The Illinois wine industry, a small but growing network of boutique wineries and vineyards dotting the state, is looking for a little more shelf space at your local retailer.
Struggling during the pandemic with a business model built mostly on tours, tastings and in-person sales, Illinois wine producers are pushing for legislation to increase self-distribution to stores and restaurants, bypassing a Prohibition-era state law requiring a middleman in such transactions.
Lynfred Winery in Roselle, a 43-year-old former basement hobby that has grown into one of the state’s oldest and largest family-owned wine producers, saw its sales decline sharply as visits by its 6,000 wine club members to the northwest suburban winery and satellite tasting rooms were curtailed by the pandemic.
State law prevented the winery from delivering the products to retailers without a distributor, making it difficult to compensate for the lost in-person sales, according to Andres Basso, general manager at Lynfred Winery.
“We make really good wine in the state of Illinois, and we’re not allowed to self-distribute a single gallon,” said Basso, 49, a Chilean-born winemaker who has been at Lynfred for more than 20 years. “It’s been a very, very difficult thing for us to survive.”
Roselle is a long way from Napa Valley — 2,090 miles, to be exact. But the Illinois industry is more robust than many people realize, with 139 wineries, 53 vineyards and two homegrown viticultural areas: Shawnee Hills in the southernmost part of the state and the Upper Midwest Valley in northwest Illinois.
Most Illinois wineries are more mom-and-pop than Ernest and Julio Gallo, however, lacking the retail heft and distributor relationships to end up on store shelves and restaurant wine lists. The pandemic disrupted the primary in-person sales channel for the wineries, highlighting the need for more retail distribution.
“Our biggest issue is limits on self-distribution and production,” said Lisa Ellis, executive director of the nonprofit Illinois Grape Growers and Vintners Alliance. “We’re for the most part small boutique winery operations, not producing millions of gallons a year like some of the West Coast wineries that you see on the shelves and grocery stores and liquor stores all across the country.”
The Springfield-based alliance is backing a proposed amendment to the state’s Liquor Control Act of 1934 that would substantially increase the amount that wineries could self-distribute to restaurants, retailers and other customers without the required middleman.
Under the current law, only wineries that produce less than 25,000 gallons a year are allowed to self-distribute their wine, with a maximum of 5,000 gallons to sell themselves to outside retailers. The proposed legislation, sponsored by Sen. Rachelle Crowe, a Democrat from suburban St. Louis, seeks to raise the production threshold to 250,000 gallons and the self-distribution limits to 50,000 gallons, enabling smaller wineries to bypass distributors and grow their own local connections.
Lynfred produces about 95,000 gallons of wine per year, Basso said.
The bill also would reduce a 60% increase in licensing fees for Illinois wineries implemented last year and allow them to retain a premises license — the ability to sell alcoholic products they don’t make — if wineries expand manufacturing operations to include beer or spirits.
The Illinois Liquor Control Act of 1934 created a three-tier system of producers, distributors and retailers. It requires that most alcohol produced for sale in the state go through a distributor and be sold by a licensed retailer. There are 305 licensed liquor distributors in the state, according to the Wine and Spirits Distributors of Illinois, a not-for-profit trade organization.
“Wine and Spirits Distributors of Illinois supports the efforts of the Illinois Grape Growers and Vintners Association to lower their state licensing fees,” Jeremy Kruidenier, vice executive director of the trade organization, said in a statement Wednesday.
Kruidenier declined to comment on the self-distribution portion of the legislation.
When the Illinois Grape Growers and Vintners Alliance formed in 1992, there were only seven wineries across the state, Ellis said. Since then, Illinois has grown into the 18th largest wine-producing state in the U.S. with nearly 1.2 million gallons vinified in 2019, according to an economic impact study commissioned by the alliance.
The Illinois wine industry generated $5.7 billion in annual economic impact and created more than 36,000 jobs, according to the study, which was conducted by liquor industry economist John Dunham.
It is still only a drop in the bucket compared with California, which led the nation with nearly 799 million gallons of wine produced in 2019, according to the study.
Illinois is a much bigger player on the drinking end of the wine business, ranking fifth among all states at nearly 38 million gallons consumed in 2020, generating $3.45 billion in sales, Dunham told the Tribune. That leaves plenty of upside for Illinois wineries, which accounted for only about 3% of total wine sales in the state, but distribution remains the biggest obstacle, he said.
“In Illinois, where the wineries tend to be small, you’re totally dependent on people coming to the winery to buy wine because it doesn’t go into general distribution,” Dunham said. “And COVID has kind of screwed that up.”
Started as a hobby by the late Fred and Lynn Koehler, Lynfred Winery opened for business in 1979 in a stately, century-old home, and is now housed in a three-level, 24,000-square-foot building added in the 1990s to the 1-acre site. The winery includes a 100,000-gallon production facility, a bed-and-breakfast and tasting rooms.
Lynfred produces more than 70 varietals and 40,000 cases of wine each year, most of which are sold on-site. But the pandemic has shifted the dynamic, with 40% of sales now coming through distribution at a handful of Chicago-area retailers. That has reduced profitability while adding a cumbersome step to a process that could be handled directly for many local customers, Basso said.
Future growth for Lynfred and other Illinois wineries, even as wine tours return in a post-pandemic landscape, could depend on the proposed legislation. Basso said it would “reshape the business,” allowing distributors to keep the big accounts, while wineries focus on getting into the pizza place down the street.
“What would it mean to Lynfred Winery if this bill passes is that we could improve our service to the small consumer like restaurants and retailers and things like that, because we can control them directly from the winery,” Basso said. “We can just send our delivery guys.”
