AZ wineries lobby to loosen regulations as business booms

This story was published on Arizona Sonora News on Feb. 11, 2016

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Dos Cabezas WineWorks in Sonoita produced more than 16,000 gallons of wine last year. (Ethan McSweeney/Arizona Sonora News Service)

SONOITA — Todd and Kelly Bostock are busy at work among empty boxes and wood barrels of wine.

The two owners of Dos Cabezas WineWorks are bottling caseloads of wine in a small warehouse off Highway 82, where last year they produced more than 16,000 gallons of their products. A short drive away, dotted across the rolling landscape of Sonoita and Elgin, a dozen other wineries are at work with tasting rooms open to tourists visiting the areas.

Dos Cabezas and the other wineries here are part of a burgeoning wine industry taking shape across Arizona — an industry that has been increasingly flexing its muscle as it lobbies to reduce regulations placed on its business. The latest effort involves legislation that would remove a requirement that larger wineries use a distributor to sell to their customers.

Led by Sen. Nancy Barto, R-Phoenix, more than 30 state lawmakers are sponsoring Senate Bill 1381, which would allow wineries that produce more than 20,000 gallons of wine annually to ship directly to customers. Currently wineries of that size need to go through a distributor in order to ship to customers.

“This is about letting people get access to wine that they want to buy,” said Eric Glomski, winemaker at Arizona Stronghold Vineyards and Page Springs Cellars. He works on legislative issues for the Arizona Wine Growers Association.

Wine distributors in the state have come out in opposition to the bill, Glomski said. Representatives from the Arizona Wine and Spirits Wholesalers Association and Beer and Wine Distributors of Arizona did not return requests for comment.

The bill, which comes from the California-based Free the Grapes, would also require that wineries, both in-state and out-of-state, obtain a direct shipment license if they wish to ship to customers in Arizona. Customers ordering from larger wineries around Arizona and around the country would be limited to 18 cases of wine a year per winery.

This is the latest bill the wine industry has pushed at the state Legislature. In recent years, lawmakers also have rolled back regulations around shipments to customers, wine festivals and other aspects of the wine business.

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Kelly and Todd Bostock, the two owners of Dos Cabezas WineWorks, bottle wine in a warehouse in Sonoita. (Ethan McSweeney/Arizona Sonora News Service)

“Over the years, our efforts have been to open up the markets incrementally,” Glomski said. “When our industry was small, we didn’t have the resources or the time or the understanding of the industry to duke it out and try to change these laws overnight. Every year, as our industry has grown — and this bill is an example — we take more chunks out of these [regulations].”

Glomski would like to see all the caps on production eventually removed, he said.

This bill comes a year after Arizona microbreweries rallied behind legislation signed into law that raised caps on their beer production.

Only two wineries in the state produce more than the current 20,000-gallon limit, said Rod Keeling, president of the Arizona Wine Growers Association. Several other wineries are close to hitting that 20,000-gallon limit, he added.

The bill also would give a boost to Arizona wine clubs seeking to buy wines from larger out-of-state wineries in places such as California, said Keeling. He is also a winemaker at Keeling-Schaefer Vineyards in Pearce.

“We want the wine culture in Arizona to be expanded and we think this helps that,” he said.

When Keeling first started his vineyard a little more than a decade ago, it was the ninth licensed winery in the state. Now more than 90 wineries are operating in the state.

“We’re still pretty darn small, but we’re starting to get some really good attention,” Keeling said.

So small that the U.S. Department of Agriculture doesn’t keep data on wine grape production for the state, said Dave DeWalt, the federal agency’s state statistician for Arizona.

DeWalt said wine grapes in the state are a “relatively small commodity” and represent a small fraction of Arizona’s agriculture industry.

blobWine production has risen by more than 53 percent in the state since 2013, according to figures provided by the Arizona Department of Liquor Licenses and Control.

While wine is not among the top 10 agricultural products in the state, it does represent a “growing and significant” area of production, said Julie Murphree, communications director for the Arizona Farm Bureau, an advocacy group for farmers and ranchers.

“It’s one of the strongest potential new growth areas for Arizona agriculture,” Murphree said.

She added that the top two searches on the Farm Bureau’s Fill Your Plate service, which allows users to search a database of products from Arizona farmers and ranchers, are beef and wine.

“More and more people respond every year, and we’re starting to get more and more national attention,” Todd Bostock said.

For the Bostocks, that attention came when the San Francisco Chronicle named them one of the top 10 winemakers to watch in 2015 — the first year the newspaper named someone outside California.

Keeling said, unlike other states that have increased their wine production, Arizona wineries have a “quality mentality.”

The Sonoita-Elgin area, about an hour’s drive southeast from Tucson, is one of the three main wine-producing regions in the state, along with Willcox and the Verde Valley in Northern Arizona.

According to a 2013 study, commissioned by the Arizona Wine Growers Association, wine production in the state is valued at $2.2 million, with about 93 percent of the business occurring in southeastern Arizona.

“More people are looking to purchase land and start wineries out here,” said Lori Reynolds, winemaker at Sonoita Vineyards. “I see really great things coming (for Arizona wine).”

Sonoita Vineyards is the oldest continually operating winery in Arizona, opening in 1983. The winery got its start when Reynolds’ grandfather, Gordon Dutt, a former soil scientist with the University of Arizona, researched wine-growing near Elgin.

The soil composition in the area, he discovered, is a “99 percent” match to what is found in the wine-producing region of Burgundy in France. Following the experiment, Dutt acquired land south of Elgin and planted a vineyard there.

Over the years, Reynolds has seen wineries spring up along the rural roads extending out from Sonoita Vineyard’s 60-acre farm. Reynolds said it’s “exciting” watching new startups bring more attention to the region’s wine-growing prowess.

“Because now we’re not a surprise,” Reynolds said, “and people don’t say, ‘What? There’s wine in Arizona?’”

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