Wine industry divided over proposed bottle labeling rule

A proposed rule amending the current federal regulation is poised to limit the use of American Viticultural Area (AVA) names, such as “Napa Valley”, in the labeling of wine produced in a state other than the one containing the AVA from which the grapes are sourced.

Using what some have called a ‘loophole’ in the regulation, wineries countrywide can currently apply for an exemption that allows them to source grapes from out of state vineyards and use the name of the grapes’ AVA, so long as the finished wine is sold only in the state where it is produced.

The potential rule has been divisive, with supporters positing that the ‘loophole’s closure protects consumers and upholds the integrity of the decades-old AVA system, while critics argue that it disadvantages customers by striking relevant information from labels on bottles of wine produced in states other than those where the grapes were grown.

“This loophole allows unscrupulous companies to deceive consumers,” wrote Rep. Mike Thompson, D-St. Helena, in an Aug. 19 letter to the Alcohol and Tobacco Tax and Trade Bureau, the agency currently weighing the rule’s adoption. Signed by 47 additional members of Congress, the letter urged TTB to finalize the rule following the first deadline for public comment on Aug. 22.

At the request of the California Association of Winegrape Growers and Wine Institute, the association representing more than 1,000 wineries and affiliated businesses in California, the agency granted a 90-day extension of the comment period in September. The second period ended Wednesday, and the agency said a review of comments is currently underway, though it declined to give a time frame for the review process.

In a joint letter to TTB on Dec. 6, Wine Institute and the Napa Valley Vintners urged the bureau to adopt the proposed rule in its entirety.

Efforts to adopt the rule began when NVV recognized the loophole after learning of a winery in a Southern state that was producing a “Napa Valley”-labeled wine. “We decided to try and tackle the problem,” said Rex Stults, NVV’s government relations director. The group brought the issue to the attention of Rep. Thompson and “he agreed it was asinine,” Stults said.

Rep. Thompson, along with California Sens. Dianne Feinstein and Barbara Boxer initially proposed the rule to TTB in September 2015. “This is about there should be one set of rules for producers,” Stults said.

“This regulation is really to protect Napa wineries producing Napa wine and not to protect the customer,” said David Lecomte, chief winemaker at City Winery, a company that sources wine grapes from myriad out of state AVAs, producing 95 percent of its wine at various locations in major cities including New York City and Chicago. For a time, City Winery also had a Napa location.

At its New York location the company offers various wines on tap, labeled by vineyard, vintage and AVA. Among these are a 2015 chardonnay from Sonoma, a 2014 pinot noir from Mendocino and a 2013 “NYC Cab” from Napa Valley. Through its wholesale business, the company sells a 2012 Cabernet Sauvignon Napa Reserve that was made with grapes sourced from two Napa vineyards and one Sonoma vineyard, according to Lecomte, that were shipped to its New York City location where they were fermented, barreled and aged before being bottled and labeled with the “Napa Valley” AVA.

If the rule is adopted, City Winery’s wholesale business would be shut down, Lecomte said. “Selling an American wine … without the capacity to name where it’s coming from. It’s not going to work. People want to know the vintage, the AVA and the vineyard.”

Jeffrey Maltzman owns boutique wineries in the city of Napa and Amador County, as well as a vineyard in Amador County. He also recently opened a winery in Colorado with the hope of selling California wines there. “I see this from all three sides,” Maltzman said.

“I completely understand the desire of Napa Valley to preserve the name of Napa and eliminate wineries that are not supposed to be using (the AVA),” he said. “But the fundamental flaw is that (the rule) actually reduces the amount of information put in front of a customer instead of increasing it.”

As a winemaker in Napa “using 100 percent Napa grapes,” Maltzman said, “I have never perceived the purported problem as being a major issue or competitive challenge.”

“As the owner of a winery in Colorado,” he said, “I don’t see why I shouldn’t be able to accurately and factually inform my customers.”

And as a vineyard owner selling wine grapes out of state, Maltzman speculated that the rule would reduce the price California grapegrowers will receive for their crops, due to a depressed demand.

The Agricultural Commissioner’s Office reported interstate shipments of fresh Napa County wine grapes to out of state wineries and hobby winemakers has risen steadily in the last three years. Shipments in 2015 came to a total of 105.5 tons. Data for 2016 was not available.

According to its website, City Winery sourced more than 20 tons of grapes from California vineyards in 2015, including six tons of grapes from Bettinelli Vineyard in Yountville. Lecomte said that if City Winery ceased purchasing wine grapes from Bettinelli, “he’s going to have another buyer within 24 hours. He doesn’t need us.”

Lecomte said that while grapegrowers in lesser known AVAs may suffer from a lack of demand, for “the high-end vineyards of Napa, I don’t think it’s going to be changing.”

Andy Beckstoffer, proprietor of Beckstoffer Vineyards and owner of more than 1,000 acres of Napa Valley vineyards, said that he was not concerned about the possible lack of demand for wine grapes from out of state wineries if the rule is adopted.

While his vineyards have sold grapes to out of state buyers, Beckstoffer said, “It’s not at all an important part of our business.”

“We’ve got more wineries in Napa and in California than we know what to do with.”

Echoing the NVV’s sentiment on the rule, Beckstoffer said, “I’m very concerned about the quality of wine that goes to the consumer with Napa Valley on it and the ability to control that when it’s made in a winery out of state is majorly decreased.” He added, “There’s a culture here in Napa of quality and I’m not sure that extends to Des Moines, Iowa.”

In their Dec. 6 letter urging TTB to adopt the rule as originally proposed, Wine Institute and NVV also put forward a joint proposal detailing how wines produced with grapes from out of state AVAs may still include information about the grapes’ vineyards through a ‘Grape Source Information’ label. The label could hypothetically list the name of the city, county or state where the grapes were grown, but could not use the name of an AVA.

Considering alternatives to the rule as proposed, Lecomte said, “I would be OK to lose the AVA if I can still name the vintage and the vineyard.”

Maltzman said, “I am fully in favor of complete and accurate disclosure of what is in wine, where the wine is made and how the wine is made, if that’s what the law is.”