Supreme Court Ruling Makes The Net More Viable For Small Vineyards - InformationWeek

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Supreme Court Ruling Makes The Net More Viable For Small Vineyards

While online wine sales remain a small part of the business, a ruling making it easier for vineyards to ship directly to customers could help niche products.

If there's one thing the Internet's good at, it's connecting buyers and sellers of products that lack the mass-market appeal needed for sale through traditional channels. For wineries, a decision by the U.S. Supreme Court on Monday could help them use the Web to peddle, say, an obscure cherry port from Michigan to a snowbird wintering in the South. But don't expect it to revolutionize the wine business.

The 5-4 decision struck down state laws that prohibit the shipment of wines from out-of-state wineries while they permit similar shipments from in-state vineyards. The ruling, in cases from New York and Michigan, could help the smallest vineyards reach new customers, and larger wineries test market new products. "The Internet gives us the opportunity to get wines that aren't distributed through regular channels in hands of friends and family in order to establish those wines in a market," says Reed Foster, co-founder of Ravenswood Winery in Sonoma, Calif., and president of the Coalition for Free Trade, the winery association behind the successful lawsuit.

However, online wine buying remains a relatively small market. An estimated $80 million worth of wine is sold over the Internet annually. So far, nearly all of that comes from online retailers, with perhaps 1% or less from vineyard sales, says Russell Fradin, VP of business development at Wine.com, the largest online wine retailer. Monday's high-court decision focuses on shipments directly from wineries and doesn't affect online retailers.

The justices held that New York and Michigan laws discriminated against out-of-state vineyards because they were banned from shipping wines to their respective residents while in-state wineries could do so. That's a violation of the interstate commerce clause of the U.S. Constitution, the court majority ruled. Now, the two dozen states affected by the ruling must decide whether to allow shipments from out-of-state wineries or ban shipments from in-state ones. Recently, New Jersey banned in-state shipments rather than allow out-of-state shipments.

The timing of the ruling could prove fortuitous for Napa Valley vineyard Quintessa, which does sell through an established distribution network but sees some sales coming from customers who visited its winery but can't find the wines in their local liquor stores. Tracy Sweeney, director of consumer business, says the St. Helena, Calif., winery will upgrade its online ordering systems in the next few months.

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