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The Wetzel family has been growing wine grapes in Sonoma County’s Alexander Valley for five decades and making wine at Alexander Valley Vineyards nearly a decade before the appellation was established in 1984.

Though Hank Wetzel has been scaling back his involvement in the business in recent years as the third generation has taken up the reins of operations and ownership, he wanted to increase his influence on issues that affect the business of making wine. In 2014 he became an officer of the board of directors for Wine Institute, moving up through the positions from secretary with each year’s election. Last week, directors of the 1,000-plus-member San Francisco-based advocacy and public policy group elected Wetzel chairman for 2019-2020.

He said that at the top of his agenda during his time at the helm are getting temporary tax cuts for craft beverage producers such as vintners made permanent; encouraging the federal, state and foreign governments to ease trade restrictions on wine; and further expand industry buy-in on sustainability.

The 2017 federal Tax Cuts and Jobs Act contained excise-tax credits for smaller wineries, breweries and distilleries, but those are set to expire by year-end. The Craft Beverage Modernization and Tax Reform Act of 2019 was introduced as S. 362 and H.R. 1175 earlier this year.

“Through the Wine Institute’s lobbying efforts in Washington and help from staff, we’ve lined up a majority of senators and representatives to support us,” Wetzel told the Business Journal. “The biggest question is when there will be an opportunity for a vote, which is concerning because Congress doesn’t seem to be voting on anything right now.”

Current law taxes wine with up to 16% alcohol by volume (ABV) at $1.07 per gallon. Before the 2017 change in credits, wines with 14%-16% ABV were taxed at $1.57 per gallon. Wetzel noted that most red table wines are in the 13.5% to high 14% range.

The credit is $0.535-$1 per gallon on the first 750,000 gallons made. The total value of the full credit is $451,700 per year, based on producing the full 750,000 gallons. One goal of the proposed legislation is to extend the credit to all wineries, regardless of production size.

“For wineries of my size, that excise-tax relief was really major,” Wetzel said. “We were able to save six figures in tax payments, and now we’re putting those savings back into infrastructure.”

His goal is to create a new barrel-aging cave cellar and remodel the winery offices to modernize and expand them.

Wetzel co-founded the winery in 1975 with his parents, Henry Jr. and Maggie Wetzel, drawing from the business plan he developed while earning a fermentation science undergraduate degree from University of California, Davis. From 7,000 cases produced the first year, the business has grown to produce over 180,000 cases annually from over 700 acres of owned vines along the Mayacamas mountains, straddling Highway 128 and the Russian River.

Amid talks of big changes to the estate tax during the Obama administration, Hank and Linda Wetzel started transferring ownership to their four children, who now own most of their parents’ share. Their oldest, Harry IV, is in charge of day-to-day operations and son Robert oversees the several salespeople nationwide. Two others are partners but not involved in the business.

Hank Wetzel’s sister Katie Wetzel Murphy also is a partner and continues to be active as brand ambassador.

Another goal of the Wine Institute that fits with where Hank Wetzel sees as the future for Alexander Valley Vineyards is lowering trade barriers.

“We’re going after export business,” he said about the winery’s plans, which could include a full-time export manager in coming years. “We’ve never really pursued it before. We may have not picked a good time to do it, but I do not think this will last. If Trump wants to get reelected, he will need to get these retaliatory tariffs fixed.”

With tariffs and other taxes, Alexander Valley Vineyards wine on Chinese store shelves is priced at about double its U.S. suggested retail price. For over a decade, the Wine Institute has undertaken international outings by U.S. vintners to build interest in foreign markets. On such a trip in 2003, Wetzel met a Shanghai importer, and the same importer is facing challenges trying to renegotiate prices for a new Costco Wholesale store set to open in the city this summer after new tariffs sent the price on four of the vintner’s wines up another 15%.

Wetzel is considering other big export markets for the family’s wine, where levels of duties are “workable.” Japan is a possibility, as is the United Kingdom. However, the latter market is challenging, as Alexander Valley Vineyards wines have been seen as too expensive. What is inspiring him to start working such markets anyway is the “sommelier phenomenon.” Greater education and certification of taste and purchasing leaders in foreign markets could increase pull-through for U.S. fine wines to middle- and upper-class consumers abroad, he said.

But other goals Wetzel is eyeing for lowered trade barriers are between U.S. states, as about 20 states have proposed excise-tax increases on wine in the past 12 months. Wine Institute’s policy chief, Steve Gross, has been working with legislatures on model direct-to-consumer shipping laws that allow out-of-state vintners to leverage modern software to collect and remit taxes back to the destination state authorities.

On the home front, Alexander Valley Vineyards has been trimming operating expenses in the winery and vineyard. About 65% of its fruit is picked by machine harvesters run by the 16-person year-round field team. More seasonal help is being leveraged to make the staff time go further, and women are increasingly part of that supplemental help, especially in trimming sucker vines in early spring and summer.

Jeff Quackenbush covers wine, construction and real estate. Contact him at jquackenbush@busjrnl.com or 707-521-4256.