Illinois Opens to Direct Shipping

Self-distribution to retail also an option for small producers

by Jane Firstenfeld
Illinois allows winery direct shipping
Mackinaw Valley Vineyards
Springfield, Ill. -- After years of lobbying, confusion and legal wrangling, Illinois has approved direct-to-consumer wine shipments from both out-of-state and local wineries. Beginning on June 1, wineries holding an Illinois Winery Shipper's License may ship up to 12 cases of wine annually to adult residents.

Another important aspect of the act, signed this week by Governor Rod R. Blagojevich, permits wineries producing under 25,000 gallons per year to self-distribute up to 5,000 gallons annually directly to Illinois retailers. This includes both in-state and out-of-state wineries that have a Wine Shipper's License, according to Katie Ridgway, communications manager of the Illinois Department of Revenue.

"With over 95% of Illinois wineries below this (25,000 gallon) threshold, our state's vibrant wine industry can better compete with the larger conglomerates located in other wine-producing states," said Lainie Krozel, acting director of the Illinois Liquor Control Commission (ILCC) in a statement released May 6.

Paul Hahn, new president of the Illinois Wine and Grape Growers Association (IWGGA) and owner of Mackinaw Valley Vineyard in Mackinaw, explained that the self-distribution law was already applicable to Illinois wineries before its inclusion in the new direct-shipping provisions.

Hahn told Wines & Vines that, due to his location midway between Peoria and Bloomington, he's able to sell about 90% of his 2,500 annual case production direct-to-consumers at the winery. But, he noted, the new regulations will be helpful to most of Illinois' 76 producers. "Most are quite small," he acknowledged, "and some are in very rural locations, where they don't have as many visitors. They have to survive any way they can." Direct shipping and self-distribution, he said, can help them expand their markets.

"We are such a niche market. We'll never be the Mondavis. We tend to slant more toward the consumer who would like to try--and is often pleasantly surprised by--a local product."

Krozel noted that "Crafting this legislation required many months of compromise and careful deliberation among all interested parties. Of key concern was ensuring the economic health of our state's wine industry, and allowing it the flexibility to continue to grow."

Hahn and the IGGWA (illinoiswine.com) had lobbied strenuously for the new regulations. "I don't know how many times I was down in Springfield--countless visits with legislators and distributors," he said. He noted that, while distributors initially resisted the erosion of the three-tier system, "The end result is that most of them don't want to deal with small producers."

Illinois' grape and wine industry contributes an estimated economic impact exceeding $250 million annually, according to the ILCC. "These types of small businesses are the backbone of our state's economy, and supporting this community is more important than ever as our nation slips toward an economic slowdown," Krozel stated.

The Winery Shipper's License uses a sliding fee scale based on production, from $150 to $1,000 for both Illinois and out-of-state wineries. The license must be renewed annually, at the same cost.

Since each licensed shipper is limited to 12 cases per customer per year, licensees will be required to report shipments to state tax authorities on a monthly basis, Ridgway told Wines & Vines. Case limits will be monitored through ILCC compliance agents.

According to the ILCC release, safety precautions to prevent shipped wines from falling into under-aged hands have been built into the new regulations. These include, Ridgway said, "The requirement of the carrier to verify the age and identity before delivery," as well as "prominent language on the packaging indicating that the package contains alcohol." Licensees must receive confirmation of delivery from the carrier and apply an ILCC-approved label. Wine brokers are prohibited from soliciting direct shipments, and ILCC has a mandate to investigate possible shipments to minors, through undercover operations or winery audits, Ridgway said.

The ILCC release stated, "Holders of a State of Illinois Retailer's Liquor License will continue to be allowed to ship to Illinois residents over the Internet; however, they may not be allowed to ship to other states. Out-of-state retailers are prohibited from shipping.…directly to Illinois consumers through the Internet."

"If Illinois prohibits out-of-state retailers from shipping to Illinois consumers," Ridgway explained, "the likelihood is that other states would similarly prohibit Illinois retailers from shipping to out-of-state consumers."

The eight-page application for the Winery Shipper's License ("Direct Shipping Permit") may be downloaded at state.il.us/lcc.
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