Wine Giant Fights South Carolina's Quirky Liquor Laws
The biggest winemaker in the United States wants to open an East Coast bottling and distribution center in South Carolina, investing $400 million and hiring up to 500 people.
But it isn't the taxpayer money and other typical incentives being offered to E & J Gallo Winery that is making the efforts struggle at the South Carolina Legislature.
Instead, it's the California winemaker’s request to open tasting rooms where people can sample their wines that has caused the bill to grind slowly through the Legislature in a state where quirky alcohol laws protect small retailers and harken back to the days of saloons and booze only in private clubs.
A bill allowing the tasting rooms passed barely before a deadline earlier this month, and a House subcommittee gave its OK on Thursday, a critical step with just nine legislative days left in the 2021 session.
Gallo picked South Carolina over Georgia and North Carolina for its East Coast operations, critical to cut costs because 70% of its customers live east of the Mississippi River, said Ron Donoho, a vice president for the winemaker.
In exchange for bringing hundreds of workers and hundreds of millions of dollars to Chester County, one of the poorest areas of the state between Columbia and Charlotte, Gallo wanted tasting rooms. Gallo said it's similar to the initial investment made by BMW in the mid-1990s, now one of the state's biggest manufacturing success stories with 11,000 employees.
The upscale rooms likely would be in tourist areas and allow a group of 10 or so people to gather for about an hour and taste a number of different wines in thimble-full amounts. After the tasting, each person could buy up to six bottles of wine.
“Many consumers will worry about making the wrong choice so we’ve learned over time that those satellite tasting rooms and that consumer experience and building brand engagement with consumers is really essential to building your business," Donoho said.
But the tasting rooms are where the state's liquor laws entered the discussion. Liquor stores in the state can't buy their product directly instead going through wholesalers. There are 1,000 liquor stores in the state, but any one person or corporation can't own more than six and in many cases are limited to just three different locations.
In 1892, South Carolina nearly approved prohibition, but instead gave the state a monopoly on the liquor business. Corruption followed, but the state remained slow in changing its laws. There are no true bars, just private clubs. Public places that sell liquor must have a restaurant operation too.
Until 1973, people brought their own liquor to have a mixed drink with a meal. For the next three decades, drinks could only be made using a full minibottle of each liquor, like the ones served on airplanes.
“South Carolina has such a piecemeal system for alcohol developed through the years and there are a lot of people who are protective of their interests,” said Rep. Micah Caskey, a Republican from West Columbia.
Wholesalers and liquor stores are against the bill because they don't want Gallo to be able to sell the wine directly after the tastings. Lawmakers responded by changing the bill so Gallo would have to buy their own bottles from wholesalers.
That didn't help liquor stores, said George McLaughlin, who owns three locations and estimates about 40% of his business is Gallo wines. He also suggested if Gallo can sell wine directly to buyers, the winemaker might then cut out wholesalers.
“If a husband and wife can buy 12 bottles, they don’t need to go to their local store,” McLaughlin said. “When hey take out 40% of my market share, I’m going to lost 40% of my staff."
The state's dozen or so small wineries also showed up Thursday to speak out against the bill or at least ask to be able to band together and open their own off-site tasting room.
Larry Cozine opened the South Bend Winery in Greenwood last year, and now he sees Gallo potentially taking away business from the live music and supper clubs at his business.
“I’ve invested my life savings in the business. I’ve put my entire family’s destiny on this like Gallo did all those years ago." Cozine said. “I'm Gallo now.”