The Question is Who Gets Screwed...Growers or Mammoth Wine Producers?

A battle in California over the meaning of A"merican" Wine

As a matter of wine policy in the U.S., one important question is constantly at the forefront and must be answered:

Who Gets Screwed and Who Gets Favored?

This question is again under consideration as the state of California decides whether to screw California grape growers and lift up multi-national wine conglomerates or to support California grape growers while forcing multi-national wine conglomerates to operate transparently?

Currently, under federal law, a winery may produce something called “American” wine. Under this appellation, the winery may use grapes grown anywhere in the country to produce the “American” wine. Importantly, 25% of this “American” wine may include imported bulk wine from anywhere in the world.

In my view, there are a few problems with this. First, of course, when you add 25% foreign wine to a blend you label as “American” in origin, you are bottling up a deception. Second, every bit of cheap, imported, bulk wine that is used by an American producer for creating “American” wine means real American grape growers aren’t selling the equivalent grapes. (See: Who Gets Screwed)

Not surprisingly, it’s a very small group of very big producers who are taking advantage of the “American” wine charade. Past bottlings of “American” wine have come from Gallo, The Wine Group, Delicato, etc. Let’s be clear, these gigantic wineries aren’t importing bulk wine from Chile and Australia to make a better wine. They are doing so because the cost of this bulk wine, which will make up 25% of their American blend, is cheaper than buying and crushing real American-grown grapes.

I’m not pretending to wonder why these huge conglomerates would choose to screw small American wine grape growers. I get it. Profit. But it’s also true that these producers of “American” wine are further incentivised by U.S. tax policy to screw real American grape growers. There is a program at the federal level that allows wineries to get a rebate on the taxes they pay on imported bulk wine as long as they export a similar amount of wine. And that exported wine does not have to be made from the same bulk wine they imported.

So, we are back to the original question: Who Ought To Get Screwed…as a matter of policy?

That debate is now taking place in California and revolves around California Assembly Bill 1585. To quote the Lodi Wine Growers on what this legislation would do:

“Assembly Bill (AB) 1585 is straightforward. Under current federal rules, a wine labeled “American” can legally contain up to 25% foreign wine. This bill would require that wine sold in California under an “American” label be made from 100% American-grown grapes. It does not ban imports. It does not restrict blending. It does not limit consumer choice. It simply requires that the label mean what it says.”

In other words, AB 1585 would incentivise these large wine producers to buy real American-grown grapes in order to make real American wine.

This seems right to me. For a couple of reasons.