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How wine business law is shifting amid coronavirus pandemic allowances for virtual tastings, direct sales

Experts in this report

Bahaneh Hobel

Dickenson, Peatman & Fogarty

1455 First St., Ste. 301, Napa 94559

707-261-7000

www.dpf-law.com

Bahaneh Hobel is a partner at Dickenson Peatman & Fogarty in Napa and heads the firm’s Alcohol Beverage Law group. Her practice focuses on all aspects of alcohol beverage law and regulation for wineries, breweries, distilled spirits plants, importers, wholesalers and retailers. Hobel has worked extensively with state and federal alcoholic beverage agencies throughout the U.S, including the California Department of Alcoholic Beverage Control and the Alcohol & Tobacco Tax and Trade Bureau.

Hobel received her J.D. in 2001 from the Boalt Hall School of Law at the University of California, Berkeley and served as a law clerk to Judge Richard C. Tallman on the U.S. Court of Appeals for the Ninth Circuit before commencing her law practice. Hobel is on the California ABC’s Licensing Task Force and also a member of the Craft Beverage Lawyers Guild.

Phillip H. Kalsched

Carle, Mackie, Power & Ross

438 First St., fourth floor, Santa Rosa 95401

707-526-4200

www.cmprlaw.com

Philip Kalsched, a partner in the firm, began his legal career in San Francisco as a litigation lawyer, where he handled complex business and real estate matters. He later founded a real estate development company.

He has practiced law in Sonoma County since 1998, with a focus on the wine industry. He works with wineries, grape growers, importers, exporters and other wine related businesses.

Kalsched has additional experience in intellectual property, including trademarks and electronic commerce, land use, licensing, international distribution, and the formation, organization and dissolution of corporations, partnerships and limited liability companies. He has further experience in international business transactions, including trade and distribution, and is a member of the International Law and Business Law Sections of the American Bar Association.

Michael Brill Newman

Holland & Knight LLP

50 California Street, Suite 2800, San Francisco 94111

415-743-6989

www.hklaw.com

Michael Brill Newman is a partner and is head of the firm's Alcohol Beverage Team. He focuses on counseling alcohol beverage and hospitality industry clients on national and international regulatory, contract, legislative and licensing matters, advertising and promotional law, importation matters, trade practices, and inter-tier relations. He represents clients before the federal Alcohol & Tobacco Tax & Trade Bureau, the California Department of Alcoholic Beverage Control and State Board of Equalization, and other state alcohol beverage agencies throughout the United States.

Newman is an associate member of the National Conference of State Liquor Administrators, the Brewers Association, the Wine Institute and the National Alcoholic Beverage Control Association. He currently serves on Wine Institute's Public Policy Committee.

Katherine Philippakis

Farella Braun + Martel LLP

899 Adams St., St. Helena 94574

707-967-4000

www.fbm.com

atherine Philippakis is a partner in Farella Braun + Martel’s St. Helena office and chairs the firm’s Wine Industry Group. She is a grape-to-glass wine practitioner who helps her clients buy, sell, develop, and operate California wineries and vineyards.

Philippakis assists cult, luxury, and premium wine brands with their efforts to protect or grow their businesses by acquiring or divesting assets, renegotiating with lenders, developing brands, and increasing debt or equity investments. Philippakis is recognized among The Best Lawyers in America and has been repeatedly named among the “Top Women Lawyers” in California by the legal publication Daily Journal.

Don L. Winkle

Spaulding McCullough & Tansil LLP

90 South E Street, Suite 200, Santa Rosa 95404

707-524-1900

www.smlaw.com

Don Winkle is a business transactional attorney with Spaulding McCullough & Tansil LLP. He has focused his practice to the manufacturing and service sectors and works primarily with brewers, wine and spirt makers, general contractors, and architects.

Even 15 years after a landmark U.S. Supreme Court decision started opening up the country to direct-to-consumer shipments from wineries, the law is still evolving on direct sales. And the need for wineries to be able to legally sell wine more freely amid coronavirus-related shutdowns of tasting rooms and restaurants is even more paramount.

The Business Journal asked the following wine law experts in the region about these trends: Bahaneh Hobel of Dickenson Peatman & Fogarty, Phillip H. Kalsched of Carle Mackie Power & Ross, Michael Brill Newman of Holland & Knight, and Don L. Winkle of Spaulding McCullough & Tansil.

In the June 2019 Supreme Court ruling on Tennessee Wine and Spirits Retailers Association v. Russell F. Thomas, how has the striking down of Tennessee's durational residency requirement for alcohol retailers changed the landscape of shipping wines across state lines? What barriers remain regarding shipping California wine across state lines?

Bahaneh Hobel: The Tennessee case has not yet changed the landscape of wine shipping in the U.S., and its impact remains to be seen. In fact, a recent U.S. Court of Appeals case related to direct shipping by retailers (Lebamoff Enterprises, Inc., v. Whitmer, opinion issued April 21) essentially ignored the precedent set by Tennessee in making its decision, which was shocking to many of us reading that opinion.

In order for retailer direct to consumer shipping to become more widespread, in most cases, each state will have to decide (on a state by state basis) whether they want to make these rights and privileges available to both in state and out of state retailers, and if so, enact rules and regulations to allow such activity.

Thus, there is a long road ahead for retailer shipping. It took winery direct shipping 15 years to get to the place it is now, but since wineries paved the way, to the extent retailer shipping is permitted, it likely won’t take quite as long.

Philip Kalsched: Thanks in large part to the Supreme Court’s (2005) decision in Granholm, there are now approximately 44 states (Kentucky coming this summer) that allow wineries to ship wine direct to consumers.

However, approximately only 13 states allow out-of-state retailers to ship wine direct to consumers. While it may not be the panacea the wine industry was hoping for, the Supreme Court’s decision in Tennessee Wine certainly provides valuable tools for future arguments against existing shipping restrictions.

In Tennessee Wine, the Supreme Court reviewed and struck down a Tennessee law providing that only residents who had lived in the state for at least two years could obtain a retail liquor license and that a corporation can obtain a license only if all of its stockholders are residents.

The Supreme Court found that the Tennessee law violated the “dormant” commerce clause which “prevents the states from adopting protectionist measures and thus preserves a national market for goods and services.”

Additionally, the Supreme Court overcame Section 2 of the 21st Amendment by providing that the purpose of Section 2 “was not to give states a free hand to restrict the importation of alcohol for purely protectionist purposes.”

Further, “[W]here the predominant effect of a law is protectionism, not the protection of public health or safety, it is not shielded by §2.”

Rather, in determining whether states properly exercised their authority to address alcohol-related public health and safety issues, courts must ask “whether the challenged requirement can be justified as a public health or safety measure or some other legitimate no protectionist ground.”

Additionally, “‘mere speculation’ or ‘unsupported assertions’ are insufficient to sustain a law that would otherwise violate the commerce clause.” In this case, the court found that the discrimination against non-residents “has at best a highly attenuated relationship to public health or safety.”

These arguments will certainly be used by opponents of strict, protectionist shipping laws, including those against the “reciprocity” states which support seemingly anti-competitive and protectionist behavior. The ability to withstand continued judicial scrutiny under what appears to be a wave of anti-protectionism will be challenging for the states supporting restrictive shipping rules and regulations.

Notwithstanding the implications arising from the Tennessee Wine case, real change will still require states’ legislative bodies to make bold moves to undo the existing structure, as well as continued legal challenges.

Michael Brill Newman: The TWSRA ruling has not yet changed the landscape of shipping wines across state lines. In sum, very little has actually changed as far as the legality of wine retailers shipping wine interstate direct to consumers. There merely is a somewhat industry-wide perception that the laws will change in the next few years.

Experts in this report

Bahaneh Hobel

Dickenson, Peatman & Fogarty

1455 First St., Ste. 301, Napa 94559

707-261-7000

www.dpf-law.com

Bahaneh Hobel is a partner at Dickenson Peatman & Fogarty in Napa and heads the firm’s Alcohol Beverage Law group. Her practice focuses on all aspects of alcohol beverage law and regulation for wineries, breweries, distilled spirits plants, importers, wholesalers and retailers. Hobel has worked extensively with state and federal alcoholic beverage agencies throughout the U.S, including the California Department of Alcoholic Beverage Control and the Alcohol & Tobacco Tax and Trade Bureau.

Hobel received her J.D. in 2001 from the Boalt Hall School of Law at the University of California, Berkeley and served as a law clerk to Judge Richard C. Tallman on the U.S. Court of Appeals for the Ninth Circuit before commencing her law practice. Hobel is on the California ABC’s Licensing Task Force and also a member of the Craft Beverage Lawyers Guild.

Phillip H. Kalsched

Carle, Mackie, Power & Ross

438 First St., fourth floor, Santa Rosa 95401

707-526-4200

www.cmprlaw.com

Philip Kalsched, a partner in the firm, began his legal career in San Francisco as a litigation lawyer, where he handled complex business and real estate matters. He later founded a real estate development company.

He has practiced law in Sonoma County since 1998, with a focus on the wine industry. He works with wineries, grape growers, importers, exporters and other wine related businesses.

Kalsched has additional experience in intellectual property, including trademarks and electronic commerce, land use, licensing, international distribution, and the formation, organization and dissolution of corporations, partnerships and limited liability companies. He has further experience in international business transactions, including trade and distribution, and is a member of the International Law and Business Law Sections of the American Bar Association.

Michael Brill Newman

Holland & Knight LLP

50 California Street, Suite 2800, San Francisco 94111

415-743-6989

www.hklaw.com

Michael Brill Newman is a partner and is head of the firm's Alcohol Beverage Team. He focuses on counseling alcohol beverage and hospitality industry clients on national and international regulatory, contract, legislative and licensing matters, advertising and promotional law, importation matters, trade practices, and inter-tier relations. He represents clients before the federal Alcohol & Tobacco Tax & Trade Bureau, the California Department of Alcoholic Beverage Control and State Board of Equalization, and other state alcohol beverage agencies throughout the United States.

Newman is an associate member of the National Conference of State Liquor Administrators, the Brewers Association, the Wine Institute and the National Alcoholic Beverage Control Association. He currently serves on Wine Institute's Public Policy Committee.

Katherine Philippakis

Farella Braun + Martel LLP

899 Adams St., St. Helena 94574

707-967-4000

www.fbm.com

atherine Philippakis is a partner in Farella Braun + Martel’s St. Helena office and chairs the firm’s Wine Industry Group. She is a grape-to-glass wine practitioner who helps her clients buy, sell, develop, and operate California wineries and vineyards.

Philippakis assists cult, luxury, and premium wine brands with their efforts to protect or grow their businesses by acquiring or divesting assets, renegotiating with lenders, developing brands, and increasing debt or equity investments. Philippakis is recognized among The Best Lawyers in America and has been repeatedly named among the “Top Women Lawyers” in California by the legal publication Daily Journal.

Don L. Winkle

Spaulding McCullough & Tansil LLP

90 South E Street, Suite 200, Santa Rosa 95404

707-524-1900

www.smlaw.com

Don Winkle is a business transactional attorney with Spaulding McCullough & Tansil LLP. He has focused his practice to the manufacturing and service sectors and works primarily with brewers, wine and spirt makers, general contractors, and architects.

And, perhaps the COVID-19 pandemic has lent support to this. For now, the reality very well may be that many retailers actually believe they can ship wine legally (or are no longer afraid to ship) and now are doing this in greatly increased numbers.

Nonetheless, the ruling has given DTC advocates much hope that the legal ability of retailers to ship in interstate commerce will be advanced in the years to come if not imminently. The ruling, at the very least, could provide a road map for how to achieve the ability to ship into more states. Additional court challenges or legislative changes will be needed to open the door to further retailer direct-to-consumer shipping.

For now, however, 36 states effectively have barriers that legally prevent out-of-state retailers from shipping wine directly to consumers.

Katherine Philippakis: The principal outcome of the Tennessee Wine case was to uphold the Commerce Clause and say it applies to retailers as well as wineries. There, the court said Total Wine was entitled to a commerce clause defense; in other words, that retailers could object to discriminatory regulations that affected interstate commerce just as wineries are able to so object.

Thus, if a state allows an in-state retailer to ship direct to consumers, then it must allow out-of-state retailers also to ship direct. The case could then have a significant impact in liberalizing direct shipping of wine. But I would expect states to continue to put up legal barriers to this, so it will not be a straight and easy path.

The question remains, will the SCOTUS decision really change anything for California manufacturers of beer, wine, or spirits wishing to enter into other states via DTC or otherwise. —Don Winkle

Don Winkle: In light of recent events, the direct to consumer (DTC) aspect of the beer, wine, and spirits business, from a manufacturers' perspective, has transformed from a growth tool to a potential survival tool. In this context the legal matter of Tennessee Wine and Spirits Retailers Association v. Russell F. Thomas recently adjudicated by the Supreme Court of the United State (SCOTUS) has become a topic of discussion, leaving many in the industry to wonder if the decision in this case will open up states to DTC sales of California products.

First some background. In 2016, the Ketchum family decided to move from Utah to Memphis, Tennessee and purchase a wine store. When the Ketchums applied for a retail liquor license, the Tennessee Wine & Spirits Retailers Association intervened by making sure the Tennessee Alcoholic Beverage Commission (the TennABC) had not forgotten about Tennessee's two-year residency requirement, which precludes a liquor license from being issued unless the applicant has resided in Tennessee for at least two years.

According to the association's website, it was founded "to protect the interests of the independent package store owners of Tennessee."

Leadership at the TennABC had concerns as to the constitutionality of the two-year requirement and was considering approving the Ketchums' application. The association, unwavering in its resolve to protect the interest of its members, was not impressed and decided the best course of action, to prevent this clear miscarriage of justice (tongue fully in cheek), was to sue the TennABC.

A federal district judge ruled that the two-year requirement was unconstitutional and the decision was upheld by the 6th Circuit Court of Appeals. The association was not done, and appealed the decision to the SCOTUS.

I am sure that the Ketchums had no idea what they had started, but this case attracted the attention of a cornucopia of interested parties, including the Cato Institute, the Center for Alcohol Policy, the National Beer Wholesaler Association, and many others (including other states).

All of this over a wine shop in Memphis? Not really.

This case was about a conflict between the 21st Amendment to the Constitution and the Constitution's Commerce Clause. The 21st Amendment repealed Prohibition, a good thing, but gave the states broad authority to regulate alcohol within their borders. The commerce clause refers to provisions of the Constitution that vests Congress with the exclusive power to regulate commerce among states.

This exclusive federal power carries an implicit consequence for states' powers. Primarily, the commerce clause prevents states from erecting business barriers with other states, unless such barriers serve or advance legitimate local purposes.

The vexing issue here was, had Tennessee's two-year residency requirement usurped Congress' exclusive power, under the Commerce Clause, to regulate commerce among states, and if so, was it nevertheless permissible under the broad authority states have, under the 21st Amendment, to regulate alcohol within their borders.

Cut to the chase, in 2019 the SCOTUS ruled, with a clear majority, that the broad authority granted to the states under the 21 Amendment remains subject to the commerce clause, and Tennessee's two-year residency requirement, implemented to protect the interests of the independent package store owners of Tennessee, was not serving or advancing a legitimate local purpose, but was simply protectionism.

The SCOTUS concluded the "predominant effect of the 2-year residency requirement is simply to protect the Association's members from out-of-state competition." As a result, it "violates the Commerce Clause and is not saved by the 21st Amendment." Ouch!

Had this decision been over a non-alcohol commodity, it would not have the potential implications that it has. Under the broad authority afforded to states under the 21st Amendment, legislation favoring wholesalers, regulating alcohol, the sales, marketing, and distribution of alcohol, and even contractual relationships between manufacturers and distributors (i.e. franchise laws) has enjoyed somewhat untouchable status; however, the 7 to 2 decision in this case signals that this is no longer the case, and that any states' protectionist legislation, including that enjoyed by wholesalers, is at risk.

The question remains, will the SCOTUS decision really change anything for California manufacturers of beer, wine, or spirits wishing to enter into other states via DTC or otherwise.

The short answer is no, at least not in the immediate future.

The 21st Amendment remains intact and each state can continue to regulate how California, and other states', products enter such state.

However, this decision does represent a clear chink in the 21st Amendment armor that numerous wholesaler trade associations have taken advantage of since the repeal of Prohibition. Accordingly, if a state regulation provides for resident manufacturers DTC privileges, but does not allow or places unreasonable restrictions on non-resident manufacturers' DTC privileges, the time may be right to challenge such regulation, and the starting point is with Tennessee Wine and Spirits Retailers Association v. Russell F. Thomas.

Regulation of winery events had been a hot topic in Napa and Sonoma counties until the COVID-19-inspired shutdowns. How will the economic losses suffered by wineries influence regulations, and when do you see this issue becoming front and center again?

Hobel: Economic loss suffered by wineries and other licensees during the COVID-19 pandemic has already resulted in pretty wide-spread relaxing of restrictions against licensees and expansion of privileges by the California ABC and TTB, such as allowing deliveries, allowing temporary expansion of licensed areas and allowing donations based on sales.

While the industry would like to see many of these regulations stay in place, that would require working with the legislature and agencies on regulation and rulemaking to make any changes permanent. The agencies right now are focused on really helping licensees through this crisis and I imagine they will turn to these long term questions as things settle down and questions are raised by the industry.

with COVID-19, strong arguments can be made that events should be held outdoors, and that outdoor event spaces should be encouraged. —Philip Kalsched

Kalsched: The shutdown has been especially hard on wineries which operate primarily through on premise sales. Tasting rooms have been closed for several months and are now just beginning to open, subject however, to strict social distancing rules. Additionally, both Napa and Sonoma counties, along with guidance from the ABC, have implemented ad hoc rules on the serving of food as part of the wine tasting experience. Events have all but ceased.

Prior to the shutdown, in addition to limiting the number and size of events wineries could hold, there was a push to force wineries to hold events in indoor spaces for the purpose of limiting noise and disturbance to neighboring properties.

However, with COVID-19, strong arguments can be made that events should be held outdoors, and that outdoor event spaces should be encouraged. This is also true for tastings themselves. These are real issues that the counties will have to address very quickly, as the industry emerges from the mandated hibernation.

Newman: One would hope, for the sake of wineries, that county officials in both counties will be sensitive to the economic losses incurred by wineries. But there has always been a significant degree of tension between the counties and wineries seeking to expand their footprint or the nature of events held at winery premises.

It still may take a bit of time, even post COVID-19 (if we ever get there), to see real change in the county ordinances to benefit wineries.

Generally, tougher economic times result in a loosening of the regulatory environment, and I would expect that to be the case in the current situation also. —Katherine Philippakis

Philippakis: Pre-COVID-19, the regulatory focus in Napa and Sonoma had been on what level of marketing was appropriate for wineries: because both counties view wineries as agricultural uses (rather than commercial or industrial), any marketing activities were viewed through the lens of an ‘accessory agricultural use,’ rather than as a purely commercial activity. This approach obviously resulted in limitations on the scope of marketing and hospitality.

Now, the regulatory focus has been on helping wineries to survive: how to create a safety protocol that will allow a sustainable level of marketing and hospitality activities without endangering employees, visitors, or the public generally. It remains to be seen whether the limited openings that have been allowed will be either economically sufficient for wineries or safe.

Wineries are taking their safety obligations very seriously, but visitors can be difficult to control. And it is unclear whether the limited tastings will be enough for wineries that largely rely on the visitor experience to generate sales.

When we are in a position to resume hospitality activities, I believe the counties will be more liberal in their approaches to hospitality and continue some of the practices that have been put in place due to COVID-19: extended opening hours, tasting activities at various locations on a winery property (including outdoors), a greater diversity of retail experience, and a greater variety of tasting experiences.

Generally, tougher economic times result in a loosening of the regulatory environment, and I would expect that to be the case in the current situation also.

What are you seeing or anticipating will be the legal fallout triggered by the shutdown and economic downturn? Will it trigger more legal disputes between wineries and suppliers or other groups? If not that, what are issues you see will be contentious going forward?

Hobel: We are seeing a lot of disputes or at least termination of relationships (sometimes on a friendly basis) with respect to grape purchase agreements. Wineries are understandably nervous about purchasing larger quantities of grapes given the economy and the uncertainty they are facing with respect to sales and distribution. With many retailers also permanently shutting down, we may likely also see distribution further tighten.

Kalsched: The shutdown has already triggered legal issues and disputes in the industry. Grape contracts are being canceled, with a key element of those cancellations revolving around the issue of whether a force majeure provision in the contract is a sufficient defense to termination.

Similarly, some producers are looking to renegotiate terms of their custom crush and alternating proprietor agreements. Distributor and broker contracts are being revisited regarding sales goals and obligations.

Other supplier contracts (glass, corks, etc.) are also under scrutiny. Event contracts are being cancelled. Claims are being made on business interruption insurance policies.

Finally, disputes between wineries and government agencies will most likely continue to increase, as wineries try to adopt to the new social distancing policies and the demands of their customers and employees for safety, as well as disputes with the ABC regarding on premise sales and consumption.

Newman: For now, players in the wine industry as a whole appear to be trying to work together to get through the health crisis and the economic downturn.

So, for the most part, there doesn’t appear to be any uptick in legal disputes.

But addressing bankruptcies at different levels going forward is likely going to give rise to issues going forward. As far as contentious issues going forward, the primary issue that divides the wine industry (wholesalers v. retailers) will likely continue to be the ability of retailers to engage in direct to consumer shipping across state lines.

Philippakis: We have already seen an uptick in legal problems associated with grape contracts, as wineries are rethinking what level of production is appropriate for the uncertain climate of 2020.

Similarly, wineries with offsite tasting rooms are generally unable to use them at the moment and for the foreseeable future, and so I would expect some wineries to reconsider whether they want to maintain these offsite premises. Since most of these offsite tasting rooms are leased, rather than owned, I would expect to see negotiations over lease termination, similar to what retailers in other industries have experienced.

Finally, some wineries that had plans in the works to expand their administrative and office space onsite are reconsidering that; many wineries have discovered that they can function perfectly well with administrative personnel working from home. So, I would expect that future wineries will have less office space and instead use that square footage for a variety of tasting spaces to host smaller groups.

Describe any recent significant changes coming from the California Bureau of Alcoholic Beverage Control, especially with virtual tastings. Are these regulations that will cause permanent shifts, or just temporary during the shutdown?

Hobel: The California ABC has made many significant changes in response to COVID-19, and there are too many to list.

Among other things, they have allowed off-premise delivery of spirits and cocktails, they have allowed expansion of premises to outdoor or areas shown on the licensed premises for certain licensees, allowing certain licensees to sell alcohol without service of food, allowed deliveries where they had not been previously permitted and even allowed distilled spirits producers to produce hand sanitizer.

They have also allowed producers to participate in virtual tastings with their customers in accordance with certain restrictions, although they have not expanded this to allow joint tastings between suppliers and retailers together.

The industry would of course like to see a lot of these changes stay in place, especially where they can increase sales without raising any public safety concerns. How this plays out will really depend on which issues industry members and industry groups choose to take up with the ABC. Right now, there is no indication that any of the temporary changes will be permanent.

Kalsched: Since shelter in place began, the ABC has issued several notices of regulatory relief. The ABC’s Third Notice of Regulatory Relief was specific to virtual tastings.

First, the ABC suspended enforcement of the rule that free tastings can only be given on a licensed premise, allowing delivery of wine samples to consumers away from the licensed premises, as part of a “virtual tasting,” provided that they are part of a sale of wine or other products.

Second, the ABC suspended enforcement of a rule limiting the size of free tastes of wine to one ounce per taste, thus allowing the amount of wine shipped for tasting as part of a virtual tasting to be larger.

Third, the ABC also now allows for free delivery of wine samples to consumers participating in a “virtual wine tasting.” It is important to note, however, that these rules do not necessarily apply outside of California. Given the uncertainty of how long the pandemic will last and the success of virtual tastings, these exceptions may well be around for the foreseeable future.

Additionally, certain other changes, such as a restaurant’s ability to sell beer, wine, and distilled spirits for off-site consumption, appear to be very popular among consumers and restaurants. Given the financial burden endured by restaurants, this exception may also be around for a while and will be difficult to remove.

Newman: We anticipate that the “notices of regulatory relief” will largely, as ABC has warned, constitute only temporary relief and, without new laws or regulations, not necessarily any permanent shifts.

The relief granted by the ABC with respect to “virtual wine tastings” was remarkable in that ABC suspended enforcement of its regulations to allow for delivery of wine samples to consumers away from the licensed premises provided that they are part of a sale of wine or other products. But again, any hope for this relief to become permanent will take a statutory or regulatory change.

Philippakis: We have not seen any objections coming from the ABC relating to virtual tastings. They have acknowledged wineries’ rights to host outdoor wine tastings without the service of food, which has been a necessity during the COVID-19 crisis as otherwise the limited reopening of wineries would not have been possible.

I would expect this to be a permanent change, as I do not think it likely that any regulatory agency will be mandating indoor tastings in the near future, nor requiring food service.

This pandemic and resulting shutdown is hardly something any client could have adequately prepared for legally. What are one or two smart things you saw some clients have in place which softened the blow from this event?

Hobel: While most licensees are not in the same boat as they were prior to the crisis, clients that already had a very strong direct to consumer business and had the flexibility to pivot to doing online tastings have been able to continue their sales and consumer interactions. Diversifying sales beyond just the wholesale and retail tier was key in this respect.

Kalsched: From a business perspective, having flexibility within the winery’s distribution chain has proven invaluable in dealing with the challenges of the shutdown.

Legally, those wineries having well defined emergency plans were best prepared to address the shutdown regarding its employees, preparing the sales and marketing team to work remotely, as well as preparing for the re-opening process.

Newman: The smartest thing I saw a client to have in place was an effective telework policy. This allowed the client to pivot as seamlessly as possible under the circumstances for its employees working at home.

Philippakis: The wineries that have done the best during this time had robust communications with their customers and well developed mailing lists. These wineries with one-on-one customer relationships were able to continue to sell wine.

Although internet marketing has continued to be important, the personal touch of direct communications by phone has been a lifesaver for many wineries.

Similarly, virtual tastings have provided another form of personal connection with customers that has been invaluable to many wineries. Just as people have Zoom cocktail hour with their friends, they can also have a Zoom tasting with a winery, and generally wineries have found these to be very successful.

For the next time, what are key measures or actions you’d advise clients to take?

Hobel: I am just going to say let’s hope there is no next time!

Kalsched: A thorough review of a winery’s contracts, including force majeure and termination provisions should be conducted. Being flexible and creative in their marketing strategies is also key. Customers want information from their favorite wineries. Virtual tastings, new outdoor tasting options, etc. were well received. It is essential that wineries also stay current in the ongoing changes and updates from the ABC.

Newman: I would say the same about having an effective telework policy. Also, early on, form an effective core management team to oversee coherently the response to the pandemic.

Philippakis: I think all wineries should have well developed safety protocols to protect consumers and employees.

Although there has been a focus on having customers sign liability waivers in order to participate in tastings, those waivers will only be valid if the wineries are carefully following their protocols. The most important thing wineries can do to insulate themselves from liability is to create (and document) a clear set of safety measures and then ensure that employees are adhering to them. A good dose of common sense can be more important than a legal document.

The other important thing that wineries can do is to keep their customer lists up to date, and put time and energy into those relationships and communications. Having loyal customers is the best protection against economic uncertainty.

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