New York State government is exceptionally creative when it comes to imposing new fees to increase revenue. This year’s budget is no exception, including all sorts of new ways to gather more dollars from taxpayers throughout the state.

One such idea is to put wine sales alongside beer sales in mini-marts, gas stations and grocery stores. This proposal would have wine merchants go the way of butchers, bakers, dry cleaners and independent pharmacies. Very few of these once-independent businesses survived after grocery chains offered the services in their stores.

As the owner of a New York winery, I am very concerned about the effect this proposal will have on the sale of New York wines, because I feel it will disproportionately reduce the number of outlets for that wine.

While on the surface it appears that wine in grocery stores would be beneficial to consumers and wineries, this is not the case. Selection of wine would be reduced and sales for smaller wineries will suffer, meaning the smaller wineries will not be able to grow into larger wineries.

The winery industry is a bright spot in the state, contributing $3.3 billion to the economy annually. That number increases every year, and the jobs that come with it include skilled labor. Since 2000, more wineries have started in New York than in the 170 years prior to 2000. The total now stands at around 275 wineries, and New York is poised to experience even more growth to meet demand for locally produced wines. The local retail chain is critical to the continued success of New York wine.

From the state’s perspective, the Liquor Authority believes that the 19,000 mini-marts, gas stations, Walmarts and grocery stores will purchase licenses and this means more revenue in the “taxes and fees” category. Much of this revenue is “one time” from the initial license fee. There likely will be an increase in wine sales, which will also increase the excise tax revenue the state collects (currently one of the highest such rates in the United States). Ditto for the sales tax (also among the highest).

From the grocery chains’ perspective, this is another area where they can grow their businesses with new products, and the largest chains are lobbying to make their big-box stores even bigger.

So far it sounds great—so why do I think this will be bad for New York? The case against wine in grocery stores centers on three areas: the impact to the wine industry, the impact to the existing retailers and the impact to the consumer.

Wineries, especially start-ups, depend on three primary sales channels: The tasting room (direct to consumer), wine merchants and restaurants. At startup, most wineries retail the majority of their products themselves at their own facilities. Growth after this is done via stores and restaurants.

Initially, the winery will be selling very small quantities and working closely with the retailer on promotion at the retail facility (primarily tastings). Sales are made one store at a time and a new winery has a lot of work to do to introduce its product to the consumer. Over time, the market builds and the wine merchant becomes an integral part of the sales channel.

In the proposed legislation, large grocery store chains will have the greatest impact on the growing New York wine industry. Grocery stores sell well-recognized national brands in a self-service environment. A young winery tasked with expanding and competing for retail space at these stores will face new challenges. The winery will be selling to a corporation interested in high volume and in recognized brands that will sell themselves in the store. The young winery has neither, and will not have access to the grocery store’s shelf space and customers.

The current legislation includes a provision to allow grocery stores to pay 60 days after delivery of wine, while holding liquor stores to the current 30 days. Also included in the legislation is a provision for wine stores to buy in quantity for discounts (lowering margins), while the wineries and distributors will have to deliver to each store separately (raising costs).

This will make it very difficult for smaller wineries to do business and will impede their growth. When we started selling to stores, some of them took only a few bottles to see how the wine sold. Over time we provided tastings in stores and our sales grew. Large grocery stores are not set up for this.

Some wineries will surely figure out how to compete. This will involve utilizing some of the well-proven methods of the mega brands —purchasing bulk tankers of inexpensive imported wine and simply bottling it in New York. Costs for high-quality New York grapes are approximately double that of California’s. The wineries that focus on creating product from high-quality New York grapes will be limited to sales to the tourists coming to their tasting room.

For the same reasons, grape growers will not see a boost from wine being sold in grocery stores. A part of New York’s economy that is doing well and expanding will be hurt badly by this legislation. The $3.3 billion impact the wine industry

has on the state’s economy will be reduced significantly.

My winery, Arrowhead Spring Vineyards, is waiting to see what happens before implementing expansion plans that include hiring staff and a larger facility. It is frustrating to have a need for expansion, but to have to wait to see if there still will be a growing market for New York wine.

Other businesses are in the same holding pattern. This proposed legislation is having a negative economic impact across the state because of the uncertainty, and we have to be assured of having a stable business environment for a number of years before implementing any long-term expansion. Ideally, when this legislation is defeated, there will be some way of assuring the current business community that regulations will be stable for five to 10 years before it is considered again.

From retailers, the introduction of wine in grocery stores will cause consolidation. Of the 2,200 wine stores in upstate New York, 51 percent are located in grocery store plazas. They will certainly lose business if they are competing with the grocery store next to them.

The loss of business will be immediate and severe for these stores. Some 4,500 jobs are tied to these stores, including 1,100 owners. The fact that most of the stores are located in a grocery store plaza is part of the reason why the wine merchants are not thrilled about proposed changes that would allow them to sell food — how much food would they sell?

The other reason is that they cannot easily acquire more space to accommodate additional shelf space needed for food. These are, for the most part, small locally owned family businesses bound by the four walls they are in. They built their business on laws that date to the 1930s and any change would have to be phased in over years to allow them to adjust.

Even grocery stores that make claims to be supporters of local products only do so in a limited fashion. I was in a major grocery store this fall and saw Concord grapes—from Arkansas. Western New York is in the heart of the largest Concord planting in the world and the grapes in a local store are from Arkansas. Wegmans’ Tastings restaurant, which closed in December, had a wine list of 119 wines — only four of those were New York wines. In a state that consistently produces the world’s best Rieslings, German Rieslings outnumbered the New York selection in this restaurant.

In its new restaurant, Next Door Bar & Grill, Wegmans offers just 12 selections from six New York wineries out of nearly 300 choices — or less than 5 percent of the wine list. Wegmans also touts the Virginia stores as examples of stores that carry local wine. Its online list consists of more than 1,500 wines for all the outlets directly or indirectly owned by Wegmans. There are but five Virginia wines listed from only two wineries — not what I would call supportive of local business.

Consumers gain and lose in this proposal. They will have easier access to wine at stores where they are already shopping. Unfortunately, that wine is likely to be a limited selection of national bulk brands. Much of this kind of wine is imported in bulk and “bottled by” or “vinted and bottled by” a mega-producer that owns a major brand. This involves tankers of wine shipped by boat and rail, then bottled or boxed at a large winery.

We would all lose the wide variety of products available to us, which is one of the most enjoyable aspects of wine. It is because of this variety that wine is best sold via individual stores that specialize in wine and have knowledgeable staff.

Replacing independent wine retailers with grocery stores means 4,500 jobs lost and a large reduction in outlets that are willing to carry specialty wines that are not national brands. This includes New York wines as well as wines from far-off places like South Africa, Eastern Europe and Provence. In a big-box world, the number of products will be limited to a few larger brands.

One of the really nice things about smaller shops is the diversity of product. This is especially true with wine. Having a large number of independently owned specialty stores provides the most market competition for a broad variety of wine. Competition occurs on price and product quality/diversity. In a scenario where wine is sold by big-box stores, one or two retailers control the bulk of the upstate market. This would be bad for competition and ultimately bad for consumers.

While other states allow wine to be sold in grocery stores, this comes with laws that are very different than New York’s laws. Ohio, for example, has “minimum prices” and does not allow central warehousing or quantity discounting. This allows the smaller specialty wineries to compete on a level field with the big companies. It also improves consumer choice because the range of wines at a price point is increased. These benefits come at the cost of eliminating quantity discounts, which are something New York consumers have been accustomed to since discounting became legal in New York.

It’s hard to understand why the governor is proposing this when his own Law Review Commission on the State Liquor Authority in December said this idea should be put on hold until there is a fuller understanding of the economic and oversight impacts. With 38 inspectors statewide to cover the existing 70,000 licensees, the Liquor Authority will have to staff up to cover the new licensees.

This will raise the cost of government, eating into the “revenue” generated by the new licenses. When the existing stores begin to fail and the number of licensees decreases, will the state work force decrease? Experience tells me that it will not, and New York taxpayers will be stuck with the higher costs.

In the past 28 years, no state has passed legislation allowing wine in grocery stores, and several notable groups have come out against this proposal. Joining the New York State Liquor Store Association against this are nearly 100 of the state’s wineries, many businesses, chambers of commerce and public safety organizations.

The issue of wine in grocery stores is more complex than it appears and it has far-reaching consequences for New York’s economy and increased costs for government oversight. The current system is working well for New York wineries, which are experiencing growth every year. Quality is up and retailers are paying attention to and selling New York wines. It’s a growing, thriving industry. That doesn’t sound like a broken system to me. Let’s refrain from legislating an industry’s demise.