Vineyard & Winery Management Magazine
Cover Story
Federal Labeling Regulations
Winemakers Find Compliance Complicated and Expensive
by Thomas G. Dolan
"The only things you can be sure of are death and taxes," said Benjamin Franklin. For winemakers, he might have added federal regulations regarding labeling. The two issues currently coming into play, with considerable discussion and controversy, have to do with site designation of the origin of the wine and nutritional -information.
The two current variations of ongoing themes are comp-licated. Both are emerging from a lot of history, the first in the wine industry and the second as part of the overall trend for nutritional labeling in the food industry.
The regulations now, as in the past, have the intent of provi-ding the consumer with accurate information, first that the area where the wine or grapes purport to come from actually do, and the second so they know just what ingredients are in the wine.
Winemakers have no problem with the principles of fair dis-closure. The regulations, as set forth in the Federal Register by the Department of the Treasury's Alcohol and Tobacco Tax and Trade Bureau (TTB), are extremely specific.
On one hand, this is all to the good, for it avoids sweeping generalizations that leave unanswered just what in particular needs to be implemented. Yet, on the other hand, as many if not most winemakers contend, the detailed requirements are onerous, sometimes contradictory and often unnecessary.
Although the issues of accurate site designation and nu-trition information are separate, since they have to be encompassed on the same label, they often tend to blend together in winemakers' minds.
So, before looking at these two issues separately, first take a quick look at how these new regulations affect winemakers in terms of the size of their wineries, small, medium, and large.
Winery Size Has An Impact on Labeling Requirement Costs
Gerard Bentryn, owner of the Bainbridge Island Vineyard and Winery, Bainbridge Island, WA, offers a rough estimate that a facility producing up to 10,000 cases a year might be considered boutique and small up to 50,000 cases. Medium would be up to 500,000 cases, and above that, large.
Since Bentryn produces 2000 cases a year, he definitely speaks for the small winery. "The problem with the new regula-tions is that if they told us the nutritional and other ingred-ients to put on the label, that would be one thing, but we're being required to conduct all kinds of tests. If you're testing one bottle out of 500,000, the cost is minimal, but if you have to do one out of 150, it's ridiculous. If you have a winery of any size, you probably have your own lab, and if it s a really small one, you can send it out to an outside lab. But for a typical small winery like ours it's absolutely insane. This rep-resents still another shift from the small producers to the big ones, one more straw on the camel's back."
Bentryn says that putting information such as carbohydrate, protein, and fat on a label will be difficult and take up a lot of space, "and I doubt if anyone will read it. When you think of how much wine an average person drinks in a day, the amount of components is ridiculously low compared to what else the person is eating."
But Bentryn says his biggest issue has to do with the fact that the laws on the books stating there should be no mis-leading terminology on the labels are often not enforced. "You often still don't know if the wine is made in bulk, where it's made, and just what's in a bottle," Bentryn maintains. "So many of the statements now made can be false."
He points out that more important than information about fat or protein content is how much alcohol is in the bottle, but the current labeling allows a variance of a few percentage points in either direction. "Sulfate is already on the labeling, but the problem of the really useful information of how much sulfate is not required. If you have 250 parts of sulfate per million that's one thing, but no one will be bothered by 10 parts per million."
Bentryn, who is close to 70 and has been making wine most of his life, says he has written TTB and the state agency detailing the unfair competitive pressures resulting from this labeling and asking why these new regulations are coming along while the old ones are not being enforced. The response, reports Bentryn, "is they say that the question of enforcing the old laws is not the topic."
Jack Cakebread, chairman and CEO of the Napa Valley-based Cakebread Cellars, describes his winery as medium-sized, and takes a more resigned attitude. "Regulations are regulations, and you have to deal with them," Cakebread says. "I've been living with them for 36 years. They're like income tax. You can't debate it. Those are the laws, you don't have to like them, and I don't mean to imply that I do. To put all the nu-trients on each batch is expensive and inconvenient, but that's what we have to do."
The Woodinville-based Ste. Michelle Wine Estates cer-tainly fits into the category of large, if not giant, winery. Jan Barnes, director of marketing, takes a more benign view of the regulations. "I think the officials are truly trying to help consumers by requiring clarity and honesty on the labels. You can't bring in fruit or juice from anywhere in the world and name it Napa Valley. They do a good job in enforcing cred-ibility and help us focus on our unique location."
Barnes reports that Ste. Michelle has always had its own compliance department so is able to have any label checked out before starting on the expensive process of labeling. She also draws an analogy with the IRS and says, "You can ask three different officials the same question and get three different answers. On occasion the winery has been nailed, for instance, for once using the description of a ‘powerful' style of wine. But, again, that unwanted phrase was removed before the labeling began."
Barnes also acknowledges that "because the regulations are very detailed, they can be overwhelming to the smaller winery." But she adds that, in some cases, outside consultants can help guide the smaller winery through the maze.
To turn to the issue of accurate site designation, a recent wrinkle to this topic, says Peter Chiarella, president of Crane Family Vineyard, Napa, CA, "is about two years ago, as a result of the trade agreement of the U.S. with the European Economic Community, we could no longer use terms like port, which affected us and was an annoyance. But, after I got over the initial annoyance, I could see both sides. I agree people should stick with their own geographic areas and come up with their own creations. I redid our port label to come up with an image of fanciful sweetness. We now call this wine Douceur, a Napa Valley red dessert wine."
Trying To Make Sense of Regions and Where Grapes Are Sourced
The basic site designation rule came about in 1978 resulting from the fact that some wineries announced their wine came from a certain region when only a small percentage of the grapes used came from there. The initial regulations stipulated the amount required.
A patchwork of state laws came into being. Originally the site might be a state or a county, such as Napa County, but then grew to include a viticultural area, a creature of regulations. A grandfather clause which said, in effect, that if you were in operation prior to July 8, 1986, you could keep your current labeling for brands before that date.
The current controversy and new set of regulations have to do with the area of Calistoga in particular and the overall general change in regulations resulting from the Calistoga issue.
Two wineries who identified themselves as Calistoga-based on their labels did not want Calistoga designated as a region. One of them would be eligible under the grandfather clause, the other not. It was other wineries in Calistoga that pushed for a change so Calistoga could be identified as a region in itself.
Wendell Lee, general counsel of the Wine Institute of California, San Francisco, says that his organization, which represents over 1000 wineries and affiliated businesses, is against the changes. "We are against the changes not so much on the merits or demerits, but rather the precipitous manner in which they are being imposed, within a short period of time. The current regulations have been more than adequate."
Voicing opposition
The Napa Valley Vinters has submitted an even stronger opposition to TTB's Notice 78, stating the new regulations would harm the entire industry and jeopardize both brand names and American Viticultural Areas (AVAs). The submission states its relevant key points as follows: This new standard does not benefit the industry as it protects neither brand owners nor the users of AVAs.
Trademark rights may be established without ownership of a COLA for five years nor use of the brand name for a period of three years. The Yellow Tail brand obtained tremendous success and brand equity in its first year, but under this standard, if an AVA petition for "Yellow Tail" was perfected within five years of the brand's first COLA, the brand would have been limited to wine from the new AVA.
A region may establish a reputation for winegrowing long be-fore any producer petitions for AVA recognition for the region. Over ten wine atlases, wine books, and publications making reference to Calistoga as a winegrowing region were in print before Calistoga Cellars was used as a brand name, but under this standard, Calistoga Cellars would be allowed continued use of the brand on wine not from Calistoga despite the area's winegrowing reputation preceding the brand's first use.
Any decision by TTB under this proposed rule could only be appealed directly to a federal court under the very high arbitrary and capricious standard of review, making a judicial appeal by a brand owner or user of an AVA virtually impossible.
Other agencies, such as the U.S. Patent and Trademark Office, allow interested parties to put forth evidence concerning their respective rights in an administrative proceeding with the opportunity for appeal to a court under the lower "substantial evidence standard."
The Napa Valley Vintners also make other points including the fact that the previous TTB rules adequately protected the rights of brand owners and AVAs, as well as the fact that the new regula-tions are contrary to international standards for wine appellations and will negatively impact the industry's ability to source grapes.
Turning to the nutritional labeling issue, Lee points out that that the Wine Institute has conducted several consumer surveys on this topic and it is really not something consumers care about. So it's unnecessary, especially in terms of the cost and trouble involved.
Summing Up the Various Aspects
In fact, this TTB Notice 73 involves a number of aspects and is quite complex. Perhaps the best way to sum them up here is to use the summary of a very long paper written to TTB by Robert P. Koch, president/CEO of the Wine Institute:
1)Serving fact information should be voluntary, not mandatory. If serving fact information is made mandatory, wine regulations should be fiscally responsible, reasonable, minimally intrusive to winery operations, and should be justified by legiti-mate public goals that will provide benefit to wine consumers.
2)The FAA Act does not authorize mandatory alcoholic content labeling for wines under 14% ABV.
3)Reference servicing sizes proposed should be modified to be consistent with today's wine varietals and should allow wines up to 16% ABV to use the 5 oz. reference serving size.
4)Requiring analysis for nutrition values will create widespread production disruptions and will add significantly to operational costs.
5)The use of "typical values" rather than analytical values will provide a very close approximation of actual values, represent huge savings in analytical costs, and logistically would allow winemakers to keep to their current bottling schedules
6)The proposed 3-year lead-time does not eliminate costs.
7)Carbohydrate testing methods define what a carbohydrate is, but testing methods for beer, wine, and spirits are not the same and are inherently discriminatory. Regulations should be flexible to adjust to changes in testing methodology as new tests become available.
8)The Linear Presentation option should be allowed for all wine regardless of container size.
9)The optional "fluid ounces of alcohol per serving" state-ment proposed for the serving fact panel should be disallowed because it is confusing to consumers.