Regulation & Safety

‘Destructive' cork tax could cost New York wine growth, wineries warn

05-Feb-2014
Last updated the 05-Feb-2014 at 14:18 GMT - By Ben Bouckley+
This woman is enjoying a glass of red wine in New York, but could prices rise as a result of controversial legislation? (Picture: Jack/Flickr)
A- A+

Small wineries, distributors and wholesalers in New York state have united to oppose a mooted ‘cork tax’ that they claim could wreck the industry's promising growth prospects.

The Stop the Cork Tax collation comprises 37 small wine and spirits distributors, distillers, wholesalers, vineyards and retailers from across the state.

The tax forms part of ‘at rest’ legislation (two bills) and would involve alcohol distributors to store drinks in New York warehouses at least 48 hours prior to delivery.

Smaller distributors use warehousing in New Jersey, where storage costs are better than half price vis-à-vis New York, but legislators claim the bills will create up to 1,000 warehousing jobs in state.

Crushing small competitors

But wineries claim they would have to pass on costs to the consumer of $1-2 per bottle, and have hit out at larger distributors including Empire Merchants and Southern Wine & Spirits.

“The cork tax is being pushed by big wholesalers to eliminate their main competition – small businesses across the state,” claims the Stop the Cork Tax coalition website, which also hosts a petition opposing the legislation.

Describing the tax as a “backdoor way” for big wholesalers to crush smaller competitors and increase profits, the coalition says it will make it harder for New York wineries to access NYC.

“This alone would undo much of the positive work done by Governor Cuomo to promote New York’s growing wine industry,” the coalition adds, estimating extra costs for wine and spirits of up to $27m per year and less consumer choice.

As early as 2012, small-sized distributor Verity Wine Partners, led by Connie Oehmler, complained that a large liquor wholesaler was lobbying for an ‘at rest’ provision, and said the move would adversely affect every wholesaler bar Empire and Southern.

Job creation and tax boost

“Imagine a landscape with only the two largest wholesalers remaining to work with. Selections would become painfully limited, prices would most certainly rise. Service would plummet,” the company said in a March 2012 statement, and its position remains the same today.

“Their pro ‘at rest’ argument (union warehouse jobs and revenue) is simply a veiled attempt by this wholesaler to destroy all the fine wine wholesale competition,” Verity added.

But the legislation is being supported by the Teamsters union – due to job creation prospects, while the bill’s supporters also claim it will boost tax revenues.

A spokesman for Senate co-leader Jeff Klein said it would protect New York warehouse jobs and mirror existing legislation in 33 other US states.

Related topics: Regulation & Safety, Beer, Wine, Spirits, Cider