D-Pacoima, which would ban so-called alcopops, controversial caffeinated energy drinks like Four Loko (a similar bill never got out of committee last year after two energy-drink makers put up strong opposition). The Food and Drug Administration has already acted on caffeinated energy drinks, so the bill is largely academic.
“There’s no stated opposition yet,” Scippa said. “But we want to make it stronger by inserting language to address giant cans of 23.5 ounces. If that goes in, you’ll see the wine lobby going public with the opposition.”
Throughout it all, local winemaker Joe Genshlea pays his dues (about $200 a year) and remains a member of wine trade associations that continue to spread influence and serve his company’s interests, as well as those of the major corporations that make up the large share of his industry, in California and beyond.

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