If you prefer an elegant Zinfandel—as opposed to the high-alcohol fruit bombs that currently dominate California—Doug Nalle is your man. The outspoken Sonoma vintner has been mak­ing old-style Zin, or “California Claret,” as he likes to describe it, since 1984 at the family-run Nalle Winery in Healdsburg, winning a reputation for finesse and contrarian tendencies.

But good luck getting your hands on Doug’s Zins. Nalle makes only about 2,000 cases a year. And although the wines are distributed in several states as well as in Europe and Asia, they are harder to find these days. When big, fruit-forward Zinfandels came into vogue, Nalle’s wines fell out of favor with critics, and some distributors dropped his products.

The good news is that you can order a bottle from Nalle directly if you live in one of 34 states that allow out-of-state wineries to ship to their residents. The bad news is that the red tape can be so frustrating that Nalle, like many small wineries, won’t ship to some states even though it’s allowed. Certain states put limits on how many bottles a win­ery can ship, or require so many reports to be filed that a small business can’t keep up. And if you live in Kentucky, Tennessee, or Utah, you’re plain out of luck: shipping wine there can be a felony. “I call it the Dis-united States of America,” grumbles Nalle. “You can ship a gun across state lines, but to some states, not wine.”

A year and a half after a Supreme Court decision that was widely hailed as cracking open the market for direct wine shipments, the laws that govern wine sales in this country remain a contradictory maze. At the heart of this anomaly is a distribution system steeped in the logic of another age.

When Prohibition was repealed in 1933, the 21st Amendment gave states broad power over activities involving alcohol within their own borders. Most states adopted a three-tier distribution system: pro­ducers sold to wholesalers, which sold to retailers, which, in turn, sold to consumers. The goal was to prevent mobsters, who had run an illicit national alcohol trade throughout the ban, from gaining a foothold in the newly legalized market.

Each state drew up slightly different rules. Some restricted retail sales to state-run liquor stores, while others set mandatory price markups. The sys­tem, with its patchwork of regulations, has remained in place ever since.

Since then, much has changed. While the American wine industry was virtually non-existent in 1933, California wines alone generated $16.5 bil­lion in domestic retail sales in 2005. The number of wineries has surged more than tenfold in 40 years. There are now more than 4,000 in the U.S., and every state has at least one. Alaska has 7, Iowa, 49. Together, U.S. wineries produce about 10,000 separate prod­ucts per year.

The rules on shipping to consumers were set in the 1930s, when the American wine industry was practically non-existent. But in 2005, California wines alone generated $16.5 billion in domestic retail sales.

Meanwhile, the Internet has streamlined sales of everything from airline tickets to automobiles. Middlemen, such as travel agents, are bypassed or put out of business unless they truly add value. More and more consumers buy things—from pears to pharmaceuticals to iPods—directly from producers. Yet the wine and spirits industry is still operat­ing under rules established before there were fax machines or interstate highways, much less comput­ers and Federal Express. Peter Granoff, co-owner of Ferry Plaza Wine Merchant in San Francisco, para­phrases Dickens: “If that’s the law, then the law is an ass.”

Winemakers and their customers chafe at what they see as outdated laws that restrict consumer choice and the flow of commerce, and they have been pushing for more direct sales. State regulators and wholesalers, who have thrived under the sys­tem, counter that it’s been working well for 70 years, so why change? On May 16, 2005, these simmering tensions came to a climax when the U.S. Supreme Court ruled on Granholm v. Heald, the first major legal challenge to the three-tier system.

Granholm was narrowly focused on the ques­tion of whether states, specifically New York and Michigan, could allow in-state wineries to ship their products directly to residents, while at the same time banning out-of-state wineries from doing the same. The restriction on interstate wine sales, argued a wine collector named Eleanor Heald and 12 other plaintiffs (Granholm is governor of Michigan), was a violation of Article I, Section 8, Clause 3 of the U.S. Constitution, which gives Congress the power to “regulate Commerce with foreign Nations, and among the several States.”

The Supreme Court, in a 5–4 vote, ruled, in effect, that the Commerce Clause takes precedence over the 21st Amendment and that having two sets of rules, one for in-state wineries and another for wineries outside the state, was discriminatory and unconstitutional. States must either open their markets to all wineries or ban wine ship-ments altogether.

The ruling sent states scrambling to reassess their laws. Some states have opened their markets on a reciprocal basis to others states with similar policies. Others, such as Kentucky, which does not allow in-state wineries to sell to consumers, did nothing. Still others devised laws that border on the absurd.

In Ohio, state law mandates that distributors mark up the price of the wine they buy from pro­ducers by 33 percent and that retailers mark it up by an additional 50 percent (the reason: high prices protect the public welfare by discouraging intem­perate consumption). The result was cushy profits for middlemen, uniformly high prices for Ohioans, and the strange phenomenon of $3.33 Chuck—the inexpensive Charles Shaw wine known elsewhere in the country as Two Buck Chuck. After Granholm, Ohio opened its doors to out-of-state wineries—leaving its own retailers struggling to peddle their higher-priced goods (although shipping costs nar­row the gap).

Alan E. Wiseman, a professor of political sci­ence at Ohio State University, believes the Ohio law and others enacted in the wake of Granholm will be challenged, setting off a new round of legal skirmishes across the country. Granholm, he says, “has just opened up another can of worms in terms of interest-group politics and wine law.”

Both sides are gird­ing themselves for battle. Winemakers have joined forces under the aegis of groups such as Free the Grapes, while the Wine & Spirits Wholesalers of America (WSWA), the association of distributors, has revved up its lobbying machine to keep the status quo.

As wineries were proliferating in the United States, the nation’s middlemen were consolidating like mad. The number of wholesalers and distrib­utors has shrunk from more than 11,000 to just a few thousand. In most states, one or two powerful wholesalers dominate.

These large distributors have become very adept at wielding their considerable clout. Their efforts have secured state laws that make it hard for winer­ies to drop distributors or play one off another.

Wholesalers argue that allowing direct sales will lead to lost tax revenue and a surge in under­age drinking. There’s little evidence to support the dire warnings. A recent survey of kids aged 14 to 20 that was touted by WSWA noted that 2 percent of respondents had purchased alcohol online. (Gee, where do the rest get their hooch?)

Advocates of liberalizing wine sales point out that minors are not likely to pay for shipping charges that can double the cost of a $10 bottle of wine or to wait several days for delivery. If kids are looking for a cheap buzz, they don’t need to import fine Pinot Noir from Oregon. Winemakers, who insist they’re happy to pay taxes, charge that WSWA is hiding behind moral issues to guard its economic interests.

'It's a classic hourglass problem,' explains Dennis Cakebread. 'Picture wine producers on top, consumers and retailers on the bottom, and the bottleneck in the middle is wholesalers.'

Liberalizing wine laws, the winemakers say, would bring more choice and better prices to con­sumers. Wine, in fact, is one of the most attractive mail-order products. Since there are so many differ­ent wines, retailers can’t possibly keep in inventory every label customers want. Wine.com is the Amazon of online retailers, with a vast inventory, while specialty retailers like Ferry Plaza Wine Merchant, which is known for carrying unusual gems like Nalle’s, offer a curated selection and personal assistance. Most retailers ship to about 20 to 25 states. But the laws governing retailer ship­ments are murky and have only become more so since Granholm, which, by not addressing retail­ers, raised doubts about what is legal. The Specialty Wine Retailers Association was formed in 2005 to seek the same direct shipping rights for retailers that are granted to wineries.

Both sides agree that the amount of wine sold over the Internet today is a tiny fraction—less than 1 percent—of total sales and that wine-by-mail is unlikely to be anything more than a niche business. Shipping costs make it impractical to ship anything but premium wines. So why all the fuss?

Craig Wolf, the CEO of WSWA and its former legal counsel, says the direct shipping issue is a question of social policy, not economics. Alcohol is different from other products, and should be treated differ­ently, he says. “Direct-to-consumer shipments will never drive a wholesaler out of business, but the deregulation it is fostering will.” With Granholm, says Wolf, the wine industry has opened a Pandora’s box that will lead to “vodka, beer, and wine, all flow­ing through carriers who don’t check for ID. It’s a recipe for disaster.” A bigger worry, perhaps, is that retailers may someday be able to buy directly from wineries and bypass middlemen altogether.

No matter how these legal battles play out, no one is suggesting that wholesalers will, or should, go away. Winemakers say that, as long as distributors provide value, there will be a role for them. “I can’t place my wine in every great restaurant and wine store,” says Cathy Corison, a Napa Valley vintner who crafts artisanal Cabernets under the Corison label. “I need a wholesaler to help me do that.”

Still, she says, “the three-tier system doesn’t work very well for small wineries. It’s hard enough to get a big distributor to take a label on, much less to get them to pay attention to it.” A 2003 survey by the Wine Institute, an association of California winer­ies, found that fewer than 17 percent of its members were distributed nationwide.

“It’s a classic hourglass problem,” explains Den­nis Cakebread, vice president of marketing at the venerable Napa winery that bears his family’s name. “Picture wine producers on top, consumers and retailers on the bottom, and the bottleneck in the middle is wholesalers.” One promising develop­ment is the growing number of small, specialty distributors that have emerged to service small wineries neglected by the giants.

Oenophiles have celebrated Granholm as an impor­tant step in liberalizing the industry’s archaic laws. For small wineries like Corison and Nalle, direct sales—which include purchases made at their tasting rooms, wine club sales, and phone and Internet orders—can account for as much as 40 percent of revenues.

But direct shipping—at least under the current patchwork of regulations—is no panacea. “It opened up a few states, but the compliance issues and extra workload cause a small business like us to hesitate,” says Nalle, taking a break from cellar duties at his Sonoma winery. For now, he says, “We’re taking the path of least resistance, focusing on states that don’t make life difficult.” That’s about 17 in all, or half of the allowable states.

And although his winemaking style may be out of favor for the moment with influential critics and wholesalers, he’s not changing course. “There are just enough European-style wine drinkers out there, and we’ll keep trying to connect with them.” J

Five Notables to Buy Directly From Wineries, or at a Good Shop

Winemaker and grower Cathy Corison knows Cabernets. She’s made highly acclaimed ones for Chappellet and Staglin and, since 1987, has crafted wine for her own label. Her wines exhibit lower alcohol levels than other California Cabs but are still monu­mental in scope. This one has abundant fruit mixed with a spicy earthiness.

Dave and Becky Corey coax gorgeous fruit from the vines of their Alta Mesa vineyard, which, at 3,200 feet, is the high­est in Santa Barbara County. Core 163, a blend of Grenache, Syrah, and Mourvèdre, bursts with red fruit that slowly reveals notes of blackberry, dark chocolate, violet, and vanilla.

Food & Wine magazine named Copain “most promising new winery” in 2004. Winemaker Wells Guthrie worked at Turley before starting Copain, but his Syrah more closely evokes reds of the northern Rhone, where he started his career. The ’04 EPR is earthy, with pronounced notes of exotic spice.

Chalk Hill 2004 Chairman’s Club Estate-bottled Chardonnay $75
(707) 838-4306
chalkhill.com

Although this Sonoma winery makes 35,000 cases a year in total, just two barrels were made of this Chairman’s Club Chardonnay. Intense tropical fruit is balanced by crisp acidity and a pleasing minerality. The 50 percent new French oak is so well integrated that it is barely perceptible.

The Nalle winery in Sonoma is a family affair: Doug makes wine along with his son, Andrew, while wife Lee runs the business. Together, they have made extraordinary Zinfandels that recall a more elegant time. The 2004 vintage has lots of ripe berry fruit and supple tannins, and can age.