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(Al Hartmann | The Salt Lake Tribune) Jay Yahne checks the progress of a batch of wine fermenting in a 70 gallon flex tank at the Hive Winery in Layton. He makes 30 kinds of wine. The Hive Winery is one of six Utah wineries which are facing hurdles put up by state lawmakers that make it difficult for them to do business.
Frustrations bottle up at Utah wineries
Alcohol » Utah winemakers say high taxes, restrictive laws are holding back their award-winning products.
First Published Apr 12 2013 10:05 am • Last Updated Apr 15 2013 07:41 am

Layton • Wine testers for the state rejected stocking a Utah-made summer honey wine in liquor stores, saying the mead made by a Layton winery had a "peculiar iodine and menthol character." Besides, state regulators noted, Utah retail outlets already were selling a similar variety from a California winery whose products are carried nationwide.

Yet a few weeks later, that same Utah wine made by The Hive Winery won first place in the 2013 Mazer Cup International in Colorado, one of the world’s largest mead-only competitions.

At a glance

Utah wineries production*

Castle Creek Winery » Moab, 12,000 gallons

Kiler Grove Winegrowers » South Salt Lake, 6,000 gallons

The Hive Winery » Layton, 5,000 gallons

Iron Gate Winery » Cedar City, 2,600 gallons

Spanish Valley Vineyards » Moab, 2,100 gallons

Chanela Farms » St. George, 2,000 gallons

Slide Ridge Winery » Mendon, 1,000 gallons

Ruth Lewandowski Wines » South Salt Lake, 800 gallons (2012)

Planet Party » West Valley City, all products sold out of state

La Caille Restaurant » Sandy, new ownership, not in production yet

Summum » Salt Lake City, wine produced for religious services

*Estimated 2011 harvest

Source: Utah Department of Alcoholic Beverage Control

Utah wine tastings

Layton » The Hive Winery, 1:30 p.m. to 6:30 p.m., Monday-Saturday, 1220 West Jack D Drive (450 North)

South Salt Lake » Kiler Grove Wine Growers, 11 a.m. to 5:30 p.m. Wednesday; noon to 7 p.m. Thursday-Saturday, 53 W. Truman Ave. (2330 South)

South Salt Lake » Ruth Lewandowski Wines, tasting begins April 20 by appointment. Call 801-230-7331; 3340 S. 300 West

Moab » Castle Creek Winery, tasting noon to 6:30 p.m., Monday-Sunday, Milepost 14, Hwy 128

Moab » Spanish Valley Vineyards, noon to 7 p.m., Monday-Saturday, off Highway 191, corner of Stocks Drive, Zimmerman Lane

Cedar City » Iron Gate Winery, 11:30 a.m. to midnight, Monday-Saturday, 100 N. 200 West

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The rejection of a local product is among the many hurdles Utah winemakers say they face in trying to doing business in a state that, at best, is ambivalent about their industry and, at worst, downright hostile toward it. From high taxes and fees to hard-to-navigate laws and almost no regulatory advantage for local producers, there’s nothing easy about turning water and grapes into wine in Utah.

In neighboring Colorado, that state’s emergent wine industry is thriving by comparison.

To be sure, the industry’s stakes and impact are on a smaller scale in Utah — and much smaller even, than the state’s 18 breweries. Unita Brewing Co., Utah’s largest, produces 1.2 million gallons of beer each year, compared with an estimated 31,500 gallons from the all eight wine producers combined. Unita’s annual revenue is $15 million, compared with $500,000 brought in by Castle Creek Winery, the state’s oldest and largest producer.

Size aside, winemakers say their concerns are no less legitimate, and producers often first point to liquor laws enacted by the Legislature, an overwhelming majority of whose members belong to the The Church of Jesus Christ of Latter-day Saints, which teaches abstinence from alcohol.

At The Hive’s 150-square-foot tasting room, law forbids imbibers with a glass of vino from strolling across an imagery line to where bottles of wine are offered for sale. Children are only allowed to be in the area of the store where the wine is sold, as long as they do not touch the wine bottles. And because The Hive doesn’t have a restaurant license, the winery must close on holidays and Sundays — busy days for most producers.

Laws that restrict liquor sales and go as far as blocking drink preparation from the public’s view have through the years been put in place by key lawmakers — with the behind-the-scenes endorsement of the LDS Church — who see Utah wineries in general and alcohol in particular as a public safety threat. Last year then-Senate President Michael Waddoups opposed increasing the number of gallons small wineries may produce and still get a tax break. He cited concerns over drunk driving and underage drinking in his successful push to defeat the proposal.

Waddoups, who has left the Legislature and is preparing to serve an LDS Church proselytizing mission in Italy, was not present earlier this year when the same proposal was defeated behind the support of other powerful legislators.

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Little relief • Beyond the laws, Utah producers say the playing field could at least be more level for them if local wines got an extra point in the state taste test that determines which wines get on liquor store shelves. That small advantage wouldn’t favor mediocre wines, but "it would give an agreeable product a little edge for the local producer," said Michael Knight, co-owner of Kiler Grove Wine Growers in South Salt Lake.

Utah regulators did put one Kiler Grove wine into state stores last year, but declined to renew the order. He’s in talks with the state to get his products back into liquor outlets, but no agreement has been reached. Yet in March, three of its wines took medals in the South West Wine Challenge in Prescott, Ariz. Kiler Grove’s 2009 Petite Sirah earned gold, its 2011 Saignée won silver and its 2009 Trebbiano brought back a bronze.

Vickie Ashby, spokeswoman for the Utah Department of Alcoholic Beverage Control, declined to discuss specific issues. She would say only that "as you know, by statute DABC cannot advertise or promote the consumption of alcoholic products. DABC does list products produced by Utah’s wineries. It is not universal, but wherever floor space allows, a ‘Utah’s Own’ or ‘Utah Wine’ section is used to merchandise Utah products. As small producers, all Utah wineries qualify for the reduced markup as provided in statute."

The state does give all small producers (not just those from Utah) a break on the markup it adds to a bottle of alcohol, 47 percent versus 86 percent for larger producers.

Small wineries are eligible for the break if they produce less than 20,000 gallons annually — compared with 100,000 gallons the U.S. government allows in calculating a lower federal excise tax. In addition, when small wineries go beyond the limit, federal tax increases are incremental — allowing for gradual production increases — while the state tax nearly doubles immediately.

Will Fryer, owner of Castle Creek Winery in Moab which produces about 12,000 gallons annually, recently bought a neighboring 5-acre vineyard, but he said he cannot expand much more if the state cap isn’t eased because "it’s not economically feasible to do so."

Even with the reduced markups, wineries in Utah pay hefty state taxes.

The Hive, for instance, paid $36,314 in taxes and fees to the state and $600 in taxes to the federal government last year, while maintaining a payroll of $21,700 for two part-time employees and its owner (who also has an engineering job).

Although Utah doesn’t charge an excise tax, other charges and fees put state wine among the most heavily taxed in the nation, at $7.24 per gallon, according to the Distilled Spirits of America, whose calculations are recognized by the National Tax Foundation, a nonprofit, nonpartisan research organization based in Washington, D.C.

By comparison Alaska, which charges the nation’s highest wine excise tax, is $2.50 per gallon, nearly three times lower than Utah’s rate.

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U.S. wine production tops in world

Wine sales worldwide increased 2 percent in 2012 from the previous year, to a record of 360.1 million 9-liter cases, with an estimated retail value of $34.6 billion.

In the U.S., California accounted for almost two-thirds (207.7 million cases) of wine sales, with an estimated retail value of $22 billion, said wine industry consultant Jon Fredrikson of Gomberg, Fredrikson & Associates. Including exports, 2012 California wine shipments to markets worldwide reached 250.2 million cases.

“The U.S. is the largest wine market in the world with 19 consecutive years of volume growth,” said Wine Institute President and CEO Robert Koch.

Wine shipments to the U.S. market have climbed by nearly 50 percent since 2001, “and it is likely that American consumption will continue to expand over the next decade as wine continues to gain traction among American adult consumers,” said Fredrikson.

Chardonnay remained the most popular varietal (made primarily from a single grape variety), with a 21 percent share of volume, followed by Cabernet Sauvignon, 12 percent volume share; Merlot, 9 percent share; and Pinot Grigio/Gris, 8 percent share.

Top markets for U.S. exports were the European Union’s 27-member countries, accounting for $485 million, up 1.7 percent from last year; followed by Canada, $434 million, up 14 percent; Hong Kong, $115 million, down 30 percent; Japan, $111 million, up 6 percent; China, $74 million, up 18 percent; Vietnam, $27 million, up 22 percent; Mexico, $20 million, up 4 percent; and South Korea, $16 million, up 26 percent.

Source: Wine Institute

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