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How Reciprocity Laws Are Benefiting Craft Producers

Laws in New York and New Mexico are giving small producers a new way to boost their bottom lines

Vivac
Patrons visiting the tasting room in Vivac. Photo by Gabriella Marks.

A few years after New Mexico’s reciprocity law was enacted, winegrowers and small brewers have enthusiastically embraced the legislation. Today, at more than 50 winery tasting rooms and brewery taprooms, producers are selling each other’s wares. So you can drink a frothy brew in a winery tasting room, or a glass of wine in a taproom. This liberalization of the sale of alcohol is giving small producers a leg up, with increased sales and revenue streams that extend beyond the tasting room.

New York led the charge for this type of legislation in 2012 with its farm producer license, which allows farm-based producers of all alcoholic beverages to sell beer, wine, cider, and spirits with a single license. The move was championed by New York governor Andrew Cuomo, and the economic impact for craft beverage producers in New York has been substantial, with more than 500 new craft businesses having opened since 2012. “New York has great agriculture,” says Jennifer Smith, who represents the New York Cider Association and the New York State Distillers Guild. “There’s incredible growth in job creation and crop utilization as a result of this legislation. This ties together expressions of place, jobs, and good old-fashioned economic gains.”

New Mexico’s reciprocity law, passed in 2015, allows all New Mexico producers of beer, as well as wine and cider producers who use at least 50 percent New Mexico–grown ingredients, may self-distribute and sell any other New Mexico–made beers, wines, and ciders from their tasting rooms. Chris Goblet, the executive director of New Mexico Wines, who chaired the economic development committee responsible for developing the legislation, says, “I just thought, Wouldn’t it be easy if a local manufacturer could sell to another local manufacturer? We could have true reciprocity.”

New Mexico’s legislation excludes spirits producers and their products, however. “We said no, we’re not going to include distilled spirits because then we’re full-fledged bars,” says Goblet, “And the liquor-license holders said no, too.”

For wineries, breweries, and cideries, the law also opens new revenue streams, allowing craft producers to host events and use their spaces as general beverage markets. For example, no additional permits are required to host weddings, concerts, or charity events in tasting rooms or vineyard spaces.

While the liberalization of producer laws appears to be spreading, New York, Oregon, and New Mexico are the exception in a national landscape dominated by red tape. Many states do provide a pathway for small producers to sell other beverages, but they typically require additional licenses to do so—licenses which are often cost-prohibitive for small manufacturers. For example, California breweries can sell wine, but only if they’re also a “bona fide eating place,” which requires an on-site commercial kitchen.

Ryan Malkin of Malkin Law in Miami Beach, Florida, who specializes in beverage law and provides counsel for producers guilds, including the American Craft Spirits Association, and who is also a contributor to SevenFifty Daily, believes the expansion of producers’ licenses is likely to grow. “The state guilds in some cases have to push for these things,” he says. “A lot of the regulators are not opposed to these rules, but it’s a question of whether or not anyone is pushing to get them passed.”

Jasper Riddle, the winemaker at Noisy Water Winery in Ruidoso, New Mexico, has taken full advantage of the reciprocity law—he operates a beer-focused taproom in addition to two tasting rooms. “I think that everybody needs to look at this, as craft alcohol collectively really benefits from this,” he says. “The more options you have as a small producer, the better. The more we can expose consumers to craft products, the better.”

The effects of the New Mexico law have been far-reaching across the state’s craft beverage industry. “It had always been more of an adversarial relationship [between] wineries and breweries,” says Jesse Padberg, the winemaker and a co-owner of Vivac Winery in Dixon, New Mexico. “But since passing the law, we’re totally able to work together, and we’re really doing much better now. I preach reciprocity to everyone.”

The law does more than create goodwill among producers and provide an extra level of hospitality to guests in both New York and New Mexico. Sales figures back up the reciprocity law as a financial win for producers. “In every group, there’s someone who wants to drink beer,” Padberg says, noting that his tasting room is increasing its offerings from 4 to 15 rotating taps this year. “Maybe I gained 2 percent in sales because of beer,” he says, adding that Vivac gained an additional 2 to 5 percent in sales of wine from other estates.

Left: Jasper Riddle. Right: Jesse Padberg of Vivac.

In addition, Vivac’s weekly happy hour crowds have doubled, which Padberg attributes to the expanded offerings. He estimates also that Vivac sells approximately 240 cases of wine to breweries in the state annually, which accounts for nearly 20 percent of the winery’s 1,200-case production. Vivac self-distributes its wares to local breweries, and Padberg doesn’t cite any logistical problems with delivery but notes the wines are only available locally.

“It’s hard to think of anyone who isn’t benefiting,” says New Mexico Wines’ Goblet, who estimates that more than 90 percent of the state’s wineries take advantage of the sales opportunities granted by the law.

Smith, of the New York Cider Association and the Distillers Guild, says that the reciprocity law has been similarly embraced in New York. “Since the first craft beverage conference in 2012, the farm-producer bill has been huge in creating jobs and making New York an agritourism destination,” she notes. “I don’t know of any producer operating a tasting room who doesn’t have at least a few complementary products from other producers … It creates a cohesive tasting room experience.”

The law may be seen as disadvantageous to local watering holes, or to distributors, but that doesn’t seem to have become a problem so far. Noisy Water Winery works with Republic National Distributing Company (RNDC) nationally and in state and reports no ill effects. “When I came to their portfolio,” Riddle says, “they said, ‘We’re taking you to every taproom in New Mexico, and we love it because we’ve never had a reason to walk in their doors before.’”

Goblet agrees, noting that many producers are using distributors for fulfillment within the state rather than self-distributing. “Distributors went for it,” he says. “They still have a net gain from this because they have more establishments to walk into.”

RNDC and the state distributors’ lobbyist in New Mexico, John Thorsen, declined to comment.

Says Malkin, “It’s often distributors who get concerned that they’re going to lose out on sales. But then you look at the example of New York, where it’s actually perhaps growing sales for the product.”

Any existing opposition in New Mexico has generally focused on safety concerns. Ponderosa Valley Vineyards in Ponderosa, New Mexico, is one winery that decided not to offer other producers’ products. “People can picnic and play, but I find it safer to not have beer,” says Mary Street, the proprietor. “I just don’t want to turn into a bar. I want to be a winery tasting room.”

Safety reasons are often cited as a reason for having excluded spirits producers from New Mexico’s legislation, but liquor license holders, who pay upwards of $350,000 for their licenses, were themselves opposed to inclusion in the reciprocity law. Goblet believes that the state’s reluctance to overhaul its complex alcohol legislation is also keeping spirits on the sidelines. “That’s the downside, that hard liquor hasn’t been included,” he says, “and [producers have] lobbied to be included. But that would involve completely redoing our liquor laws.”

While reciprocity laws have yet to expand across most states, Riddle believes that the model is a true win-win. “Any sip of craft alcohol sold is a win for all the little guys,” he says, “and we all need to keep that in mind as we grow.”

Laura Burgess is a Certified Sommelier who left New York City for California’s Sierra Nevada, where she lives at a vineyard, alternately writing and making wine. A drinks-pairing expert and amateur scientist, Burgess has written for VinePair.com, Rachael Ray Every Day, Christie’s International Real Estate Magazine, and The Kitchn, among other publications.

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