State uncorks effort to stop wine seller

A raid by alcohol enforcement officials on a Minneapolis liquor store is tied to a dispute with a Massachusetts firm over wine it sells at tasting parties.

They’ve been described as Minnesota’s Tupperware parties for wine tasters.
For the past two years, a consultant with the Traveling Vineyard, a Massachusetts company operating in nearly 30 states, would come to your home. Along with friends, you’d sample a pinot or chardonnay, and then fill out a form if you wanted to buy some.

On Tuesday, state authorities raided a landmark Minneapolis liquor store, Surdyk’s, seizing about 40 cases of wine in an effort to shut down the Traveling Vineyard. Surdyk’s ships prepackaged and prepaid orders from the company to its customers.

The state alcohol enforcement division says the Traveling Vineyard can’t legally sell wine without a license.

But an attorney for the company said its wine is bought through a licensed importer, a licensed wholesaler and a licensed retail outlet, and that the state needs to examine whether its liquor regulations are lagging behind in a changing Internet marketplace.

Marlene Kjelsberg, a supervisor for the state’s alcohol and gambling enforcement division, said officials repeatedly warned the Traveling Vineyard to cease the operation. Meanwhile, she estimated that the company has made more than $1 million, and she said that it has paid state taxes on the wine.

Texas, Washington and Massachusetts will be taking some form of regulatory action against Geerlings & Wade, which owns the Traveling Vineyard, to change or stop how it does business in those states because it is violating licensing laws, according to a search warrant filed Tuesday.

Minnesota would be the first state to attempt to present a criminal case against the company. Misdemeanor and gross misdemeanor charges are expected to be filed by the Minneapolis city attorney’s office today, Kjelsberg said.

„We aren’t aware of any other business in the state that operates like the Traveling Vineyard,“ she said. „They are taking sales away from legitimate retailers.“

On its website, Geerlings & Wade is described as a „direct-to-consumer winery“ and „America’s leading direct marketer of fine wine and wine accessories.“ The company said it provides home and office delivery and has more than 100,000 regular customers and members.

A taste and some tips

One of those customers was Daniel Igoe of Eden Prairie, who attended a wine-tasting party in the winter with about a dozen people. The consultant immediately told them how the wine could be bought at the end of the party and that they would be ordering it through a company, he said. Partygoers also learned how to properly swirl and sniff the wine, he said, laughing.

„I was wondering how they could sell without a license, but I didn’t feel the company was doing anything wrong,“ Igoe said, noting he’d probably still prefer beer. „In theory, we will now go to the liquor store and buy more wine because of the party.“

Attorney Gary Hansen, who is representing the Traveling Vineyard, said the company has been running a model wine-tasting operation for years. When the company was contacted by state officials two years ago, they focused on whether there was a sale of wine taking place at the taste sites, he said.

The company didn’t hear from the state for another year, so they believed the issue had been satisfied, he said. The Traveling Vineyard was again contacted in the fall, when the company provided sales records and brought some of their 130 tasting consultants to meet officials, he said.

The company understands the need to follow the state’s three-tier regulation system requiring that alcohol sales go through licensed importers, wholesalers and retailers, Hansen said. The Traveling Vineyard isn’t „some fly-by-night“ business, he said, adding he’s disappointed that the state is now taking the position that the company isn’t following state law.

But state officials told the company two years ago when they initially discussed plans to sell and promote wine that is was illegal, Kjelsberg said. Using Surdyk’s as the Traveling Vineyard’s licensed retailer was just an illusion that they were complying with state law because Surdyk’s wasn’t receiving orders directly from wine-tasting customers and had no control over prices, she said.

Surdyk’s did get some compensation from the Traveling Vineyard, but Kjelsberg wasn’t aware whether the retailer knew the company was doing anything illegal.

Surdyk’s isn’t facing any charges at this point, she said. In a statement, Surdyk’s said it is cooperating with the state’s investigation.

A changing market?

Hansen said he wasn’t surprised that several liquor businesses complained to the state about the Traveling Vineyard because this is a new way to sell liquor. He cited a recent U.S. Supreme Court decision that struck down restrictions on wine shipments in about half of the 50 states.

The court ruled that states could not allow in-state wineries to ship directly to consumers while barring out-of-state wineries from doing so. That decision didn’t affect Minnesota, because the state bans all wineries — in-state and out — from taking orders on the Web.

„There is no doubt the Traveling Vineyard model is not a model of the past. A competitor could initially react as if we must be doing something wrong,“ Hansen said. „In other states, we’ve preceded well with regulators.“

The charges that the city of Minneapolis expects to file against the company are selling alcohol without a license and setting retail prices. Fines might include payment of an off-site license, which can range between $200 to $1,000, Kjelsberg said.

„I hope this will be the end of the company, but that remains to be seen,“ she said.

Source: startribune.com