Santa Barbara is sewn up in regulatory red tape

As a kid, I can remember seeing the EF Hutton commercials. They had a group of people in a room and someone would say "EF Hutton says that" and then everyone would go quiet and try to listen.  The commercial would end with "When EF Hutton talks, people listen."

When it comes to the world of wine, and especially when you are talking about investing in vineyards, EF Hutton is a good comparison for David Freed. Mr. Freed is a partner in Silverado Partners who own and/or manage a large number of vineyards, as well as own a wine brand.  Over the years, Silverado has been one of the major players in vineyard investment and development in all of the major wine producing regions, incluing Santa Barbara County.  He is a regular speaker at industry meetings and is highly respected by the members of the industry.

Recently, he was interviewed on the inability of California wines to keep up with demand and to hold their market share.  He indicated that this will continue and that California will be unable to hold onto its market share, because there is not enough planting going on to support it.  Here is a quote from the article in Wine Business......

"Freed thinks there won’t be much new planting, though. Napa is basically planted out, Sonoma County is basically planted except in marginal areas, new vineyard development has stalled out on the Central Coast. (It’s essentially on hold in Paso Robles because of concerns about ground water levels; Santa Barbara is sewn up in regulatory red tape, and the economics in Monterey are difficult because of fierce competition for land from vegetable growers)." http://www.winebusiness.com/news/?go=getArticle&dataid=121797

I have been a land use lawyer in Santa Barbara County for the past 8 years, and I could not entrely dispute what he was saying about people staying away due to issues with red tape.  However, I cannot not help being down right angry about it.  Santa Barbara County claims in its right to farm laws and various of its ag rules, that it supports agriculture and wants to promote agriculture in the County.  If this is true, then why is Mr. Freed convinced that red tape is what stops him from buying or planting vineyards in Santa Barbara County.

In the other Central Coast Counties, Freed indicates that either land prices, competition, or water issues have put the brakes upon vineyard development.  However, here in Santa Barbara where we supposedly support agriculture, it is government red tape that stops development.  If this County wants to see more vineyards planted, it had better figure out a way to keep Planning and Development as well as the anti everything agitators out from creating the kind of red tape that stops a man like David Freed from putting his money to work in this County.

Santa Barbara County Winery Development Ordinance

Santa Barbara County Winery Development Ordinance Revisions

Santa Barbara County is still in the middle of a budget crisis.  One of its largest industries are the wineries and vineyards.  On top of the revenue that this industry creates directly, it is also one of the major attractions for tourist visiting the area.  All this being said, one would think that our County would be supporting these businesses, instead of enacting further unnecessary restrictions upon them.

Instead, the County has a proposed new ordinance that does not support the industry.  If this is not stopped, it will leave any new winery being permitted severely handicapped with respect to their ability to compete with the existing wineries or to even run a sustainable business.  Along with the incredible long and expensive processing times for a winery permit in this county, this inability to compete will simply drive prospective investors to start wineries somewhere else.

Let me tell you just a few of the issues with this proposed ordinance:

1. The ordinance reduces the number of allowed visitors from 80 to 50 without triggering the need for a special events permit.  This is a dramatic reduction and is being proposed for new wineries that are both 40 acres and 500 acres.  Clearly, the impacts of 50 people is different on these two parcels sizes. Thus, the across the board reduction is simply arbitrary and not related in any way to impacts or efforts to balance the industries needs.
2. The ordinance allows for wine maker dinners to be hosted on the winery premises.  However, it also requires that all guests be off the property prior to 7pm.  This early closing time is simply to strict for wine maker dinners or special events that often occur later in the evening.  While it is fine to limit the normal tasting room hours to 7pm, wineries need to be allowed to hosts guest into the evenings for events and dinners. Many of these events are held in support of our local charities, and the community and our charities needs this support.
3. The ordinance provides an incredibly broad definition of who a winery visitor is.  If someone only wants a winery and no tasting rooms, they are not allowed to have any winery visitors at all.  This would mean that you could build your winery and never be allowed to show it to your parents and friends.  It is broad enough that you would also be prohibited from allowing potential buyers on the property to look at it.
4. The ordinance does allow for finger food and prepackaged items to be served in the tasting rooms.  This will assist with both the visitor experience, as well as having  insuring that only sober drivers on the road.  However, for special events, only catered food is allowed.  It is not clear whether this implies that the food cannot be made onsite in the wineries kitchen, but to require all food to be made offsite would simply degrade the quality of the food and increase the amount of traffic to the site for little or no apparent reason. It again seems entirely arbitrary to require offsite food production, as this has no impact on the neighbors.
5. Lastly, the County has stated that these revisions will not affect the holders of existing permits.  However, there are terms being defined in this ordinance that were not clear in the previous ordinance.  An example is by appointment tastings.  Presently, the County is very coy about whether this is allowed without a tasting room permit  Going forward, they have defined this as needing a permit.  It is hard to imagine how this could not affect people with an existing permit.

Clearly the County has done a lot of outreach. They have held meetings and listened to a large number of people.  As someone speaking from the industry side, the issues above are serious and would severely harm our chances of convincing new wineries to come here.  Thus, it is hard to see the balance in the proposed ordinance.

Repost from Ship Compliant

I am reposting the an email from Ship Compliant.  If you are a small winery, you need to be looking at the data in the report.

 

The 2013 Direct Shipping Report: How Will It Change Your Strategy?

Posted: 16 Apr 2013 02:28 PM PDT

Every year, ShipCompliant teams with Wines & Vines to report on the state of the direct-to-consumer wine market. The 2013 Direct Shipping Report is now available! If you are feeling antsy, feel free to click here to download the report! If you’ve got a few minutes, we’ve provided some summary highlights below.

The model, built to project the totality of winery direct-to-consumer shipments, provides a vivid picture of this important distribution channel.The report is based on millions of anonymized transactions in our ShipCompliant Direct software that ultimately led to direct shipments from January 2012 through December 2012. Using the comprehensive Wines & Vines database of all 7,400+ wineries across the United States, these transactions are the basis to project total shipments from all United States wineries using multiple stratifications including location of winery, annual production of winery and destination of shipment.

1. Direct shipping is growing (in volume and value)
According to our data, American wineries have been shipping more wine every year. Direct-to-consumer orders reached a new high of over 3.1 million cases in 2012, representing a 7.7% increase from 2011, and a 17.7% increase from 2010. That equates to over 72 bottles sold per minute, or 1.2 bottles sold every second! It’s not just the volume that’s growing; the average price of a bottle of directly-shipped wine has also risen over 5% in the past two years, which leads us to record sales of over $1.465 billion in 2012.

These figures show that the direct shipping market is quickly becoming a more important (and more profitable) distribution channel for wineries than in years past.

Expand your direct shipping footprint; order licenses for new states here!

2. Direct shipping is outpacing other sales channels

If we compare the annual sales of the direct shipping market to the U.S. Export figures released in February by the Wine Institute, we find that the 2012 value of domestic direct shipping ($1.465 Billion) exceeded the value of wines exported from the United States to Europe, Asia and the rest of the world. In addition, the average price of a direct shipped wine is 26% more than the average bottle of wine exported from the the U.S.

3. More reliance on the fall and winter seasons

The fall and winter rush at wineries is showing no signs of slowing down. Our data from 2012 shows a remarkable skew towards the last four months of the year, and is approaching a level of dependence that usually is only seen by the inflatable Santa Claus lawn ornament industry.

Our research has also shown that the last quarter of the year saw 37% of total sales in 2012, and September sales of direct wine jumped 26% year over year. This should be a call to action for your business– if you aren’t focusing the majority of your energy into fall and holiday season, you should be.

This is just a sample of our findings. We’ll be analyzing additional elements of the report in the coming days. In the meantime, check out the entire report by clicking the link below.

Click here to download the 2013 Direct Shipping Report today!

Wine Club Contracts

I recently taught a class to a group of present and aspiring tasting room managers. Many of them were not aware that there wine club contracts were regulated by the state. With the abuses of recurring contracts by health clubs and CD of the month clubs, the State stepped in to regulate these types of recurring contracts, including your wine clubs.

California Business & Professions Code §17600:

•       Effective beginning on December 1, 2010;

•       Regulates an offer which includes an automatic renewal provision;

•       Offer must include a clear and conspicuous disclosure; and

•       Clear and conspicuous = larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from the surrounding text of the same size by symbols or other marks, in a manner that clearly calls attention to the language.

What Must All Wine Club Contracts Include:

1. The subscription will continue until the customer terminates the contract;
2. The cancellation policy for the offer;
3. The amount of the recurring charges that the customer's credit card will be charged, and, if the amount will change, the amount that the charge will be changed by;
4. The duration of the automatic renewal term or that the subscription is continuous; and
5. If there is any minimum purchase requirement.

I know that many wine clubs only have a small form where they collect contact information.  You can add this information to the form, or you can post terms for your wine club membership on your site.  Lastly, you could include this information in your club shipment.

Ranch Insurance and Operating Companies

When I read articles like these, I questions whether my clients maintain enough insurance and have proper operating companies in place to protect their personal assetts from these types of claims:

$17 million Zaca Fire costs repaid

Four corporations connected to La Laguna Ranch in the Santa Ynez Valley have made the final payment in a $17 million settlement to compensate the state and federal governments for the costs of fighting the largest wildfire in Santa Barbara County history.

La Laguna Ranch LLC, Rancho La Laguna LLC, La Laguna Cattle Company LLC and Rancho Reata LLC made the final $5.5 million payment Tuesday to the U.S. Treasury in a $14 million federal settlement over the 2007 Zaca Fire, according to the U.S. Attorney’s Office in Los Angeles
The companies, which agreed to the settlement without admitting fault, also paid $3 million to the California Department of Forestry and Fire Prevention, the U.S. Attorney said.
The Zaca Fire ignited on July 4, 2007, when employees of La Laguna Cattle Company were using a grinder to repair a section of metal pipe.
Sparks from the grinder ignited dry vegetation, which started the fire.
It quickly spread from the ranch property to state and then federal land in Los Padres National Forest, where it burned 228,000 acres until it was fully controlled months later, on Oct. 28, 2007.
The Zaca Fire was the second largest wildfire in California history. At its peak, thousands of fire personnel were assigned to the blaze, which injured 43 people and destroyed one outbuilding.
However, no one was killed and no major structures were lost as the fire was steered away from communities and into Los Padres National Forest.

Wine Snobbery

I read an article on food snobbery in the New York Times. http://www.nytimes.com/2011/08/25/opinion/bruni-unsavory-culinary-elitism.html?em&exprod=myyahoo  It struck a cord with me, partly because of the fact that Gary Vanerchuck, a guy that I have always associated with bringing a distinctly unsnobbish view to the wine industry, retired from reviewing wine on line.  I am wondering if any readers know of people out there that are doing a good job of bringing wine out of the aura of high scores and high prices and down to talking about how to get good wine at really reasonable prices.

Please comment and let me know(comments would allow me to assume that someone actually reads this stuff.)

Dropping a Million Dollars Worth of Wine

When was the last time you reviewed your insurance policy to determine if you have coverage for dropping a pallete of wine?  Does your policy cover you for replacement costs? What about lost profits?

Million dollar drop as wine tumbles

• Staff writer
• From:Herald Sun
• July 22, 201112:00AM

IT was certainly an expensive drop - more than $1 million worth of shiraz wine has gone down the drain after it was dropped by a malfunctioning forklift.

The 462 cases of 2010 Mollydooker Velvet Glove shiraz - at $185 a bottle - fell more than 6m to the ground as it was being loaded for export from Adelaide to the US.

The drop was so forceful, the bottles punched through the top of the cartons. Winemaker Sparky Marquis said the accident had cost him a third of his annual production.

"We just couldn't believe it," Mr Marquis said.

"This wine is our pride and joy, so to see it accidentally destroyed, and not consumed, has left us all a bit numb."

Mr Marquis now is working with insurance agencies to help recoup the losses.