Fall fears for wineries… new help?

Jim Trezise
President, Wine America

“How are you all doing?”

Those were the first words of Senate Minority Leader Chuck Schumer this week when he came to 3 Brothers Winery in the Finger Lakes for a socially distanced discussion with several wine industry leaders, including Erica Paolicelli, co-owner of 3 Brothers and the current President of the New York Wine Industry Association, which focuses on public policy. When first elected to the Senate many years ago, Senator Schumer vowed to visit all 62 New York counties every year—and he has kept that promise (this was in Seneca County).

Jim Trezise

He came to announce some federal initiatives to help the industry, but first wanted to hear firsthand from those on the front lines. It’s easy to get confused:

• Wine sales during the COVID-19 era have boomed in the off-premise and Direct-to-Consumer channels, more than offsetting the dire losses in restaurant wine sales. But… over a quarter of the off-premise sales went to just 15 of the largest brands, and very few to small wineries like those in attendance.

• When tasting rooms were ordered closed, most states allowed new marketing opportunities like curbside pickup and home delivery, and wineries became more creative and aggressive with internet sales. But… those things didn’t make up for tasting room losses.

• One Finger Lakes winery with a large restaurant and 30-room inn reported lots of outdoor tastings, August room bookings well ahead of last year, and the need to turn people away from the restaurant. But, that’s partially because of mandated capacity restrictions, and none of this makes up for the immensely popular jazz festivals and lobster fest they had to cancel.

The chart above shows the impact on wineries of different sizes.

The discussion on Wednesday took place on a covered deck overlooking lush green vineyards and deep blue Seneca Lake on a perfect sunny August afternoon. The large parking lot was full, and many visitors were enjoying wine, food, and coversations at outdoor tables. Those who went indoors to buy wine were socially distanced and wearing masks, with no complaints. Things seemed good.

But the winery owners noted that there are clouds on the horizon as summer turns to fall. The new normal of outside service is unlikely to continue as the days shorten, the temperature drops, and the weather becomes capricious. In a sense, the COVID-caused shutdowns occurred at a good time—the slow winter/spring season—so losses were less than if they had been in the summer when tourism provides a vital financial lifeline. 

Fall is normally a huge season for wine country tourism, as consumers flock to witness the harvest and experience the crush amidst crisp temperatures and turning leaves. There’s something magical about sipping wine with friends at a tasting room bar watching crews pick the grapes and winemakers transforming them into juice.

But just like COVID-19 forced the national political conventions to change from massive indoor crowded gatherings of enthusiastic people to a virtual production, the tasting room experience this fall will be very different from the past. But different doesn’t always mean worse, and some winery owners are actually bullish about some of the changes forced by the crisis.

The bottom line: The COVID era has been tough, but wine people are toughter. They adapted, worked together, and survived, and will continue to do so.

Restaurants Act and EIDL Act

On a brighter note, the good news is that Senator Schumer is working on two measures that could help the industry: the Restaurants Act and EIDL for Small Businesses Act, both of which could provide grants and loans to wineries.

The Restaurants Act proposes $120 billion to help restaurants and other eating and drinking establishments, including winery tasting rooms. The bill also has strong bipartisan support in both houses, with 27 Senators and 177 House members co-sponsoring the bill. The restaurant industry has been devastated by the COVID-19 crisis, and needs relief ASAP. The reopening of restaurants when appropriate will also help restore wine sales.

The EIDL for Small Businesses Act would re-fund and reform an existing program that has run out of money, and which the Small Business Administration hurt with unreasonable regulations. Initially, vineyards and wineries were ineligible for Economic Injury Disaster Loans, but Senator Schumer got that changed. Even so, the amounts of money for both grants and loans that the SBA imposed essentially made the program ineffective.

The new initiative provides $100 billion for the EIDL program, and another $80 billion for an Advance program, with caps of $2 million for loans, and an automatic $10,000 for grants to qualified businesses. For those which already received smaller grants, the new amount would be retroactive.

A WineAmerica survey in mid-June showed that 70% of respondents had applied for grants from the Paycheck Protection Program (PPP), but only 6% from EIDL—mostly likely due to the regulations and restrictions. The intent here is to make EIDL more user-friendly and accessible to the many small businesses which need financial help.

Tax Update

A top priority of WineAmerica and our beverage coalition partners is to make permanent or at least extend the current excise tax rates under the Craft Beverage Modernization and Tax Reform Act, rather than reverting to the higher ones prior to January 1, 2018.

While we were hoping it could be included in the next stimulus package (if and when that happens), it is increasingly unlikely, so other vehicles will be needed for passage such as a Continuing Resolution by the end of September or during a lame-duck session after the election.