Last week, a bill that could have brought relief to California’s struggling grape growers was suddenly pulled by its authors ahead of its state Senate hearing.

California Assembly Bill 1585, marketed by its proponents, including grower and winery associations in a dozen California regions, as a “truth in labeling” bill, would have required that any wine produced, bottled or sold in California and labeled as “American” or from the “United States” be made from 100% U.S.-grown grapes. That standard already applies to wine labeled “California,” but American-labeled wines – typically low-cost bottlings produced en masse by conglomerates – can legally contain up to 25% imported wine.

The bill would have created more transparency for wine consumers, but its supporters were also keen on another effect: It would discourage the U.S. wine industry’s largest corporations from purchasing wine abroad, in theory bringing business back to desperate California grape growers.

Many domestic growers believe that cheap imported wine is contributing to declining demand for their grapes. In 2022, bulk wine from Australia and Chile was half the cost of that from California. What’s more, U.S. Customs and Border Protection’s trade incentive duty drawback program enables wineries to get up to a 99% refund on duties, taxes and fees paid on imported wine if they export an equivalent amount of domestic wine – making it virtually tax-free. Unsurprisingly, wine conglomerates are choosing this cost-cutting route; many have shut down production facilities and tasting rooms, downsized their portfolio and announced mass layoffs.

“Last year, when growers left over 400,000 tons of grapes unpicked and removed over 40,000 acres of vines, we saw bulk imports go up 19% to 45 million gallons,” said Natalie Collins, president of the California Association of Winegrape Growers, which co-sponsored the bill.

In May, the bill had cleared the California Assembly without a single dissenting vote, 67-0. “There was nothing but praise and support for the bill” ahead of the Senate hearing, the bill’s co-author, Assembly Member Rhodesia Ransom, D-Tracy, told the Chronicle.

But in the days leading up to vote, senators started changing their minds, according to Ransom, and it became clear the bill wouldn’t have the votes to pass, she said. She and her co-author, Assembly Member Damon Connolly, D-San Rafael, decided to pull it.

So what happened?

“There was a lot of politics at play,” Collins said.

AB 1585 had a very powerful opponent: the Wine Institute, a public policy and regulatory advocacy association that represents about 1,000 wineries and affiliated businesses and usually works alongside the CAWG. Its main argument was that if the bill passed and companies continued to import wine – forgoing the “American” or “United States” label – they would also, per federal law, have to forfeit listing the wine varietal or vintage. This means the wine label would simply list the producer’s name and a generic descriptor like “red blend.”

“The bill had an unintended consequence of leaving consumers with less information than they had before – information that’s essential to customers,” said Tim Schmelzer, the Wine Institute’s vice president of California state relations. “In our opinion, (the varietal and vintage are) about a thousand times more important to consumers than if the wine is of an American wine appellation.”

The Wine Institute also argued that wineries need the flexibility to source overseas to fill gaps created by inconsistent or weather-impacted domestic harvests and to adapt to changing consumer trends. The organization pointed to other wine label designations, such as county, state and American Viticultural Areas (federally-recognized wine regions known as AVAs), which don’t require 100% sourcing. Up to 15% of grapes in a Napa Valley-labeled wine, for example, can come from outside of Napa Valley.

Schmelzer said the Wine Institute “cares super deeply about growers” and understands “they are hurting,” but he disagreed with the idea that wine imports are a significant contributor to the grape glut. “We’re making less wine because demand is down and that needs to change,” he said. “We start making more wine, those problems go away real fast.”

The first sign that AB 1585 was in trouble came June 19, just four days before the Senate hearing, when committee chair Sen. Susan Rubio, D-Baldwin Park, released a 14-page bill summary to Senate members. The summary, which the Chronicle reviewed, argued that the bill “could displace workers, hurt bottling operations and expose the state to significant constitutional risk.”

Collins said she felt the document read “like an opposition summary,” and that it wasn’t until after it was distributed that many senators who previously said they would vote yes “started to change their position.”

Stuart Spencer, executive director of the Lodi Winegrape Commission, described the summary as a “biased, one-sided report that mirrored the Wine Institute’s talking points.”

State lobbying disclosure records reviewed by the Chronicle show that wine conglomerates Gallo, the Wine Group, Delicato and Constellation, as well as wholesalers and distributors Wine & Spirits Wholesalers of California, Southern Glazer’s, and Breakthru Beverage, hired lobbyists for work related to AB 1585.

Schmelzer said that before the bill even reached the Assembly, he started meeting with the Senate committee “member by member” to “try to educate them on why this was important to the winemakers.”

The records don’t state which position the companies took on the bill, though in Rubio’s summary, the Wine Group, the second-largest U.S. wine producer, Wine & Spirits Wholesalers and the Wine Institute were listed as opponents. According to a leading industry analyst, the Gomberg Fredrikson Report, the Wine Group, Delicato, Gallo and Constellation are among the California companies importing the largest volumes of bulk wine.

Campaign donation records reveal that just three days after the bill cleared the Assembly, Gallo gave the maximum political donation of $5,900 to Rubio. Gallo did not respond to the Chronicle’s request for comment.

“It’s aggravating that legislation that had such broad and deep wine industry support got killed by corporate interests,” Spencer said.

Assembly Member Ransom criticized larger wine companies for working to kill the bill instead of compromising or offering “some amendments” to it. “They were really stuck on how they’ve always done things instead of looking for creative ways to continue to do what they do,” she said.

The Wine Institute and the bill’s other opponents didn’t offer any amendments because they “couldn’t land on an idea that was going to be workable,” Schmelzer said.

“We were so close,” Ransom said, but she, Connolly and the bill’s sponsors “are all committed to continuing this next year.”

Subscribe

There’s more to San Francisco with the Chronicle. Subscribe today for just 25¢.

This article originally published at How a new law aimed at easing California wine crisis was smothered at the 11th hour.