Our region’s gently rolling topography is spotted with endless rows of grape trellises winding toward the turquoise lakeshore. Each year, more of our agricultural landscape continues to be converted to grape production.
Why, you ask? You guessed it. Wine. Pure Michigan wine. It takes a lot of grapes to produce the roughly three million gallons of wine bottled here in Michigan. But, just how do all those grapes make their way into bottles of wine and who controls that?
The Michigan Liquor Control Commission (MLCC), in conjunction with the Alcohol and Tobacco Tax and Trade Bureau (TTB), is tasked with regulating the manufacture, import, possession, transportation and sale of liquor in Michigan. Michigan maintains a three-tier system of alcohol distribution consisting of manufacturers, retailers and distributors. Almost anyone in the business of manufacturing, importing, possession, transporting or selling alcoholic beverages in the state of Michigan must be licensed through the MLCC and the TTB. So where do our local vineyards, wineries and wine shops fit in?
Got Grapes?
Vineyards are where it all begins. The quality of wine produced depends heavily on the quality of grapes used in that wine. So, does the MLCC really regulate how grapes are grown? The answer is no, as long as the grape grower’s role is strictly limited to growing and selling grapes in their natural state. Since grapes on the vine have not yet been fermented, they are not considered “alcohol,” which keeps grape growers out of the purview of the MLCC and the TTB. (They are subject to other rules and regulations imposed by the Michigan Department of Agricultural and Rural Development.) Additionally, since wine producers want the highest quality product and demand certain grape varietals, agreements between the grape grower and the winery are put in place to lay out specific terms not only for the purchase of grapes, but also expectations for strict farm management practices.
So, You Want to be a Winemaker
Maybe being the mastermind behind crafting world-class wine is your calling. Becoming involved in the actual production of wine triggers licensing and regulation of your activities by both the MLCC and the TTB – unless it is only for your own consumption. Most winemakers in Michigan will produce less than 50,000 gallons of wine annually, and therefore fall into the small wine maker category. Obtaining a small wine maker license from the MLCC requires – among other things – compliance with local zoning, approval from the local governmental entity, fingerprinting and background checks, entity documentation, inspection of financial records and the licensed premises, as well as payment of applicable fees. A winemaker is also required to be licensed at the federal level with the TTB, including registration and approval of all wine labels. While a licensed winemaker will have authority to self-distribute to retailers or sell to licensed wholesalers, a separate permit is required for an on-premises tasting room or direct wine sales to consumers.
Have Wine, Will Travel
So vineyards are not your thing, and you do not want to spend hours checking pH and sugar levels during fermentation. Instead, you decide the sale and distribution of wine to licensed retailers (i.e., your favorite local wine shop) is what you’d like to do. Well, just because you are not producing the wine doesn’t mean you can just sell the wine out of the back of your van. The MLCC and the TTB require distributors of wine to be licensed. A wholesale license allows the distributor to purchase wine from a licensed manufacturer for the purpose of reselling that wine to a licensed retailer. Among other requirements, a wholesale licensee is required to be a Michigan resident for at least one year prior; they cannot sell directly to the consumer; all vehicles used to transport the wine require MLCC vehicle decals; and all individuals engaged in the sale, promotion or delivery of wine are required to have a salesperson license. Additionally, wholesalers must enter into written distribution agreements with the winemakers granting the wholesaler a certain sales territory where they can sell that specific brand of wine.
Just Sell It
If relying on Mother Nature to grow grapes stresses you out, you have no room for stainless steel fermenting tanks, and you do not want to drive around selling wine; perhaps selling wine directly to the consumer is right up your alley. So, can you just start selling wine out of your storefront? No. The MLCC regulates the retail sale of wine to the consumer, and requires a retailer to be properly licensed. Convenience stores, grocery giants and specialty markets alike, all must hold certain on-premises or off-premises retail licenses in order to purchase wine from manufacturers or wholesalers for resale to the consumer. The process for obtaining a retail license from the MLCC is similar to that of licenses in the other tiers; however, choosing the appropriate type of retail license depends on the activities conducted at the retail location.
From the vine, to fermentation, to bottling and careful placement on our favorite store’s shelves, each glass of Michigan wine should certainly be celebrated. The numerous regulations, laws and administrative rules of the MLCC and the TTB touch almost every aspect of winemaking and being able to navigate them is critical in obtaining and maintaining proper licensing. So, if you happen to run into one of our many local and talented grape growers, winemakers, distributors or retailers, please shake their hand. Thank them for continuing their dedication to this region’s economic stability, preservation of our region’s rich agricultural history, and of course for their contribution to the creation of some of the most delicious wines produced worldwide.
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Cortney Danbrook advises business clients on liquor licensing and regulatory compliance and provides specialized counsel to individuals, families and businesses in the areas of estate planning and administration. She can be reached at (231) 714-0163 or cdanbrook@darlawyers.com.
This article was featured in the June 2019 issue of the Traverse City Business News.