California can’t get out of their way in being business unfriendly and it amazes me that big wine interest groups let them travel down this road so easily. We seem to be slowly turning back the clock from Granholm, where barriers to entry were destroyed, to an environment where barriers to entry are becoming commonplace again.
Recently California passed into law a bill that creates a new recycling program. Under the California Redemption Value (CRV) program, a consumer is charged a fee in hopes they return the bottle after consuming product.
A major problem with the law is the labeling requirements. Under the law, wine produced effective January 1, 2024, will be required to have a CRV message about the recycling program.
In the past, I was critical about the wine industry interest groups standing by when there is a potential of bad nutritional and labeling requirement laws.
But the CRV laws have already set sail and the damage is imminent.
So why should we be concerned?
California’s laws start a dangerous precedent and make it difficult for small producers to compete in the marketplace.
Suppose one is a small winery in Michigan, that winery may sell 5 cases into California, maybe more and maybe less. With the new CRV labeling requirements that winery must make a choice, either incur an expense over a small amount of sales or decide it is not worth it to do business in California.
Think of the choice, the Michigan winery would need to project how much they would sell into California, isolate those bottles and print a different label for them. Or put a California CRV notice on every bottle, even though the vast majority are not going into California.
California is already imposing mandates on out-of-state businesses as a condition for doing business as we have seen from the pork producer case. National Pork Producers Council v. Ross, 598 U.S. 356 (2023).
It seems the trend is hitting small wineries that will now be forced into difficult business decisions.
The other issue is where will this trend lead? Will other states follow California’s lead and put in CRV labeling requirements on a wine bottle? So, what is imposed on out-of-state wineries to sell into California, may one day be imposed on California wineries selling into other states.
This would lead to further adverse consequences for the industry. The label is valuable real estate for a winery, taking the label up with information that is not necessary, takes away valuable space on the wine bottle and is detrimental to a wine’s major selling point, its label.
When Granholm legalized DTC shipping it led to a major growth spurt in the wine industry with the number of wineries doubling since Granholm. Open and free markets and the tearing down of barriers to entry is what led to greater growth.
Now we seem to be enabling laws that slowly turn back the clock to the Pre-Granholm days, where wine sales will be slashed because of government regulation. Major wine interest groups start to become like Nero where they watch as the fire starts. But be careful because what will one day impact out-of-state wineries, may come back and bite California wineries.