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Vines Entwined

Is regulation destroying small wineries?

By Dwight Caswell

THEY'RE SHUTTING OUT small businesses," says Rick Kasmier, "They just don't care." Kasmier is standing in the middle of his "Kaz" winery, a winery so small that it does not quite occupy the basement of his home in Kenwood. The "they" he is referring to are all the government agencies that regulate the wine industry. Rick, a commercial photographer, and his artist wife, Sandi, moved to Sonoma County to build a home and start a winery. They had no idea they would be stepping into a regulatory quagmire as well.

Wineries are regulated by, among others, the Bureau of Alcohol, Tobacco, and Firearms, the state Alcoholic Control Board, county health, planning, and agricultural agencies, and the alcohol regulators of every state in which a winery sells its wine. Regulations cover everything from farming to winemaking practices to tax regulations, and some winemakers say the cumulative plethora of regulations is beginning to take its toll.

"The bureaucracy sucks," Kasmier says bluntly. "The permits are expensive and time consuming. My permit would have cost only $12 if I was making 500 cases, but since I make a little more, it cost me $2,000. I paid a penalty for my honesty."

The San Francisco Bay Area Water Quality Control Board also became involved with Kaz, concerned that his gray water would pollute the soil and, eventually, San Francisco Bay. "I'm organic," Kasmier complains. "I don't add caustic stuff. All I'm doing is adding a little yeast to the soil, which is already there. I pollute more every time I flush the toilet."

Small wineries have been hurt by changes in the rules; recently they lost business when the ABC declared a moratorium on the sale of Type 20 licenses. The state requires that everyone engaged in an alcohol-related business purchase some form of ABC license. The Type 20 was originally intended to regulate off-sale beer and wine in small retail stores, but it soon became the license used by telemarketing operations, and by vineyard owners having their grapes "custom crushed." This is the practice by which a grower has another winery crush his grapes; the Type 20 allows him to retail the wine produced. Unfortunately for such growers, and the wineries who make their wine, stores with Type 20 licenses proliferated in Southern California, especially in high-crime areas. They were the target of the moratorium, put in place after the Los Angeles riots, but wineries suffered as well. Sen. Mike Thompson has found the ABC "very helpful" in preparing a bill to resolve the situation.

Bob Anderson, executive director of United Winegrowers for Sonoma County, notes that "the wine industry is one of the most regulated of all industries, both for growers and for wineries. Everyone feels that life has become more complicated in the last few years." He points to required safety classes for workers, storm water permits, and the complexity of the tax structure. "There are a lot of players, each with a different structure and a different deadline.

"A concern I've heard voiced," says Anderson, "is whether we're just filling up file cabinets with completed forms, or anyone is benefiting."

"I understand the value of most of the regulations," says Rod Berglund, "but the sheer volume makes it difficult." Rod is winemaker at Joseph Swan Vineyards, the winery founded by his late father-in-law. "If you're a small operator, you're not pruning your vines, or topping your barrels, or servicing your accounts, or doing the things that keep you in business. You're shuffling papers instead." Berglund suggests that there should be a production threshold, below which standards for small wineries would be relaxed.

This does not seem to be the direction regulators are taking. For instance, ABC regulations affect even winetastings, which in Sonoma County are a means for wineries to promote their product while raising money for worthwhile causes. Each event requires a temporary ABC license. One event manager says that she has had few problems, but tastings without a "track record" are subject to closer scrutiny: "They [the ABC] have an attitude, and they don't have to give you a license." Another organizer complains that she has had to get a different permit for each table at which wine is served.

Mike Naudon, district ABC administrator, maintains that "the majority of new regulations put in place in the last few years have been directed toward retail." He believes there has been a lessening of regulation for wineries, at least as far as the ABC is concerned. As for regulations governing winetastings, the ABC is simply enforcing the law. Winery personnel can't pour wine at non-profit events, since the non-profit holds the license; separate licenses are required for different locations at one event if the locations are widely separated.

"We've been in a business-friendly climate for some time," Naudon says. "If wineries succeed, we succeed too. We just want people to operate within the confines of the law." He is proud of the way in which his office has helped small wineries get into business by making it possible for them to rent space and equipment from larger wineries, a "symbiotic relationship" that helps both. He is sympathetic with small wineries, but questions how a regulatory threshold such as Berglund suggests would work. "I hear what they're saying, but I don't know how you would make that differentiation."

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From the May 9-15, 1996 issue of the Sonoma Independent

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