NY Producers and Wine in Grocery Stores

In my last post about the Governor's proposal to allow grocery stores to sell wine, I didn't discuss New York wine producers. How will they fare if this legislation is enacted?

On the whole, NY wineries seem to support the proposal. There are about 21,500 grocery stores in New York State and about 2,500 liquor stores, according to the Rochester Democrat and Chronicle. That means an additional 19,000 potential customers. That's an exponential increase and could mean an explosion in revenues.

I don't know though...if I were a NY wine producer, of good wine anyway, I would not be so excited. I might even be a bit worried.

There is nothing in the legislation to ensure that grocery stores stock New York wine. In other words, the decision whether or not to purchase New York wine would be at the discretion of the grocery store, as it is at wine and liquor stores.

The model of sales at a grocery store is quite different from that at a wine and liquor store. Grocery stores do not use sales staff to advise customers. In a grocery store, the product must speak for itself and brand name and price (and location in the store, but that's another story) are of paramount importance. Customers faced with a wall of laundry detergent must make their own decisions about what to purchase. No one says to a clerk "I'm thinking about a detergent and I want it to be a good stain remover, but I don't have a lot to spend. What can you recommend to me?"

But that is precisely what happens in wine and liquor stores everywhere. Perhaps not so much for sales of Gallo, Yellow Tail, or other mass market wines with good brand recognition. But for wines that cost more than $15 or $20 a bottle, and for small production wines, many customers like to speak with sales staff before making buying decisions. This will not be possible in grocery stores unless the store hires an employee for this purpose. And by the way, the wine stores that can't do this kind of thing well are among the stores that are more likely to go out of business if the legislation is enacted.

Without such an employee (and even with one), New York wines are likely to get lost in the supermarket wall of wine. Why? Because New York wine does not yet have the brand recognition to sell itself. And because wines from California and the rest of the world have an established reputation for quality that New York wines do not yet have, but New York wine often costs the same amount or more than their counterparts from elsewhere.

The New York wine that sells for under $10 might compete with similarly priced wine at a grocery store. But I would guess that the higher end wine would not sell at a grocery store. Imagine a customer with no prior knowledge of New York wines - what must happen for that customer to decide to purchase an $18 or $26 bottle of Long Island Cabernet Franc? Sales staff would have to recommend the wine. Retail sales of high end New York wine might actually decline under the new legislation if the people who buy a $25 bottle of wine every now and then stop shopping and wine and liquor stores and start doing their wine shopping at grocery stores.

I received an email today from the marketers who represent the National Federation for Independent Business (NFIB). In their email they included a link to the wine list at a Wegmans (a large Rochester-based grocery chain) restaurant called Tastings. There are 110 wines on the list, four of them are New York wines. The NFIB claims that this is representative of what will happen at all of the large grocery stores under the new legislation.

But hey, that's just the way I see it, and what do I know. Wine producers seem thrilled about the proposal and wine and liquor stores are terrified. In fact, I heard from New York wine blogger Lenn Thompson that some retailers are exerting pressure of their own. Lenn told me that he has reliable sources who say that "In upstate New York, any wineries that show public support (for the proposal) are being unofficially boycotted by wine shop owners (meaning that wines are being pulled from shelves). It's getting ugly up there...but no one is talking on the record...which you'd expect."

Care to share your opinion? How do you think New York wine producers would fare if this proposal passes?