WINE AMERICA PERSPECTIVES: Reopening; Cannabis

Jim Trezise, President, Wine America

Reopening ups and downs

Jim Trezise

There are lots of things happening these days, many good but some bad.

• The number of people vaccinated continues to grow, including younger people (12 and up), but more slowly due in part to hesitancy, raising doubts if the nation will ever reach herd immunity.

• With more people vaccinated, parts of the economy are reopening, and consumers are more active, but there are concerns about shortages of some products and possible inflation.

• The hospitality and leisure sector, including restaurants and wineries, is raring to go, but shortages of workers are holding things back.

But the good news, according to CGA, is that all 50 states now permit indoor dining (some with capacity restrictions), the sales velocity is not only way better (225% up) compared to the same time last year (not surprisingly), but it's also marginally better (4%) than in "normal" 2019, and 15% of consumers say they're willing to pay more than they did at that time. In other words, things are finally looking up in the fine dining sector which was so hard hit by the Covid crisis.

The $28.6 billion in the Restaurant Revitalization Fund is now being distributed to help businesses recover, with much more money expected later on, which will help speed the resurgence.

This week (as of this writing), Texas became the latest state to make permanent some special Covid-era marketing practices, in this case allowing restaurants to continue offering alcohol-to-go with their take out meals. Other states have made similar moves, and also extended curbside pickup and home delivery, benefitting both wineries and consumers.

And yesterday, the CDC issued new guidance that people who are fully vaccinated (like me) no longer have to wear masks indoors or outdoors in most circumstances.

Life is good.

Cannabis

It seems certain that Congress will initiate legislation to legalize and decriminalize cannabis in the U.S., for both medicinal and recreational use. There is no bill yet, and we don't know if WineAmerica will take a position when one is introduced, but our staff, Board and Government Affairs Committee have already discussed the key issues:

Agriculture: Cannabis is already grown in some traditional wine/grape growing regions, especially in California, and the two don't mix well in terms of water requirements, pesticide use, odors, and other factors.

Appellations: Some cannabis producers would like to adopt appellations of origin like those of wine (such as Napa Valley), which could cause confusion and competition. While they probably could use "Napa County" because it's in the public domain, using an existing wine appellation could be problematic. In addition, cannabis grown indoors shouldn't have an appellation since the whole concept is to reflect the natural enviornment in which something is grown.

Consistency: Today, 36 states permit medical marijuana and 17 allow recreational use, with many of the laws and regulations differing among states. The federal government will need to figure out how to coordinate all this.

Regulation: On the federal level, will the federal Tax and Trade Bureau (TTB), which already regulates alcohol, be the primary regulatory body, or the Food and Drug Administration (FBA), or some hybrid system? If it's TTB, it's important that cannabis be separated as a new product, with a dedicated staff, so alcohol regulation doesn't suffer from lack of attention.

Distribution: What are the ways in which cannabis will get from the producer to the consumer? Will alcohol wholesalers be involved, or a new, separate wholesale network? Will there be Direct-to-Consumer options, and if so how will they be regulated?

Taxation: Part of the attraction of cannabis is the amount of new revenues it could generate, but if the tax rate is set too high, it could encourage the continuation of the black market. In addition, who will bear responsibility for submitting excise taxes --the producer, wholesaler, or retailer?

Enforcement: Just as there are clear standards for alcohol-based DUI charges, some system would need to be established related to marijuana.

Cannabis Tourism: Part of the American wine industry's success is due to "wine country" tourism in every state, and the cannabis industry would likely want to duplicate that.

In short, this is a very complicated issue on many levels. We certainly don't have any answers, but at least we know the key questions. Stay tuned.

Jim Trezise is president of WineAmerica.