How a Proposed SLA Restriction Could Drastically Change NYC Wine Lists

New York’s best restaurant wine lists may be soon killed off, and the proposed culprit is the New York State Liquor Authority (SLA), which has announced an intention to alter one of the key provisions of state beverage law. The change would be a big blow to how wine lists are written in the state, and would mean the end of the dominance that New York currently enjoys for wine in this country.

At issue is the sale of wine from "private collections" to restaurants. This has long been allowed by the law and has been the backbone of some of New York City’s most famous wine lists, notably Veritas in the past. More recently, if you look at the lists of wine destinations like Rebelle, Maialino, Charlie Bird, and Racines, you see lists that couldn’t have been constructed without sourcing from private collections. Those restaurant names stand out in particular because they are some of the top restaurant wine destinations in the country, let alone the state, and the changes that the SLA has proposed would mean an end to that. And it isn’t just a handful of restaurants that would be affected. Virtually every distinguished wine program in New York City today has sourcing from private collections as a part of what they do. Without that capability, the wine lists in New York might look much more similar to those in states like Massachusetts, where regulations hamper the ability of wine programs to operate at a world-class level. Quietly, and without much notice of the plan during a busy holiday season, New York State intends to kill off one of the areas in which it leads the nation today.

"It is a real thing," commented Grant Reynolds of Charlie Bird restaurant in Manhattan. "In the world today, New York’s is the greatest wine culture. Restaurants and private collectors live together in this ecosystem and what you get to taste out of that is super appealing." Reynolds cites the wine possibilities here as the reason that he decided to take a job in New York a few years ago, moving to the state from Colorado to do so, instead of pursuing the position at Noma Restaurant in Denmark that he had also been offered: "The access is here. I needed to be tasting certain wines for my own education and without a doubt you can do that here right now." But Reynolds is equally worried about a future for wine lists in New York with restrictions placed on sourcing from private collections. "Sommeliers won’t be able to meet the gap between the demand from customers and the availability of the wines," he says. "If you are fortunate enough to have the demand, it is important to have the wine for sale."

At issue are the tight allocations available to sommeliers for the wines that customers want and are willing to pay for. Sommeliers limited to a couple of bottles a year of something that their customers will willingly buy several cases of over the same time period have looked to private collections as their salvation. It isn’t that they aren’t buying the wine from the traditional distribution source; it is that they want to purchase much more than is ever made available to them. "I have never been allocated a bottle of Dauvissat in my entire career," says Robert Bohr, also of Charlie Bird and a longtime sommelier. "What should I do about that? There are customers who want to drink that wine." What has drawn sommeliers to private collections is fairly easy to comprehend: limited availability in the market for wines that they want to purchase. "I am willing to pay 10 percent more for a bottle from a private collection and not make as much money on it because it is important to have that wine on the list," says Reynolds.

But what has made the private collections themselves more readily available is primarily attributable to four aspects. The escalation in prices for many wines has made the return for private consumers who have those wines more appealing. What they bought in the past can now be sold for more dollars than they might have expected. Also, the recession of late 2008 really changed the habits of a generation of private collectors. They often stopped purchasing wines at full restaurant markup and started thinking about drinking down their own cellars instead, pursuing BYO opportunities, and selling off parts of their collections. And at the same time, that Baby Boomer generation, one of the first in America to actively collect wine on a large scale since the end of Prohibition, is now getting older. They physically can’t drink as much alcohol as they used to. They are experiencing health issues. Thus they are more willing to sell off chunks of their own cellars than they were in the past, when the excitement brought on by certain wine critics led them toward large purchases of wine. Finally, the economic issues which many people face in Europe has also led to the liquidation of collections there. Those bottles often make their way to New York consumers who are looking for opportunities to try those wines.

Reynolds also sources wines sold through auction houses for Charlie Bird, but has increasingly found that auctions only focus on the well established names, leaving out a large number of wines that are relevant to his program as customers seek new discoveries. Cellared examples of those less well known wines are often only available from private collections, and rarely come up at auction. "Auction houses don’t see the upside in dealing with wines that aren’t blue chips, even if those wines are in huge demand" among sommeliers, says Reynolds.

The changes proposed by the SLA, which have already been drafted, would change how private consumers can sell their own property. Think about that for a second: If you own a couch, or a piece of stereo equipment, both of which together might be valued at less than a single bottle of wine, you assume that if you choose to you can sell those at any time. Your property belongs to you, and you can make it available for sale at any time you see a benefit to doing so. What the SLA is saying is that this would not be true any longer for wine. If you have a bottle of red wine you would need, as a consumer, to wait 10 years from the vintage before you could sell that wine, according to the SLA. That is an entire decade, and it ignores any valuation curve in the market. If the prices paid for that red wine suddenly spike in the first five years, which is entirely possible, you would be unable to resell as a consumer what you already own to take advantage of the pricing.

The regulations for white wines and rosé would stipulate a five year holding time. This despite the fact that after five years many whites wines and rosés lose monetary value instead of gaining it. And when the time period has passed and a private consumer can finally sell their wine, they would be out of luck if they had lost the original receipt while they were waiting all those years. Without an original proof of purchase they would be prohibited from completing a sale to a retailer or restaurant. Do you own wine that you might hope to sell in New York one day? The SLA expects you to have all of those receipts, or else no sale. "Private property owners ought to have the ability to sell their property when and how they see fit" contends Jamie Wolff of New York of prominent Manhattan retailer Chambers Street Wines, "and this proposal from the SLA would fundamentally change that."

Also in the text of the proposal is a stipulation for a two-year waiting period, during which the owner of the wine must possess it before making a sale. It would not be possible to purchase a nine-year-old bottle of red wine and then resell it for a profit until two years had passed. This stipulation for a waiting period is analogous to what was stipulated in the highly contentious "At Rest" proposal that was considered by the SLA in 2013. That proposal was strenuously objected to by the New York Alliance of Fine Wine Wholesalers on the grounds that it was anticompetitive and would cost jobs. Perhaps not surprisingly, the origins of "At Rest" and the newly proposed restrictions on private collections arise from the same group of interests, that is, large national distributors. The review of private collection sourcing in New York was suggested by an attorney representing Empire Merchants, part of a large, multi-state distribution group, in an Industry Workgroup Meeting of a special SLA committee on November 12 (fast forward to 00:33:19 in the session recording to hear the proposal). That working group was formed by Governor Andrew Cuomo earlier this month with the intention to "cut red tape and break down bureaucratic barriers in order to help this state’s burgeoning craft wine, beer, spirit and cider producers thrive and create jobs." But the first meeting of the group has resulted in adding regulation proposals that will very likely kill jobs and raise prices in New York’s booming restaurant wine sales sector. In the same meeting, the group killed a proposal that would have allowed restaurants to pay wine invoices by credit card, a result seemingly at odds with the Governor’s description of the working group as one that would provide perspective "on how to bring our laws into the modern era."

"This a naked money grab and advance of large wholesale rights over consumer rights," says Bohr. "This advisory is narrowly tailored to the interests of monied distributors, instead of consumers, restaurants, and retailers. It is so one sided that it is tough to argue for any benefits to consumers at all. Obviously distributors play an important role, but this is set to suit their needs only," continues Bohr. He raises the possibility that as options for purchase diminish, prices will rise and available bottles to sell will disappear. He envisions a future where wine sale revenue and the corresponding sales tax revenue that they bring in will decrease because opportunities for sales diminish. In the market, he says "the wine goes to where the regulations are the least onerous." Bohr also notes: "You can expect if this proposal goes through that the wine will move to California instead of New York." And Wolff agrees that ultimately this proposal would diminish availability and options to consumers in New York: "In the cases where demand greatly exceeds supply and the distributors can’t by any stretch of the imagination meet that demand it seems reasonable that a licensed vendor would want to find more wine elsewhere to meet customer demand. This is not about beating the local price, this is about availability to consumers."

Written comments about the SLA proposal to further regulate the sale of private collections must be forwarded on or before January 14, 2016 to: Secretary’s Office, State Liquor Authority, 80 South Swan Street, Suite 900, Albany, NY 12210, or via electronic mail to Secretarys.Office@sla.ny.gov