In New York Battle over Wine in Groceries, Money Talks

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Albany's budget square dance may once again trample the hopes of New Yorkers wishing they could pick up a bottle of Riesling while shopping for cod and corn. Last week New York's State Senate and Assembly both passed their versions of the state budget for the upcoming fiscal year and neither includes Gov. David Paterson's proposal to allow wine sales in grocery stores. Though Paterson can veto these legislative budgets, and though the final budget is often reached in a behind-the-scenes scrum between the governor, Assembly speaker and Senate majority leader, the wine sales measure has thus far been stonewalled by the Democrats.

If Paterson's proposal fails in the coming days, it will be the second time in two years that the legislature has rejected the idea of wine sales in grocery stores. At a time when the state is facing a huge deficit, Paterson's office estimates the measure would raise $300 million over the next two years by levying a one-time franchise fee on grocery stores that wish to stock wines, plus projected increases in sales taxes after that. But despite concessions to liquor stores worried about the new competition in this year's proposal, the idea has lit a tinderbox of controversy. To its opponents, the Wine Industry and Liquor Store Revitalization Act is a strangulation of small business owners by chain supermarkets and a callous attempt by the government to bludgeon its way out of the deficit. Likewise, some proponents have tarred the opposition movement as a cabal of big liquor distributors and wholesalers maneuvering to shackle consumers to yesterday's protectionist blue laws.

In an in-depth investigation, Wine Spectator has discovered that the biggest winners may be the legislators themselves, who have collected campaign contributions from the various parties, and the lobbyists paid to woo those legislators. While contribution figures are not yet available for 2010, a look at the donations during last year's debate is revealing. Campaign finance records show that in 2009, the leading opponents of the Paterson proposal, liquor stores and their trade interest groups, donated almost $415,000 to state politicians, political action committees (PACs) and party committees. Large spirits conglomerates and wine companies also made generous contributions.

Meanwhile the supermarket chains have given far less, opting to use their money for a PR campaign to convince officials and the public of the benefits of the idea. As for New York's wineries, virtually none have the capital to muscle into the fight, weathering a difficult economy in an unforgiving industry. That may have denied them a voice in a debate that could dramatically shape their futures.
We have to give money to the lobbyists

New York state law currently limits wine and liquor sales to the 2,700 liquor stores and allows the 19,000 grocery stores, bodegas and pharmacies to only sell beer. This year's proposal would permit liquor stores to sell food and expand to a second location. But many store owners feel they have the most to lose if Paterson's proposal passes, and they have rallied accordingly.

"We do lobby, we do help. We have to give money to the lobbyists," said Stefan Kalogridis, president of the upstate New York State Liquor Store Association (NYSLSA) and owner of Colvin Wine Merchants in Albany. "We're all smaller. We're all independently owned. If we had millions of dollars to give away, we wouldn't care about any of this."

Last year, the state's liquor stores donated en masse to the Democratic Assembly Campaign Committee, the Democratic Senate Campaign Committee, the Republican Assembly Campaign Committee, the Republication Senate Campaign Committee and a number of individual legislators. (New York state law requires disclosure of all contributions to state and local candidates, political action committees, party committees and other political interest groups.) Wine and liquor retailers made 96 donations to the party campaign committees. Of that, $272,000 went to the Democrats, who control both chambers, and $58,200 went to the Republicans. Contributions from liquor retailers accounted for 51 percent of all corporate giving to these party committees in the filing period between Jan. 11, 2009, and Jan. 11, 2010, with 96 percent made last February and March, during the budget debate.

Liquor stores and their interest groups gave an additional $67,644 in 2009 contributions to the election committees of individual legislators, the governor and the attorney general. And the Metropolitan Package Store Association (Metro PSA), an advocacy coalition made up of liquor retailers in the greater New York City area contributed $22,225 to 20 state-level politicians and party committees. (Metro PSA, NYSLSA and the Retailers Alliance lobby together as Last Store on Main Street, the single-issue front against the governor's proposal.) Altogether, liquor retailers and their advocates gave $414,669 to New York state political interests.

Kalogridis views the pushback as a necessity for his livelihood. "I don't know what we would do if this went through. We have four employees; I'm going to have to lay off people. I'm going to have to be working 12 hours a day even though I work seven days a week, and I could end up closing."
Our view is that our story is compelling

Tracking money from those who support wine in grocery stores is more challenging. Most independently owned grocery marts focus on giving to local politicians, and larger chains make state-level political contributions every year. Of New York's most prominent food wholesalers, ShopRite, Duane Reade, Price Chopper/Golub Corp., Target and Tops Markets donated a total of $18,441 to state politicians and party committees in 2009. Wegman's, Whole Foods, Costco and other franchises did not make state-level contributions in 2009. Wal-Mart, a prolific donor every year, contributed $89,000 last year.

In the same period, New Yorkers for Economic Growth and Open Markets, an advocacy group of grocers, winery owners, farmers and some liquor retailers in favor of the proposal, received $76,195 from supporters but contributed just $5,000 to state-level politicians.

Asked why grocery chains had not contributed more vigorously in 2009, Paul Speranza, the vice chairman and general counsel for Wegman's said, "To date, we have spent money on PR firms and government relations firms, but we haven't done that with respect to actual politicians. Our view is that our story is so compelling that we're hoping that that is sufficient."

Other groups in favor of wine sales have also made contributions. The New York Farm Bureau and the Food Industry PAC together gave $6,400, and the Business Council of New York State, which represents both corporate and small enterprises, gave $40,525 through its PAC.

Many wine and spirits companies have been very active donors while maintaining official neutrality in the fight. Gallo made no donations in New York in 2009. But Rochester-based Constellation Brands, the second-largest wine producer in the country by volume, donated $60,574 to state-level politicians and party committees through eight different branches of the company. (Donations from a single corporate entity are limited to $5,000 per year in total.) Constellation has both wines and spirits in its portfolio and has stayed neutral in the debate. "We support both the distributors and the retailers as well as the grocery stores," said Angie Blackwell, director of media relations.

The North American branch of Diageo, the world's largest alcohol company, has publicly backed the Last Store on Main Street and promised to oppose Paterson's proposal. Diageo is also a major donor in New York, with $120,900 in state-level contributions in 2009, up from $50,250 in 2007. Of that, $113,000 went to the Democratic Senate and Assembly Housekeeping Committee Accounts, which, as party building and maintenance accounts, can accept unlimited money from corporations. Distributor Southern Wine & Sprits contributed $16,500 in 2009, and Pernod Ricard and Brown-Forman together gave $3,000. A representative from Southern declined to comment on the company's stance on the issue.
Whose voice is loudest?

Caught in the middle are New York's 270 wineries. According to a study by Cornell professor Bradley Rickard, their revenues could grow anywhere between zero and 50 percent if the proposal passes, with the likeliest scenarios providing a 15 percent boost. Many vintners feel expansion is impossible unless they have more outlets to reach customers, but many are also sympathetic to the wine stores that have supported them in the past.

The wineries have little money speaking for them in Albany; together, they made less than $4,000 in state-level political contributions in 2009. Indeed, few have the revenues for such discretionary spending. "The quality of our wine continues to improve but the volume of our production has been fairly stagnant," said Peter Gregg, spokesman for the New York Farm Bureau. "If this were to go through, there are some wineries that have said they would have to triple their capacity to keep up with the demand. It'll create thousands of jobs in upstate New York, which desperately needs new economic stimulus."

Recent polls show that roughly 60 percent of New Yorkers support the idea of wine sales in grocery stores. But this is a measure that will live or die depending on the 213 citizens in the legislature and the governor's mansion. And as the donations show, constituents with the deepest pockets appear to have the loudest voices in this fight.