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Farmers’ Markets: A New Frontier for Small Wineries in Michigan

One of the biggest challenges for small wineries in the United States is developing a market for their products. Small wineries often have a difficult time getting conventional retail shelf space because they do not produce enough volume or products to make it cost effective for wholesalers to carry their wines.[1] Further, due to the continued prevalence of the three-tier system, which prohibits producers from selling directly to retailers, small wineries in many states are disallowed from selling directly to retailers[2] like liquor stores, wine shops and grocery stores.[3] Thus, small producers face substantial challenges in getting their wines to consumers.

While many states have loosened restrictions on small producers by allowing direct shipping to consumers[4] and off-site sales at the winery, small wineries still face an uphill battle in cultivating a market because consumers are less likely to be initially exposed to their wines. Without knowing anything about a winery and never having seen any of its products, consumers are much less likely to find a small producer online and make a purchase or take a trip to the winery for an off-site sale.

However, the state of Michigan has recently given its small wineries a new, potentially powerful, tool in developing consumer markets for their wines. On July 2nd, Governor Rick Snyder signed Senate Bill 79, which will allow small wineries to make sales and host tastings at local farmers’ markets.[5] Under the new law, qualifying small wine makers will be allowed to purchase a license that enables them to serve up to three 2-ounce servings per customer at farmers’ markets around the state.[6] The licenses, issued by a state commission, will cost $25 for each farmers’ market location.[7] In order to qualify for a license, the wine maker must manufacture or bottle no more than 5,000 gallons of wine per year.[8] The policy behind the new legislation is simple: by allowing smaller producers to directly engage consumers at farmers markets, small wineries will be able to both generate immediate sales and build a market for their wines that will drive sales online and off-site sales at the winery.

In passing this legislation, Michigan will be joining a number of states that allow for sales at farmers’ markets. [9] However, Michigan’s approach goes one step further by allowing consumers to actually taste the wines before making a $20 or $30 investment in a bottle. Currently, tastings at farmers’ markets is only allowed in a limited number of states, including California, Maryland, Massachusetts, North Carolina, and Virginian.[10] However, later this month, Washington State will also begin allowing farmers’ market tastings once legislation[11] enacted in May goes into effect.



[1] See Institute for Justice, Challenging Minnesota’s Advertising and Internet Speech Ban That Bottles Up Wineries and Consumers, http://www.ij.org/minnesota-winery-internet-speech-background. Cf. Missouri Wine and Grape Board, The Economic Impact of Wine and Grapes in Missouri 5 (2010), available at http://gwi.missouri.edu/publications/mo-winery-impact.pdf (“[D]istributor support for . . . wineries is unusual in the midwest, where many producers have found distributors’ resistant to supporting their product.”).

[2] See Indiana Alcohol and Tax Commission,  Direct Wine Shipment Report 2 (2011), available at http://www.in.gov/legislative/igareports/agency/reports/ALTOB01.pdf.

[3] Of course, in many states including Alaska, Colorado, Delaware, Kansas, Tennessee, Minnesota, Oklahoma, Pennsylvania, North Dakota, Utah, Connecticut, Kentucky, Mississippi, New York, and Wyoming, grocery stores are prohibited from selling wine all together. Bradley Rickard, Marco Costanigro and Teevrat Garg, The Availability of Beer, Wine, and Spirits in Grocery Stores 24 (Am. Ass’n of Wine Econ., Working Paper No. 95, Dec. 2011), available at http://www.wine-economics.org/workingpapers/AAWE_WP95.pdf.

[4] This is, in large part, thanks to the Supreme Court’s decision holding that disallowing out-of-state wineries to directly ship to in-state consumers while allowing in-state wineries to do so is unconstitutional. See Granholm v. Heald, 544 U.S. 460 (2005).

[5] See S.B. 79, 97th Leg., Reg. Sess. (Mi. 2013) (enacted), available at http://www.legislature.mi.gov/documents/2013-2014/billenrolled/Senate/pdf/2013-SNB-0079.pdf.

[6] Id. at Sec. 415 (7).

[7] Id. at Sec. 415 (2).

[8] Id. at Sec. 415 (12)(d).

[9] See, e.g. 28-A Me. Rev. Stat.tit. 28-A, § 1366 (2012) (Maine); Ky. Rev. Stat. Ann. § 243.155 (2012) (Kentucky); Conn. Gen. Stat. § 30-37o (2012) (Connecticut);

[10] See, Cal. Bus. & Prof. Code § 23399.45 (California); Md. Code. Ann., art. 2B § 2-101 (Maryland); Mass. Gen. Laws ch. 138, § 15F (Massachusetts); N.C. Gen. Stat. § 18B-1114.1 (2013) (North Carolina); Or. Rev. Stat. § 471.223 (2012) (Oregon); 3 Va. Admin. Code. § 5-70-160 (2013) (Virgina).

[11] See S.B. 5674, 63rd Leg., Reg. Sess. (Wa. 2013) (enacted), available at http://apps.leg.wa.gov/documents/billdocs/2013-14/Pdf/Bills/Session%20Laws/Senate/5674.SL.pdf. Prior to Washington’s new law, the state had a small-scale test pilot program for allowing tastings, which the current legislation seeks to expand.

 Farmers’ Markets: A New Frontier for Small Wineries in Michigan

About the author

Byron Crowe II wrote one article on this blog.

Byron Crowe is the founder of the Society of Wine and Jurisprudence at Cornell Law School. He is a J.D. and holds a B.A. in economics from Tufts University. His favorite wines are Oregon Pinot Noirs and New Zealand Sauvignon Blancs.

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