Regulation and industry apathy is hurting craft wineries

Small wineries are losing ground to wholesale influence and industry silence. It's time to unite.

Regulatory interpretation and changing legislation are damaging our industry in an indefensible way. Sorry to jump right into it, but I cannot sit back while producer and consumer rights are whittling away under the guise of public safety, while the winners are the same few parties every time. Modern trade practices and regulatory technology can improve a state’s ability to manage regulatory worries without constraining the industry. Currently, the market for wine products is crashing and no one is coming to help.

Over 95% of U.S. wineries are family-run or craft producers. The other 5% are large, manufactured brands that dominate wholesale distribution and fund most national and state industry associations. That split matters. It helps explain why the rules keep getting tighter for small producers while staying flexible for the large few.

Industry associations have all but given up fighting for expanded shipping rights, protecting the rights that already exist, or even working to remove the restrictions they had to compromise on to get directs sales allowed in the first place. They act as if their work is done because wineries can ship to 40+ states. Wrong. There is still so much to do.

Yes, the number of states allowing direct sales has expanded to almost all of the US states and that is a great win. But look at the new restrictions and the tightening of rules making it harder for small wineries. Compliance costs go up. Operating gets harder. And once again, the burden falls on the 95% of the industry that are not large wineries.

States like Delaware, Mississippi, Montana, Michigan, Maine, Delaware, Virginia, and you can go on and on, have wholesaler influenced restrictions (like quantity limits) that are not applied to instate retailers. These restrictions, aimed at DTC sellers (who are retailers as well because they sell to end consumers) include quantity limits, address limits, label registrations, alcohol percentage restrictions etc. They are added as an extra layer of complexity and justified as consumer protection, even though these exact restrictions do not apply to products that have passed through the wholesale tier. Once the wholesale distribution tier receives their cut, they do not care about consumer protection or any health and safety matters.

In California, the powerhouse of wine associations is the Wine Institute. They have a $25 million plus annual budget to enact positive change in the state where 80% of wineries reside. According to public records, half of the $25m goes directly to employee salaries, leaving around $12.5m left for change. It is notable that the Wine Institute CEO made $2 million in 2025, close to double the base salary of Constellation Brand’s incoming CEO.

The Wine Institute Board of Directors consists of the who’s who of the largest US producers. They continue to push their outdated Model Direct Shipping Bill built on very antiquated wholesale compromises and limited quantity shipping limits. Who benefits from that? Follow the money.

The Wine Institute should replace the Model Direct Shipping Bill with the widely supported National Direct Shipping Bill of Rights, which updates the Bill for modern commerce and better and lower cost regulatory structure.

The Wine Institute is not using its voice to support the vast number of businesses in California unless an issue directly impacts its biggest members. I’ve been told this is why it was against direct shipping initially and advised members to not support what became the famous Granholm case.

The recent changes in Maine effectively killed direct-to-consumer wine sales. The Wine Institute could have taken a much stronger position on this legislation, but chose not to. That said, no other state association added commentary to the legislative process either. No word from Wine America, which claims they represent the producers at the federal and state level across the country.

Another great example of the Wine Institute not helping the small craft producers here in California, is the Type 79 license (Certified Farmers’ Market Sales Permit). This should be a great license for small producers to introduce their products to customers that love small, family brands. Instead, with input from the Wine Institute, this license is limited to wineries with a California type 02 that manufacture using exclusively fruit (grapes only) grown on their estate property. This takes away the opportunity from many small producers who start up using fruit of others or who use alternative fruit. It blocks cider makers, mead makers etc. because those products are not made 100% from grapes.

This is not how you help small businesses grow and establish themselves. When we read that Gallo is closing production facilities, we need to be supporting our next generation of producers, not making it harder for them. At the time of writing this blog, the Family Winemakers of California have submitted legislation to remove the estate fruit clause. It’s currently progressing and should be receiving wide industry and legislative support.

You would think as the wine, cider and mead industries are so important to California’s agricultural base, our leading industry association should be leading the way for positive regulation around the country and teaching the smaller states how to help the industry. Please tell me if I am blinded by optimism. Are there any downsides?

What the industry needs to understand is that the continued success of our domestic wine business is heavily at the hands of the legislators and enforcing regulators at this point. And nobody has more influence over legislators and enforcing agents than the wholesale distribution tier. You see the problem here. No state would purposely take away consumer choice and reduce sales tax collection. They are being manipulated by false information and fear mongering from the wholesale distribution tier.

We need to unite in the wine industry. This really is a story of David vs Goliath. The wholesalers are organized. The small producers are fragmented. That is why distributors can join forces and enact the changes that they want.

As an industry, we do have new and modern ways to manage regulations, collect taxes, verify age, track products and generally reduce the management of regulation to make it easier for states and lower their cost of operating. But regulators have to work with the industry, not be the VP of NO.

If we keep letting legislators add rules that do not apply to retailers, keep allowing regulators to flex muscle through their negative interpretation of rules, and keep accepting industry associations acting like the work is done, we will keep losing. Consumer choice will shrink. Compliance costs will rise. Small wineries will close.

This is not complicated. If there is anything a small winery does not like or is making it difficult to operate their business, join your local or national association. Then use your association to communicate with your legislators. Educate them on the impact on you, your business, and the families of your employees. Legislators don’t know what they don’t know, and right now they are being educated by the wholesale distribution tier. Once they hear from the families running small businesses in their states, they will start supporting you. If we don’t unite and do this, the 5% of large businesses will keep writing the rules for the 95%.