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First, I want to thank all of you for inviting me here to share my thoughts today.
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The Governor’s budget proposal is a very complex issue. It will effect just about every
person in the state in one way or another, and many complex interrelationships make it
very difficult to analyze and decide what is truly the best course of action. Here’s just
some groups that are affected by his proposal:
• NYS wineries and grape growers
• liquor stores
• big box retailers like Costco and Wal-mart
• supermarkets
• drug stores
• parents of underage children
• landlords
• trucking companies
• law enforcement
• and the State taxpayers in so many ways like:
• unknown changes in tax revenues from excise, income and sales taxes
• and the unknown effects on budget costs for unemployment, public health
and so on.
Most people find themselves in more than one group, and what’s best for them in one
group is not necessarily best for another.

I will focus my talk on just two individuals: Me and You. I would like to start by saying
that we are more alike than not. We are both small business owners in the classic
sense. We work 80 hours and 7 days a week without vacations or sick days, and we do
it because we would rather do that then work for “the man” and lose our soul and sanity
in the process.

Every day we work with our families by our side to build a future for them and to
provide our communities with jobs and tax revenues. We take big risks for relatively
little rewards but we wouldn’t have it any other way. If you didn’t agree with me on that
then I don’t think you would even be in this room today.

I want you to understand where I am coming from because I need your help. If I am
unsuccessful in persuading you to stop the Governor’s plan I absolutely believe that my
business, and yours too, is in grave danger.
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First, let’s talk about me. I won’t re-hash all the arguments; you’ve heard them all
before. During the Q&A session later I will be happy to go into details if you want
clarification, and I plan to stay after the session If anyone wants to talk.

Instead I would like to focus on two issues:

1. (first) My store’s survivability
2. (second) How my survivability affects you.
It’s clear to me that if the governor’s plan becomes reality I will lose a huge chunk of my
wine business. Exactly how much is the subject of great debate, but I project it will be
at least 50% of my wine sales. Here’s why:
1. (first) The pie is only so big. The wine business is driven by what’s called “core”
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customers. Although they are only 17.4% of the U.S. adult population they
consume 92% of all table wine. This group is not going buy more wine and
therefore any additional wine sales due to more outlets will be very small.
2. (second) The new outlets will concentrate on the same brands that define my
core wine business. Brands like Yellow Tail, Franzia, and Folonari are the
brands they will sell. Customers are not going to make an additional trip to my
store to buy these popular brands, or any of the many NYS wines that I stock.

That 50% wine sales drop will eliminate 35% of my gross profit and subtract 8% from
my bottom line. As business owners, I think you can clearly understand what that would
mean for your business. You could not survive that - and neither will I.

To address this sales drop, the Governor now proposes to expand the items I can sell to
include a few food items. But there’s a catch. Selling items like cheese and mixers
requires investment in special, refrigerated equipment and more space to display it.
• Where is the money supposed to come from to pay for this unplanned store
renovation?
• I haven’t heard the Governor talk about renovation grants or low interest
loans to help me out.
• Have you tried getting a small business loan lately?
• Where am I supposed to store the empty returnable bottles?
• Shoplifting is a real problem in my store. Do I really want school kids walking
through my store to buy a bag of chips and a soda?

The way I see it, the Governor’s plan has me bleeding badly after just a few months,
and before the year is out I will be bankrupt. All my employees and myself will be
unemployed. Now, other than the fact that you are compassionate people, why should
you care if I go under?
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Let’s talk about you, now. The New York Wine & Grape Foundation reported that most
of your sales come from the tasting room. Next, from liquor stores with direct shipments
a distant third. With me gone, you will lose an important, established customer, and will
have to establish new relationships with the big box stores. You know that won’t be
easy, and if you don’t get on their shelves you will be shut-out of the retail wine market
because they will own almost all of the core wine business. Sure, you may still be
stocked by the few liquor stores that survive, but you will have a much reduced market
presence. This will make it harder to grow your business, not easier.

That’s because you would then be faced with the daunting task of selling directly to the
thousands of new, independent outlets that will be left. The potential sales volume in
these stores is so tiny that even wholesalers won’t call on them. If they sell any wine at
all it will probably come from a big box store and will be limited to the top 25 national
SKU’s. Can you imagine your cost of selling and servicing these low volume stores?

Now, some voices predict that this won’t happen, but you’re all intelligent business
owners. What do you think is going to happen? Are you willing to roll the dice to see if
what you hope happens actually plays out? And if it doesn’t, you won’t be able to go
back to the good old days. Let me ask you two related questions:
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• (1) Are you absolutely sure that you will be a “winner” after this change?
• (2) Isn’t there a real chance that you will be much worse off after this change?

So, where does all this leave you? You still need to sell more grapes and more wine
but I’ve demonstrated that the Governor’s plan won’t increase overall wine sales very
much, or your sales in particular. Meanwhile, the risk you take by accepting his proposal
is real and irreversible.

But now some good news: You can still increase both your wine sales and your tourist
trade without tearing down the current, working system and replacing it with this great
unknown. Please, focus on this idea: Any plan you support should not just hint at a
chance for greater wine sales overall, and hope that your sales will just float up with the
rising tide. You should only support a plan that specifically delivers greater wine sales
for you, not your competitors. The Governor’s plan can’t do that.

But, there is a plan that can. I don’t have a lot of time detail it up here, but I am available
to talk to anyone interested. I developed this plan over four years ago working closely
with Ron Reals, a man that many of you know and trust. It’s based on concepts that he
used with his Finger Lakes Wine Company but expands on them dramatically. Using a
modern, effective and integrated Point-of-Sale technology coupled with an efficient
marketing effort, this plan is capable of effectively increasing the sales of your grapes
and your wines alone. Let me repeat that: all the benefits would go to you, not out-of-
state competitors.

This can be done within existing laws and regulations, but with a little tweaking from the
Legislature it can be made even more effective. And the best part is that you reap all
this growth and financial benefit without the burden of doing all the work. You can give
up the headaches of managing direct sales, deliveries, web site maintenance and all
the other tasks that go with the Governor’s plan.

• This is a better, less risky option than the dice-roll the big box stores are offering
you.
• And, you won’t have to grow your business using the same old paradigm
anymore.

With my plan you can get back to doing what you love most:
growing grapes and making world class wines.

So, let me sum up: New York’s wine distribution system is sound. It balances
convenience with control and allows you full market access. It delivers broad consumer
choice (as measured by the number of labels available) and delivers one of the lowest
alcohol related traffic fatality statistics in the nation. Rather than tear it down to replace
it with a great unknown I want you to consider building on top of it, instead. Building it in
a way that benefits New York agriculture rather than exports our jobs and profits
thousands of miles away.

Thank you for listening.