Livin’ the Dream, Part 2

Livin’ The Dream, Part 2
Part one of this article released outlined some of privileges that Arizona farm wineries have allowing local grape growers and wine producers to compete in an industry dominated multi-national conglomerates. The privileges are grounded in business reality and though they are designed to encourage investment and support start-ups, there are contingencies that must be met as well as local and federal regulations that must be abided by. With these privileges comes great responsibility and even greater financial liability.
Arizona wineries have a responsibility, first to the consumer. There is the expectation that the

wine produced should be of good quality. It should be a stable product and its value commensurate with its price. Most importantly, Arizona wine should be produced with Arizona grapes. New legislation has been created to protect the consumer and create legitimacy within the state’s wine industry.

John McLoughlin doing punchdown

John McLoughlin doing punchdown

State legislators made their intention to protect the consumer as well as the legitimate integrated vineyards and wineries abundantly clear by requiring licensees to actually produce wine, not just purchase out-of state bulk or bottled wine. An Arizona winery will only retain the privileges of the #13 license if it is actually producing wine or growing a minimum of five acres of grapes. Roughly translated that is 4,500 vines which will eventually, (4-6 years in maturity) produce around 15 tons of grapes or 2400 gallons of juice that needs to be aged anywhere from 1-6 years. The end result for this time & capital investment is about 1,000 cases. An obviously over-simplified statement would be that a truly integrated growing and producing winery could wait 5-6 years to enjoy their first bottle of wine. This looming reality is something that the currently non-producing #13 licensees must face. Legitimize or forfeit the license.

Records
It is the requirement of both federal and state government that a winery maintain immaculate records. At any given moment either entity may enter a licensed premise and conduct an audit. It is the responsibility of the winery to record information from the moment the grape enters the facility. This includes any additions to the wine, (yeast), movement between vessels, (racking), filtering, bottling, cellaring and of course, selling. A gap in information can generate damaging repercussions including forfeiture of a license.
Liability
Capital investment is one thing, financial liability is another.

courtesy 123rf.com

courtesy 123rf.com

One of the most assertive examples of the strain of financial liability is demonstrated in the inequitable taxation of wine over beer by the federal and state government. Craft breweries are taxed at a combined rate of 38 cents per gallon. A winery is taxed at a combined rate of $2.41 per gallon, over six times higher than that of a brewery. Keep in mind the above statement that a true winery has to wait five years to sell their first bottle and begin to recoup their growing and production costs. Beer can be produced and sold in week. It is a curious inequity that shows up in the final price of the wine to the consumer, who is also taxed at the point of purchase.
These are only a couple of examples of the striking reality of the accountability that is tied to privilege. There is a joke in the wine industry and wine makers laugh only because it is true, “To make a small fortune in wine, you have to start with a big one.”