Op-Ed: Why NJ should eliminate cap on direct-to-consumer wine shipments

Andrew Zwicker | April 26, 2021 | Opinion, Business
A nine-year-old law arbitrarily limits the availability of wine for shipment direct from U.S. wineries to NJ consumers’ homes or workplaces
Andrew Zwicker

It isn’t every day that lawmakers can make a policy decision that has only winners.

A bill in the Legislature to “free the grapes” in New Jersey offers just such a tradeoff-free proposition.

This legislation would increase consumer choice, bring in additional state revenue and do so without causing local retail beverage stores any loss in business or jobs.

At the heart of the issue is a nine-year-old New Jersey law that arbitrarily limits the availability of wine for shipment direct from U.S. wineries to consumers’ homes or workplaces. The law bans wineries that produce more than 106,000 cases of wine per year (that’s a medium-sized winery) from shipping directly to New Jersey consumers. Wineries making less than that amount are allowed to ship, as long as they pay an annual license fee and collect and remit the applicable state sales and excise taxes.

The effect of the law is to prevent New Jersey consumers from having 90% of domestic wines shipped to their door. And it’s not as though wine lovers can just pick up the wine at a neighborhood store instead. There are 10,000 wineries in the U.S., and they produce more than 100,000 wines. No store can stock more than a fraction of that output. And much of the wines banned for direct-to-consumer shipment in New Jersey are specialty products, sometimes available only at wineries or through wine clubs that are growing in popularity.

The COVID-19 pandemic has only made things worse, with far fewer people able to go out to eat or visit local stores. Indeed, direct shipping from wineries to consumers across the nation grew by a record amount over the past year — but New Jersey’s growth ranked last among states.

A case of wine fairness

I’m pleased to be the sponsor of legislation that would eliminate the “capacity cap” that limits direct-to-consumer wine shipping in our state. Of the 46 states that allow direct shipping from wineries to consumers, only New Jersey and Ohio have restrictions based on the size of a winery. Fairness alone ought to mean New Jersey changes its law. But there also is considerable data to back up the case.

A recent report by two expert wine researchers Danny Brager and Dale Stratton, commissioned by Naked Wines, a California winery, adds to the growing evidence that the legislation (A-1943 and S-2683) has only upsides.

Among the findings:

  • New Jersey would gain $3 million to $4.4 million in tax collections per year in the short term, and up to $6 million annually in the longer term. The state would gain new fees from winery licenses and wine label registrations, as well as sales and excise tax remittances from wineries. Since the existing limited law was adopted in 2012, New Jersey has lost nearly $30 million in potential wine tax and license fee collections.
  • New Jersey consumers would enjoy wider choice at a broader price range. The average bottle of wine shipped direct from wineries to consumers in New Jersey cost $45.51, while the national average price for direct shipped wine last year was $36.83 a bottle. With greater winery shipping, New Jersey consumers have access to more value-priced wines.
  • Local retailers would not be affected. Only 30%  of New Jersey retailers’ alcoholic beverage revenue comes from wine sales and, of that, 80% is from wines priced under $15 a bottle or in cans, boxes, etc. That means the majority of liquor store overall sales would not be affected by more wine shipping. This is consistent with research in Maryland and retail sales growth rates in other states showing that expanding direct winery-to-consumer shipping causes no harm to local businesses. Additionally, a robust online marketplace that does not exclude larger wineries benefits both wineries and local retailers by increasing consumer comfort with online channels, which are used heavily by both wineries and retailers in New Jersey.

Prohibition ended nearly nine decades ago. There’s no reason for New Jersey to cling to a rule that serves no one’s interest.