Don’t Get Caught Off Guard During Wildfire Season

By: Michael Harding, Senior Risk Solution Specialist, Markel Specialty

Weather conditions and natural disasters occasionally take a toll on vineyards and other agricultural production systems. Due to climate change and recurring droughts, some of which are severe, the frequency and severity of wildfires is expected to increase. These risks highlight the need for winegrowers and winery owners to be as prepared as possible to reduce risk.

Putting Your Plan Together

  Many wineries may have already revisited their evacuation plans and filed them with their respective state agencies. Staying current of wildfire season developments can help enhance your ongoing planning and preparedness. Technology can also support your wildland fire planning and response. Additional planning resources by the American Red Cross are available at: www.redcross.org/get-help/how-to-prepare-for-emergencies/types-of-emergencies/wildfire.html

Steps to Take Before a Wildland Fire Event

•    Take a close look at your winery’s communication protocol for evacuations. Everyone should have a clear understanding of any community alarms that signal when you need to evacuate. Assign specific accountabilities to staff so everyone works collectively to achieve a positive outcome of protecting lives and property.

•    Work with your regional Forest Service to better understand emergency evacuation procedures in your area.

•    Coordinate with the American Red Cross, FEMA, and other emergency agencies to give them the locations of your evacuation sites. Invite your local fire department out as part of a fire pre-incident plan. They should be provided a map of your property, highlighting planned evacuation routes. They can also offer technical assistance to support your plan.

•    Prepare and post route maps for each site, including alternate routes. With a large fire, you may need to use “Plan B.”

•    Consider forming a cooperative agreement with another site to share resources and serve as an evacuation site.

•    Identify key equipment to be evacuated, including computers and other vital records. As part of your business continuity planning, programs should already have information backed up and stored remotely. But, in case you don’t, practice removing this equipment as part of your practice response.

•    Stock an ample supply of water and easily-prepared foods until rescue arrives.

Controlling Wildland Fire Exposures

  Wildland fires are one of the most catastrophic threats to wineries.  Protecting your structures from ignition and fire damage is an important program objective second only to an evacuation plan. Taking precautions ahead of time can help reduce the exposure of a wildfire intrusion. There are a number of proactive measures a winery can take to mitigate the property damage a wildland fire can cause.

  To support a fire adaptive community philosophy, the local fire department or authority having jurisdiction for your winery should require you to develop a landscape plan for your property. It is wise to seek their advice and incorporate their recommendations as you develop a plan specific to your location. You can learn more about fire adaptive community planning at the Fire Adaptive Communities, www.fireadapted.org

  According to the NFPA 1144 – Reducing Structure Ignition Hazards from Wildland Fires, fire protection plans should address four zones around a property.

What are the primary threats to property during a wildfire?

Research around property destruction vs. property survival in wildfires point to embers and small flames as the main way that the majority of properties ignite in wildfires. Embers are burning pieces of airborne wood and/or vegetation that can be carried more than a mile through the wind, they can cause spot fires and ignite structures, debris and other objects.

  There are methods for property owners to prepare their structures to withstand ember attacks and minimize the likelihood of flames or surface fire touching the structure or any attachments. Experiments, models and post-fire studies have shown structures ignite due to the condition of the structure and everything around it, up to 200’ from the foundation.  This is called the Structure Ignition Zone.

What is the Structure Ignition Zone?

  The concept of the structure ignition zone was developed by retired USDA Forest Service fire scientist Jack Cohen in the late 1990’s, following some breakthrough experimental research into how structures ignite due to the effects of radiant heat. 

The structure ignition zone is divided into three zones; immediate, intermediate and extended.

Immediate Zone

  The structure and the area 0-5’ from the furthest attached exterior point of the structure; defined as a non-combustible area. Science tells us this is the most important zone to take immediate action on as it is the most vulnerable to embers.

  START WITH THE STRUCTURES then move into the landscaping section of the Immediate Zone.

•    Clean roofs and gutters of dead leaves, debris and pine needles that could catch embers.

•    Replace or repair any loose or missing shingles or roof tiles to prevent ember penetration.

•    Reduce embers that could pass through vents in the eaves by installing 1/8” metal mesh screening.

•    Clean debris from exterior attic vents and install 1/8” metal mesh screening to reduce embers.

•    Repair or replace damaged or loose window screens and any broken windows. Screen or box-in areas below patios and decks with wire mesh to prevent debris and combustible materials from accumulating.

•    Move any flammable material away from wall exteriors – wooden pallets, mulch, flammable plants, leaves and needles, firewood piles – anything that can burn. Remove anything stored underneath decks or porches.

Intermediate Zone

  5-30’ from the furthest exterior point of the structure.  Landscaping/hardscaping – employing careful landscaping or creating breaks that can help influence and decrease fire behavior.

•    Clear vegetation from under large stationary propane tanks.

•    Create fuel breaks with driveways, walkways/paths, patios, and decks.

•    Keep lawns and native grasses mowed to a height of 4”.

•    Remove ladder fuels (vegetation under trees) so a surface fire cannot reach the crowns. Prune trees up to 6-10’ from the ground; for shorter trees do not exceed 1/3 of the overall tree height.

•    Space trees to have a minimum of 18’ between crowns with the distance increasing with the percentage of slope.

•    Tree placement should be planned to ensure the mature canopy is no closer than 10’ to the edge of the structure.

•    Tree and shrubs in this zone should be limited to small clusters of a few each to break up the continuity of the vegetation across the landscape.

Extended Zone

  30-100’, out to 200’. Landscaping – the goal here is not to eliminate fire but to interrupt fire’s path and keep flames smaller and on the ground.

•    Dispose of heavy accumulations of ground litter/debris.

•    Remove dead plant and tree material.

•    Remove small conifers growing between mature trees.

•    Remove vegetation adjacent to storage sheds or other outbuildings within this area.

•    Trees 30 to 60’ from the structure should have at least 12’ between canopy tops.

•    Trees 60 to 100’ from the structure should have at least 6’ between the canopy tops.

If an Evacuation Becomes Evident

•    If possible, identify the location and direction of the fire event. Remain cognizant that this can quickly change direction and speed.

•    Clearly explain your evacuation procedures to all that may be involved.

•    Identify special medical needs and gather emergency equipment and necessities, including trauma supplies for ready access.

•    Designate enough vehicles to evacuate everyone safely. Reinforce safe driving practices with all drivers.

•    Equip staff with emergency communications equipment (cell phones, walkie-talkies, whistles, flares, colored smoke canisters, etc.). Ask your local jurisdiction authority for suggestions.

•    Load key equipment, vital records, food, and water.

•    Ask qualified associates to disconnect and move LP gas tanks to a safer location, such as a gravel lot, or follow the manufacturer’s instructions to empty the tanks.

•    Warn firefighters of underground fuel storage or LP gas tanks before you leave.

  Making your facility fire resistant can help reduce property loss. However, keep in mind that these steps should be done only by assigned staff in conjunction with an evacuation and never require or allow staff to remain behind. Close and secure all doors and windows once combustible materials have been moved away from these openings.

•    Wet down buildings and roofs. There are commercial grade fire retardant products available that can help support your efforts to protect your property. But do your research ahead of time; and don’t let the application of these products reduce the priority of evacuating.

•    Have qualified personnel cut down trees in the fire path, bulldoze a firebreak, and cut field grass as short as possible.

•    Remove brush and dry vegetation near buildings.

Fire evacuation – What you need to know

  During wildfire season, you may be forced to evacuate in a hurry. People are your first priority; to include guests, staff and firefighters. Most fire evacuations provide at least a three-hour notice; but due to the scope of your operation, you may need to do it sooner. Take proactive steps before and during an evacuation to reduce anxiety and avoid injuries. Plan, prepare and practice.

Filing Claims

  In the event your area experiences a wildfire event, it is highly likely it will not only be monitored by your insurance agent, in addition to your insurance company. Pre-loss documentation, such as video recordings and pictures of buildings, business personal property inventories, should be up to date and included as part of your evacuation materials. Working with your agent is a great resource to understand what might be necessary to help with documentation, if you should need it.

Reference

•    NFPA 1144 – Reducing Structure Ignition Hazards from Wildland Fires, 2018 Edition. National Fire Protection Association. Quincy, MA 02169, 2018

•    Fire Adaptive Communities. Fire Adapted Communities Learning Network.

      www.fireadaptednetwork.org

•    Wildfire Safety.http://www.redcross.org/get-help/how-to-prepare-for-emergencies/types-of-emergencies/wildfire.html. © 2019 The American National Red Cross

  This document is intended for general information purposes only, and should not be construed as advice or opinions on any specific facts or circumstances. The content of this document is made available on an “as is” basis, without warranty of any kind. This document can’t be assumed to contain every acceptable safety and compliance procedures or that additional procedures might not be appropriate under the circumstances.  Markel does not guarantee that this information is or can be relied on for compliance with any law or regulation, assurance against preventable losses, or freedom from legal liability.  This publication is not intended to be legal, underwriting, or any other type of professional advice.  Persons requiring advice should consult an independent adviser.  Markel does not guarantee any particular outcome and makes no commitment to update any information herein, or remove any items that are no longer accurate or complete.   Furthermore, Markel does not assume any liability to any person or organization for loss of damage caused by or resulting from any reliance placed on that content.

Are You Seeing the “Low Hanging Grapes?”

(What if OSHA Came Knocking at Your Door?)

Frequent Winery OSHA Violations – Are You in Compliance?

By: Michael Harding, Senior Risk Solution Specialist, Markel Specialty

If you’ve been doing this for a while, no one needs to tell you that operating a winery is NOT a simple business. There are many things to pay attention to in order to run your winery efficiently. You have to contend with regulatory approval, deal with all of the aspects of making your wine, obtain the right equipment, staffing, marketing & sales as well as sanitation and waste management – just to mention a few. Oh yea, don’t forget safety and OSHA compliance! Is that also on your list of things to manage?

  You might think that safety is just common sense and that your employees will always  work safely while on the job. This is not always the case. Each year thousands of employees die from work-related deaths and thousands more are injured on the job, many of which require numerous days away from work. This not only causes pain and stress for the employee and family but also costs employers (such as you) billions of dollars each year.

  The Occupational Safety and Health Act (OSHA, commonly called the OSH Act)was enacted in 1970 to “to assure so far as possible every working man and woman in the Nation safe and healthful working conditions to preserve our human resources”. This OSH Act consists of a number of safety and health regulations that employers are required to follow. The OSH Act also allows states to enact their own safety and health laws as long as they are at least as strict (meaning some states regulate more than others) as the federal standards. As a winery, you are required to comply with these standards (either federal or your state’s program). So how do you think you doing?

  If you’ve never experienced an OSHA inspection, the National Safety Council has an excellent article, “What to expect when OSHA is inspecting” that can provide you with valuable insight regarding OSHA inspections. This article also highlights a list of programs that require records and proof documents that you may need to be maintaining.

  For this article, we’ll highlight frequently cited federal OSHA regulations for wineries (within NAICS Code of 312130) during the past year as well as violations cited in California (with one of the larger state OSHA programs and a large number of wineries).  We hope you and your winery find this information useful. We suggest you use this information to develop a checklist that you can use to help improve your safety program, where needed, and perform inspections to help you “see the low hanging grapes” regarding OSHA compliance. Of course, there may be  other safety regulations that may also apply to your winery so you’ll want to consider seeking out professional advice regarding any additional standards that may apply.

  Should you need help with any of these regulations, you can contact your local state OSHA office; most of them have a free voluntary compliance division that can offer free advice and assistance. They can also provide you with the specifics of each of the regulations governing your state.

Frequent Winery Violations

  Below you will find some of the frequently cited OSHA regulations within the winery industry. If you click on the heading of each, it will take you directly to the federal OSHA regulation.

  General Duty Clause: OSHA requires that each employer “furnish to each of its employees a workplace that is free from recognized hazards that are causing or likely to cause death or serious physical harm to its employees.”

  With this you’re expected to identify and correct any health or safety hazards present in your work environment. This is a “high level” standard and a serious responsibility that you as an employer must address to reduce the chances of one of your employees being injured or harmed. OSHA provides guidance on what elements should be included in an effective occupational safety and health program.

  Some states (such as California) even require that employers develop a written “Injury and Illness Prevention Program” (IIPP) which is a basic safety program tailored to your winery operations. As part of an IIPP you are required to identify the hazards within your workplace and how you can eliminate or reduce them.

  Hazard Communication:  This standard requires that you must provide your employees information about the hazardous substances to which they might be exposed. This needs to be a written program that outlines your winery’s policies and procedures. You must use Safety Data Sheets (SDSs), appropriate labels and other forms of warning, along with training to make sure your employees understand the substances and how to protect themselves.

  Permit-Required Confined Spaces:  Generally speaking a confined space is a space not intended for continuous occupancy and has limited means for entry or exit. These have the potential to contain a hazardous atmosphere and other potential safety or health hazards. Fermentation tanks, silos and sumps are examples and must be evaluated to determine if they meet the definition of “permit required.” In turn you must prepare the space before entry and test the atmosphere with a calibrated direct-reading testing device. This standard also requires a written program that outlines how your winery will comply with the regulations governing confined space entry.

  Respiratory Protection:  Wherever needed, this regulation requires a written program that governs how your winery will select and use all respirator types ranging anywhere from disposable dust masks all the way up to a self-contained breathing apparatus (SCBA). With this you must develop written worksite- specific procedures.

  Medical Services and First Aid:  As an employer, you need to ensure that medical advice and consultation on matters of winery health are readily available. Since most wineries are not in close proximity to a medical facility, you need to have a person or persons adequately trained to provide first aid AND have adequate first aid supplies readily available. If you have any corrosive chemicals that your employees could be exposed to, then you need to have quick drenching or flushing capabilities provided in your work area for immediate emergency use.

  Emergency Eyewash and Shower Equipment:  The most common citation from this regulation is the lack of or insufficiency of an emergency eye wash. You must have an emergency eye wash whenever the eyes of one of your employees might come in contact with a substance that can cause corrosion, permanent tissue damage or severe irritation to their eyes, such as a fork truck lead battery charging station. Eye wash stations must meet certain criteria as defined in ANSI Z358.1-2014 and either be plumbed or have a self-contained reservoir capable of providing at least a 15 minute hands-free flow of continuous water.

  Personal Protective Equipment (PPE):  This is OSHA’s standard for governing personal protective equipment. As an employer, you must provide and employees must wear appropriate PPE whenever they could become injured or sick by not wearing it. This standard, linked above, places the responsibility of determining the where, what, when, how along with proper storage and care on each winery.

  Flexible Cords & other Assorted Electrical Hazards:  This is a common violation among wineries. Flexible extensions cords are frequently cited for misuse and abuse. Generally speaking you cannot use flexible cords to provide electricity to a piece of equipment when you should have installed an electric outlet. Also, you can’t connect one extension cord to another and then to another (also referred to as a “daisy chain”); you cannot extend cords through walls, windows or doors. You should have someone knowledgeable in this standard review your facility to identify any electrical concerns so that they can be quickly remedied.

  Moving Parts of Machinery or Equipment:  You can be cited for a machine guarding violation when moving parts of your equipment are not properly protecting the operator and other employees. Just think about an area where an employee could get part of their body injured by moving portions of your machinery or equipment. Crushing areas, bottling lines and conveyors are but a few examples that should be evaluated to make sure that they are adequately guarded. Your maintenance shop also should be regularly inspected to make sure that tools such as grinders and saws and the like have proper guards in place. Bottom line – if someone can get any part of their body into a moving part while it’s in operation, it probably should be guarded.

  Guardrails and Elevated Work Locations:  Your winery can be cited for not installing guardrails on the open sides of work areas that are more than 30 inches above the floor, ground, or surrounding working areas. Examples that might require guarding include platforms or other elevated locations which are accessed for maintenance or storage.

  A standard guardrail consists of a top rail, midrail, and posts. You must also install a toe board if falling tools or materials would be a hazard to employees working below. The vertical height of the guardrail must be 42 to 45 inches measured from the upper surface of the top rail. The guardrails must support 20 pounds per linear foot applied either horizontally or vertically downward on the rail.

Conclusion

  The intent of this article is to ensure that safety and health regulatory compliance is both “on your radar” and a recurring part of your business focus. By inspecting these and other safety and health matters in and around your winery, you can be in a better position to address the “low hanging grapes” and enhance the overall safety and well-being of your employees.

  This document is intended for general information purposes only, and should not be construed as advice or opinions on any specific facts or circumstances. The content of this document is made available on an “as is” basis, without warranty of any kind. This document can’t be assumed to contain every acceptable safety and compliance procedures or that additional procedures might not be appropriate under the circumstances.  Markel does not guarantee that this information is or can be relied on for compliance with any law or regulation, assurance against preventable losses, or freedom from legal liability.  This publication is not intended to be legal, underwriting, or any other type of professional advice.  Persons requiring advice should consult an independent adviser.  Markel does not guarantee any particular outcome and makes no commitment to update any information herein, or remove any items that are no longer accurate or complete.   Furthermore, Markel does not assume any liability to any person or organization for loss of damage caused by or resulting from any reliance placed on that content.

  *Markel Specialty is a business division of Markel Service, Incorporated, the underwriting manager for the Markel affiliated insurance companies.

Software for Wineries: Time-saving Technology Lifts Wineries to Higher Levels of Productivity

Credit: Vintrace

By: Cheryl Gray

Software applications are helping wineries worldwide manage day-to-day operations from vineyard to table, including that often elusive commodity: time. From tracking product inventory to monitoring grapes’ ripeness, time-saving winery software choices are available for virtually every business need. The question of what applications are on the market is immediately followed by where to find it.

  Process2Wine:  Leave it to the south of France to provide an answer by way of Process2Wine, a cloud-based SaaS vineyard and winery production management platform for desktop and mobile devices, developed by Ertus Group in Bordeaux, France. Created by a team of technicians, winemakers and oenologists, Process2Wine has been in use in wine regions of France, including Bordeaux, Burgundy, Champagne and Languedoc, since 2013. To expand into the United States, Ertus Group acquired Wine Management Systems in 2018. Clement Chivite, an experienced winemaker turned business manager in California, spearheaded the adaptation of Process2Wine to fit the U.S. and Canadian markets.

  “With Process2Wine, you can record all operations from vine to bottle. The software helps winemakers and growers manage record keeping and allows them to monitor their production by creating reporting at every stage of the winemaking process. Comparing procedures, inputs, analyses and costs year-over-year helps viticulturists and winemakers make the right decisions and find efficiencies based on accurate data. Plus, it saves so much time to be able to generate a 5140 report or a pesticide use report at the click of a button.

  “The software is continuously being updated. Our R&D aims to help the industry respond to new challenges, such as climate change, using the internet of things and precision agriculture.”

  Process2Wine customer assistance includes training sessions, online support and direct contact with client account managers.

  Vintrace:  Arriving from Australia to the U.S. in 2008, vintrace is a cloud-based global competitor, serving wineries of all sizes in North and South America, Europe, New Zealand and its native Australia.  Heather Crawford, general manager for the company’s North American division, told The Grapevine Magazine why the word “trace” is part of the company’s name.

  “Starting in the vineyard with assessments for harvest planning, creating bookings, writing work orders for grape processing, labs and all movements, ending with the final packaging and tracking of inventory, vintrace enables every part of the winery. With accurate, real-time information, time is saved at critical moments, like harvest, and fewer mistakes are made as all tanks, all vessels and all wines are tracked.”

  Crawford added that using vintrace’s application programming interface makes it possible for clients to expand the software’s productivity.

“Increasingly, we are seeing wineries extract production information from vintrace to put alongside other data, such as planning and forecasting, in tools like Microsoft Power BI, to better measure their operations. Using vintrace APIs makes this completely self-service.”

  Clients have access to either self-help or hands-on technical support from the vintrace team. Crawford said the application increases scanning capabilities and is available on Android and iOS for mobile connectivity.

  TeraVina:  Oztera, based in Pleasanton, California, partnered with Microsoft to offer TeraVina, a winery software application built on the Microsoft Dynamics Business Central (NAV) platform. Oztera provides both cloud-based and computer-installed winery software. Michael Stallman is the company’s director of business development.

  “We took the base functionality and underlying technology from Microsoft and extended that solution to provide winery specific functionality. We were fortunate to work with some very prestigious wineries and seasoned industry veterans to really focus on winery requirements and automating common tasks. We continue to grow our solution to meet the needs of all our clients and push the buck on technology. It is important to note that we can move more quickly with changing technology trends because we have Microsoft behind us. We can extend their technologies to keep up with the larger market and not bootstrap wineries to specific technologies.”

  Oztera can also apply its toolset to integrate with external systems, allowing wineries to keep existing functions they like and improve the output of others, even if that application is an Oztera competitor.

  “A good example is a recent integration with Winemaker’s Database. We encountered a scenario where the winemaking team really liked where they were at with their winemaking systems, but the rest of the business needed help. While on the surface, WMDB is a competitor of ours, we were willing to work with them and provide a solution that helped our client achieve their goals.  We delivered a system that provided them with the gains they needed on other fronts while building a bridge to WMDB, making that part of their business more streamlined. “

  VinNOW:  Another choice for wineries with small budgets looking for big package solutions is VinNOW, the brainchild of Ted Starr. A software engineer, Starr put his 40 years in the industry to work by creating a software system that he said can handle just about anything. 

  “VinNOW was created in 1999 as a custom program for wineries with a need: telesales, customer records, inventory tracking, order discounting and invoicing. It has been growing ever since to include point of sale, robust wine club processing, QuickBooks integration, compliance and shipping integrations with multiple vendors, comprehensive reporting and time cards, to name a few. “

  Starr and his wife, Deanna, an experienced winemaker, use VinNOW in their Milano Family Winery, based in Hopland, California. He explained to The Grapevine Magazine how the software helps to save time. 

  “We utilize our integration with ShipCompliant to collect and submit various states’ compliance reporting for sales tax and excise taxes, saving countless valuable hours of time. Our extensive reporting capabilities allow us to get the information needed to complete various reporting requirements such as sales tax, wine sales by alcohol level, and shipments, inside and outside of our state. 

  In addition, we use our VinTracker bulk wine and custom crush billing module to track the wine’s containers, volume and work performed, as well as generating work orders for current work to be completed.”

  Starr said that VinNOW offers an alternative to cloud-based software systems, which can be a problem for wineries with poor internet connections.

  “As many wineries are in areas which experience this, that is a major challenge.  On a busy day, if you can’t use the solution, you lose sales. Using software that is on your computer ensures you are in charge of your data – it is located at your site. With cloud-based systems, if your internet is down or slows, it will hinder your ability to sell your products.”

  Starr added that product installation and data maintenance are intuitive and VinNow also comes with free unlimited live support and training. New features and functions are added continuously, including some adaptations to accommodate the demands that COVID-19 restrictions have placed upon wineries.

  “We have redesigned our point of sale to facilitate the sales process. We are also able to process credit card transactions away from the winery or tasting room.”

  InnoVint:  Ashley Leonard started her career as a winemaker nearly a decade ago.  Frustrated by winery software that didn’t quite fit her needs, Leonard founded InnoVint, a cloud-based, mobile software solution managing all aspects of the winery. Backed by a team of experienced winemakers and modern software engineers, Leonard said her company is the first to bring mobile-driven software to the wine industry.

  “The software goes beyond activity tracking as a digital workflow productivity tool, uniting winery teams both within production and with other departments such as finance and compliance. Daily activity is recorded in real-time, whether in the vineyard, the lab, the cellar or on-the-go. Production integrates seamlessly with compliance and costing, so the winery has confidence that their entire operation is running smoothly.”

  Leonard said that InnoVint puts the winery back in charge of time management, taking the head-scratching out of technology use.

  “Winemakers are not software gurus. They shouldn’t have to waste their time figuring out clunky, legacy databases to fit their unique processes. They deserve purpose-built software that caters directly to their specific vineyard and winery activities. InnoVint is designed by a team of winemakers with 75 harvests under our belt, and it shows in how catered our solution is for them.

  Whether the winery is a small boutique producer, large custom crush operator or bulk wine supplier, we save them hours of time per week by reducing communication friction, bringing relevant winemaking data to the surface and uniting production with the other departments at the winery through a single pane of glass.”

SAFETY FOR YOUR WINERY:

Have You Fortified Your Workers’ Compensation Program?

Even though there may be many aspects that are similar, the safety programs for every winery will in all likelihood look very different. Like any other effort to manage your risks, your plan will need to identify the risks you face and in turn determine how they will be managed.

There are many hazardous activities carried out in the wine industry that can result in a serious injury or even death if not managed properly. Your risks may include things such as:

•   The physical work environment

•   Occupational hazards(i.e. slips and falls, chemicals, cuts/lacerations)

•   Machinery, processing and substances used

•   Work practices and systems of work

•   Special events involving live music, weddings, special tastings, etc.

  A commitment to managing these safety and health risks is a great way for your winery to protect your greatest resource – your people. Spending time on health and safety can help create a better work environment and improve your worker morale. Winery accidents on the other hand, due to a lack of this kind of commitment, can have an immense impact on your injured workers, their co-workers and on their families in terms of pain, suffering, disability, stress and loss or change of employment. Your winery can incur direct costs that may include claims costs, increased insurance premiums, and fines. There are also indirect costs, which may include damage to property, the cost of finding and training temporary employees, and production or service interruption leading to loss of customers.  The total cost of an accident can be significant.

  At first, managing workers’ compensation for your winery may seem like a daunting task. You want to protect your employees while still keeping your premiums as low as possible.  There are many challenges to address. Avoiding accidents is a sure way to not only protect your employees but also keep your premium costs down. Where do you start? What should you focus on? A good way for you to begin is to identify areas that warrant your initial safety efforts by asking a few basic questions:

•    How frequently do safety incidents arise?

•    How will our management deal with them?

•    Who is responsible for mitigation efforts?

•    What costs are associated with each event?

•    What costs are associated with initiatives to mitigate them?

•    What safety and legal regulations are applicable to our organization?

•    What are the training and recordkeeping requirements?

  You might also ask your insurance agent to help you answer some of the questions above so you can determine your safety risks and in turn start putting together a safety program to specifically address your winery’s risks. In OSHA’s “Safety and Health Program Management Guidelines”, they suggest the following core elements be included in a Safety and Health Program to aid in managing workplace risks:

•    Management Leadership

      a) Top management demonstrates its commitment to continuous improvement in safety and health, communicates that commitment to workers, and sets program expectations and responsibilities.

      b) Managers at all levels make safety and health a core organizational value, establish safety and health goals and objectives, provide adequate resources and support for the program, and set a good example.

•    Worker Participation

      a) Workers and their representatives are involved in all aspects of the program—including setting goals, identifying and reporting hazards, investigating incidents, and tracking progress.

      b) All workers, including contractors and temporary workers, understand their roles and responsibilities under the program and what they need to do to effectively carry them out.

      oWorkers are encouraged and have a means to communicate openly with management and to report safety and health concerns without fear of retaliation.

      c) Any potential barriers or obstacles to worker participation in the program (for example, language, lack of information, or disincentives) are removed or addressed.

•    Hazard Identification and Assessment

      a) Procedures are put in place to continually identify workplace hazards and evaluate risks.

      oAn initial assessment of existing hazards and control measures is followed by periodic inspections and reassessments to identify new hazards.

•    Hazard Prevention and Control

      a) Employers and workers cooperate to identify and select options for eliminating, preventing, or controlling workplace hazards.

      b) A plan is developed that ensures controls are implemented, interim protection is provided, progress is tracked, and the effectiveness of controls is verified.

•    Education and Training

      a) All workers are trained to understand how the program works and how to carry out the responsibilities assigned to them under the program.

      b) All workers are trained to recognize workplace hazards and to understand the control measures that have been implemented.

•    Program Evaluation and Improvement

      a) Control measures are periodically evaluated for effectiveness.

      b) Processes are established to monitor program performance,  verify program implementation, identify program deficiencies and opportunities for improvement, and take actions necessary to improve the program and overall safety and health performance.

•    Coordination and Communication on Multiemployer Worksites

      a) The host employer and all contract employers coordinate on work planning and scheduling to identify and resolve any conflicts that could impact safety or health.

      b) Workers from both the host and contract employer are informed about the hazards present at the worksite and the hazards that work of the contract employer may create on site.

  By having an organized and integrated approach to the safety and health program for your winery, you can be well on your way to better managing the welfare of your employees and avoiding accidents and their associated costs.

Understanding Workers’ Compensation Basics

  Workers’ compensation was one of the first insurance programs adopted broadly throughout the United States.   It is designed to provide a satisfactory way to address the medical and economic aspects of employment related injuries.

  With this insurance, your workers’ are provided benefits for certain conditions sustained in the course of employment such as injury, disability, and death.  These benefits are paid without regard to fault in exchange for the worker giving up their right to sue  their employer.

  Most states have compulsory workers’ compensation laws requiring  employers to accept and comply with all provisions of the law. The purpose of these workers’ compensation laws is to provide benefits for any of your employees who suffer an occupational injury or disease. 

Important Wording Within These Laws Include:

•    A definition of “occupational injury” that appears in many state workers’ compensation laws is an injury “arising out of and in the course of employment.” 

•    “Arising out of employment” is generally interpreted to mean that the injury must arise out of a risk which is reasonably related to the employment. 

•    “In the course of employment” is generally interpreted to mean that for an injury to be compensable, it must occur when the worker is at work, during the hours in which they are expected to be there, and while they are engaged in the work that they are employed to do.  In other words it has to do with the time, place, and circumstances of the injury.

  While early workers’ compensation laws had no provisions for occupational disease, each state has now either incorporated occupational disease coverage into workers’ compensation  law or passed separate disease legislation.

  All workers’ compensation laws incorporate four types of benefits: Medical, Disability, Rehabilitation, and Survivor also known as death benefits.

•    Medical benefits provide payment for the medical treatment of an injured worker.  

•    Disability benefits compensate workers who are unable to work as a result of a work-related injury.

•    Most states have laws addressing workers’ compensation rehabilitation benefits and every state accepts the provisions of the Federal Vocational Rehabilitation Act of 1973. 

•    Survivor also called “Death Benefits” attempt to compensate a surviving spouse, children or other relatives of a worker whose death results from an on-the-job injury.

  The most common funding method to pay for these benefits is a workers’ compensation insurance policy from a private insurance company.  Under this method you, as an employer transfer all compensation obligations to your insurance company, which then pays worker benefits to your employees and handles other details required by law. 

Fundamentals of Managing Workers’ Compensation Safety Program

  Reducing the frequency and severity of claims is the best way you can contain your total cost of workers’ compensation.  Written safety programs that address the hazards your employees are exposed,  along with top management support and effective employee training not only help reduce direct claims expense, but eliminate the indirect or “hidden” costs of workers’ compensation claims.  These programs can produce substantial savings for your winery over time, since related expenses such as: loss of services, cost of training a new worker, temporary help, and administrative expense are often multiples of the direct claims costs incurred.

Claim Investigation

  Your supervisors and managers will play a key role in preventing claims and must understand the importance of thoroughly investigating the causes of injuries and taking appropriate corrective action to eliminate unsafe conditions and practices that produce claims.   It is frequently your supervisors who play a pivotal role in the opportunity for, and success of return-to-work programs including: modified duty and transitional work programs.

  Actions taken by your supervisors immediately after an injury occurs can have a major impact on the ultimate disposition of your claims.  These individuals are critical since they are frequently the first to know of claims and have the initial opportunity to investigate, direct and manage events.

Claim Reporting

  Prompt reporting of insurance claims should be encouraged and is considered a best practice in workers’ compensation.  There are significant benefits for promptly reporting all of your employee injuries.  This includes:

•    Most states have reporting requirements for insureds to report claims on a timely basis and may impose monetary fines as a penalty for failing to report claims.

•    Prompt reporting allows the claim adjuster to complete a timely investigation of the loss to determine compensability and to determine an appropriate plan of action for resolving the claim.

•    “Red flag indicators” of fraud are able to be detected and this allows the carrier to determine whether a case should be referred for surveillance or if there is an opportunity to pursue subrogation against a negligent third party.

•    The prompt reporting of injuries allows medical treatment to occur within specialized occupational medical clinics familiar with treating workers’ compensation injuries with a focus on facilitating an early return-to-work to promote quicker healing.

•    In some states, workers’ compensation benefits may be reduced (or altogether denied) if there is confirmed evidence of alcohol or a prohibited drug on a post incident drug test.

Medical Control/Provider Selection and Management

  Proper selection of workers’ compensation medical providers, combined with effective referral procedures and ongoing provider communication programs can significantly reduce your claims expense. Medical providers must understand your winery operations and human resources philosophies, should specialize in occupational medicine, and be willing to work closely with your insurer.

Return-to-Work

  It is well established that returning injured employees to the workforce in a timely manner substantially decreases both direct and indirect costs.  Programs that focus on managing temporary disability, permanent disability and early return-to-work will have the greatest impact on reducing claims expense and increasing employee satisfaction and productivity.

  There are many approaches to establishing return-to-work programs, based on your winery’s culture and individual needs. They range from simple “modified duty” plans to fully integrated “total absence management” programs seeking to use the same practices and protocols to manage all time off work – both occupational and non-occupational injury and illness. In addition to reducing workers’ compensation expense, these programs can decrease your exposure under the Americans with Disabilities Act (ADA) and other similar federal and state laws.

Know your Experience Rating or Experience Modification

  An experience rating or modification provides a financial incentive to reduce workplace accidents.  The rating does not apply to all employers.  Most small employers are not eligible.  Visit with your insurance agent to determine if or when you may qualify for an experience modification.

  An experience modification compares your winery’s loss or claims history to all other companies in the same industry that are similar in size.  A modification of less than 1.00 reflects better than average losses while over 1.00 reflects worse than average losses.  The modification increases or decreases the cost of your winery’s workers’ compensation insurance premium.  It must be applied to your policy regardless of the insurer.

Conclusion

  There are many things to consider as you attempt to “fortify” your workers’ compensation” exposures. Not only do you need to have controls in place to manage the safety and health risks inherent to your winery you also need to have systems in place to manage a claim should it occur. Having an integrated management system such as this can greatly help your winery in addressing these risks.

  This document is intended for general information purposes only, and should not be construed as advice or opinions on any specific facts or circumstances. The content of this document is made available on an “as is” basis, without warranty of any kind. This publication is not intended to be legal, underwriting, or any other type of professional advice.  Persons requiring advice should consult an independent adviser.  Markel does not guarantee any particular outcome and makes no commitment to update any information herein, or remove any items that are no longer accurate or complete.  

© 2020 Markel Service, Incorporated.  All rights reserved. 

Don’t Get Caught Off Guard During Wildfire Season: Tips For Your Winery

Weather conditions and natural disasters occasionally take a toll on vineyards and other agricultural production systems. Due to climate change and recurring droughts, some of which are severe, the frequency and severity of wildfires is expected to increase. These risks highlight the need for winegrowers and winery owners to be as prepared as possible to reduce risk.

Putting Your Plan Together

  Many wineries may have already revisited their evacuation plans and filed them with their respective state agencies. Staying current of wildfire season developments can help enhance your ongoing planning and preparedness. Technology can also support your wildland fire planning and response. Additional planning resources by the American Red Cross are available at: www.redcross.org/get-help/how-to-prepare-for-emergencies/types-of-emergencies/wildfire.html

Steps to Take Before a Wildland Fire Event

•   Take a close look at your winery’s communication protocol for evacuations. Everyone should have a clear understanding of any community alarms that signal when you need to evacuate. Assign specific accountabilities to staff so everyone works collectively to achieve a positive outcome of protecting lives and property.

•   Work with your regional Forest Service to better understand emergency evacuation procedures in your area.

•   Coordinate with the American Red Cross, FEMA, and other emergency agencies to give them the locations of your evacuation sites. Invite your local fire department out as part of a fire pre-incident plan. They should be provided a map of your property, highlighting planned evacuation routes. They can also offer technical assistance to support your plan.

•   Prepare and post route maps for each site, including alternate routes. With a large fire, you may need to use “Plan B.”

•   Consider forming a cooperative agreement with another site to share resources and serve as an evacuation site.

•   Identify key equipment to be evacuated, including computers and other vital records. As part of your business continuity planning, programs should already have information backed up and stored remotely. But, in case you don’t, practice removing this equipment as part of your practice response.

•   Stock an ample supply of water and easily-prepared foods until rescue arrives.

Controlling Wildland Fire Exposures

  Wildland fires are one of the most catastrophic threats to wineries.  Protecting your structures from ignition and fire damage is an important program objective second only to an evacuation plan. Taking precautions ahead of time can help reduce the exposure of a wildfire intrusion. There are a number of proactive measures a winery can take to mitigate the property damage a wildland fire can cause.

  To support a fire adaptive community philosophy, the local fire department or authority having jurisdiction for your winery should require you to develop a landscape plan for your property. It is wise to seek their advice and incorporate their recommendations as you develop a plan specific to your location. You can learn more about fire adaptive community planning at the Fire Adaptive Communities, www.fireadapted.org

According to the NFPA 1144 – Reducing Structure Ignition Hazards from Wildland Fires, fire protection plans should address four zones around a property.

What are the Primary Threats to Property During a Wildfire?

  Research around property destruction vs. property survival in wildfires point to embers and small flames as the main way that the majority of properties ignite in wildfires. Embers are burning pieces of airborne wood and/or vegetation that can be carried more than a mile through the wind, they can cause spot fires and ignite structures, debris and other objects.

  There are methods for property owners to prepare their structures to withstand ember attacks and minimize the likelihood of flames or surface fire touching the structure or any attachments. Experiments, models and post-fire studies have shown structures ignite due to the condition of the structure and everything around it, up to 200’ from the foundation.  This is called the Structure Ignition Zone.

What is the Structure Ignition Zone?

  The concept of the structure ignition zone was developed by retired USDA Forest Service fire scientist Jack Cohen in the late 1990’s, following some breakthrough experimental research into how structures ignite due to the effects of radiant heat. 

The structure ignition zone is divided into three zones; immediate, intermediate and extended.

Immediate Zone

  The structure and the area 0-5’ from the furthest attached exterior point of the structure; defined as a non-combustible area. Science tells us this is the most important zone to take immediate action on as it is the most vulnerable to embers.

  START WITH THE STRUCTURES then move into the landscaping section of the Immediate Zone.

•    Clean roofs and gutters of dead leaves, debris and pine needles that could catch embers.

•    Replace or repair any loose or missing shingles or roof tiles to prevent ember penetration.

•    Reduce embers that could pass through vents in the eaves by installing 1/8” metal mesh screening.

•    Clean debris from exterior attic vents and install 1/8” metal mesh screening to reduce embers.

•    Repair or replace damaged or loose window screens and any broken windows. Screen or box-in areas below patios and decks with wire mesh to prevent debris and combustible materials from accumulating.

•    Move any flammable material away from wall exteriors – wooden pallets, mulch, flammable plants, leaves and needles, firewood piles – anything that can burn. Remove anything stored underneath decks or porches.

Intermediate Zone

  5-30’ from the furthest exterior point of the structure.  Landscaping/hardscaping – employing careful landscaping or creating breaks that can help influence and decrease fire behavior

•    Clear vegetation from under large stationary propane tanks.

•    Create fuel breaks with driveways, walkways/paths, patios, and decks.

•    Keep lawns and native grasses mowed to a height of 4”.

•    Remove ladder fuels (vegetation under trees) so a surface fire cannot reach the crowns. Prune trees up to 6-10’ from the ground; for shorter trees do not exceed 1/3 of the overall tree height.

•    Space trees to have a minimum of 18’ between crowns with the distance increasing with the percentage of slope.

•    Tree placement should be planned to ensure the mature canopy is no closer than 10’ to the edge of the structure.

•    Tree and shrubs in this zone should be limited to small clusters of a few each to break up the continuity of the vegetation across the landscape.

Extended Zone

  30-100’, out to 200’. Landscaping – the goal here is not to eliminate fire but to interrupt fire’s path and keep flames smaller and on the ground.

•    Dispose of heavy accumulations of ground litter/debris.

•    Remove dead plant and tree material.

•    Remove small conifers growing between mature trees.

•    Remove vegetation adjacent to storage sheds or other outbuildings within this area.

•    Trees 30 to 60’ from the structure should have at least 12’ between canopy tops.

•    Trees 60 to 100’ from the structure should have at least 6’ between the canopy tops.

If an Evacuation Becomes evident

•    If possible, identify the location and direction of the fire event. Remain cognizant that this can quickly change direction and speed.

•    Clearly explain your evacuation procedures to all that may be involved.

•    Identify special medical needs and gather emergency equipment and necessities, including trauma supplies for ready access.

•    Designate enough vehicles to evacuate everyone safely. Reinforce safe driving practices with all drivers.

•    Equip staff with emergency communications equipment (cell phones, walkie-talkies, whistles, flares, colored smoke canisters, etc.). Ask your local jurisdiction authority for suggestions.

•    Load key equipment, vital records, food, and water.

•    Ask qualified associates to disconnect and move LP gas tanks to a safer location, such as a gravel lot, or follow the manufacturer’s instructions to empty the tanks.

•    Warn firefighters of underground fuel storage or LP gas tanks before you leave.

  Making your facility fire resistant can help reduce property loss. However, keep in mind that these steps should be done only by assigned staff in conjunction with an evacuation and never require or allow staff to remain behind. Close and secure all doors and windows once combustible materials have been moved away from these openings.

•    Wet down buildings and roofs. There are commercial grade fire retardant products available that can help support your efforts to protect your property. But do your research ahead of time; and don’t let the application of these products reduce the priority of evacuating.

•    Have qualified personnel cut down trees in the fire path, bulldoze a firebreak, and cut field grass as short as possible.

•    Remove brush and dry vegetation near buildings.

Fire Evacuation – What You Need to Know

  During wildfire season, you may be forced to evacuate in a hurry. People are your first priority; to include guests, staff and firefighters. Most fire evacuations provide at least a three-hour notice; but due to the scope of your operation, you may need to do it sooner. Take proactive steps before and during an evacuation to reduce anxiety and avoid injuries. Plan, prepare and practice.

Filing Claims

  In the event your area experiences a wildfire event, it is highly likely it will not only be monitored by your insurance agent, in addition to your insurance company. Pre-loss documentation, such as video recordings and pictures of buildings, business personal property inventories, should be up to date and included as part of your evacuation materials. Working with your agent is a great resource to understand what might be necessary to help with documentation, if you should need it.

Ref:

•    NFPA 1144 – Reducing Structure Ignition Hazards from Wildland Fires, 2018 Edition. National Fire Protection Association. Quincy, MA 02169, 2018

•    Fire Adaptive Communities. Fire Adapted Communities Learning Network. www.fireadaptednetwork.org

•    Wildfire Safety. www.redcross.org/get-help/how-to-prepare-for-emergencies/types-of-emergencies/wildfire.html. © 2019 The American National Red Cross

  This document is intended for general information purposes only, and should not be construed as advice or opinions on any specific facts or circumstances. The content of this document is made available on an “as is” basis, without warranty of any kind. This document can’t be assumed to contain every acceptable safety and compliance procedures or that additional procedures might not be appropriate under the circumstances.  Markel does not guarantee that this information is or can be relied on for compliance with any law or regulation, assurance against preventable losses, or freedom from legal liability.  This publication is not intended to be legal, underwriting, or any other type of professional advice.  Persons requiring advice should consult an independent adviser.  Markel does not guarantee any particular outcome and makes no commitment to update any information herein, or remove any items that are no longer accurate or complete.   Furthermore, Markel does not assume any liability to any person or organization for loss of damage caused by or resulting from any reliance placed on that content.

Understanding the Domino Effect of the European Wine Tariffs

By: Tracey L. Kelley

At press time, the Office of the United States Trade Representative is deciding the revised outcome of a controversial decision from 2019: an increase in import tariffs for European wines by 25%. This action is part of a World Trade Organization judgment against the European Union to end subsidies granted to aerospace giant Airbus. The USTR issued the tariff hike in response to what it believed to be an unfair disadvantage to U.S.-based competitor Boeing.

  In February 2020, the USTR announced it wouldn’t raise European wine tariffs to 100%, but for the upcoming review, it’s unclear if last year’s decision will be upheld, or if those WTO tariffs will shift to other European products. 

  To provide a more tailored scope of the issue, The Grapevine Magazine talked with Benjamin Aneff, president of the U.S. Wine Trade Alliance and managing partner of Tribeca Wine Merchants in New York City; and Eric Faber, chief operating officer of Cutting Edge Solutions in Cincinnati, a wine import and distribution business.

Why the Tariffs Create Conflict

  The Grapevine Magazine (GV): Let’s break down the issue for the layperson: what does U.S. and European wine have to do with Airbus and Boeing?

  Benjamin Aneff (BA): Great question. Nothing. Unfortunately, the USTR has decided to put large tariffs on most wines from the EU because of the dispute involving Airbus and Boeing. It’s incredibly unfortunate, given that these tariffs do roughly four times the economic damage to U.S. businesses than they do their targets overseas. They’re back-firing and hurting mostly small, family-owned businesses in the U.S.

  Eric Faber (EF): I’ve heard the arguments that these tariffs protect American jobs, that people can just buy domestic wines instead of European. In some cases, this may be true, but to believe this about the wine industry shows a complete lack of understanding into how our industry uniquely works and how it’s connected. These connections exist based on an industry that is among the most regulated in the U.S. Companies shouldn’t be asked to change their business model because of an international trade dispute of an unrelated industry.

  The truth is that these tariffs may cause job losses and business closures in Europe, but they will cause job losses for the American small businesses who rely on these wines for their livelihood. Ambassador Robert E. Lighthizer, the USTR, can try to tell us it will simply lead to new American jobs, but that only shows his lack of knowledge about our industry.

  It’s an industry that—unlike Boeing and Airbus—has always paid its fair share of taxes. In fact, the regulation of alcohol means we pay more than most businesses. We don’t get the tax breaks that massive companies like Boeing, Amazon, Apple and others enjoy. Taxes on the alcohol industry help provide billions of dollars to state and local governments. And we’re more than happy to do so, but we shouldn’t be burdened as a result of the poor practices of two of the largest companies on the planet.

  Airbus has recently offered a solution to this entire dispute, and it’s equivalent to the changes made in regard to Boeing. If the goal is to punish Airbus for its misgivings, then punish that industry. But leave the lives of millions of hard-working Americans who aren’t affiliated out of it.

  GV: What would be the direct impact of the 25% tariff increase on small- to medium-sized producers/vintners, and what tangible change happens for them if it’s defeated?

  (BA): Well, ending these tariffs would certainly help small- to medium-sized producers in the U.S., particularly producers looking for distributors that rely on this access to market. These are the companies that actually make sure those small producers in, say, Oregon or California, can make it to the shelf of a wine store or get poured in a restaurant in Chicago, Dallas or New York.

  When distributors are having trouble financially—which they are now due to the tariffs—it’s much harder for them to take the risk of bringing on a new U.S. producer, which generally are unknown and require time and capital investments from distributors. It’s less clear how it helps producers in, say, France.

  There’s pre-pandemic data from the Global Trade Atlas that showed, despite a huge drop in wine exports from France to the U.S. after the enactment of the tariffs, the overall wine exports from France actually grew. In a nutshell, they sold their wine elsewhere. This is just one of the reasons why these tariffs are such a bad idea. They do significantly more damage to the U.S., and they’re incredibly unlikely to influence the EU to change behavior.

  (EF): Should the tariff be justifiably rolled back, things will mostly go back to normal. I say “mostly” because the pandemic has its own role to play in our industry, which adds to the need for the tariffs to be lifted.

  The European wineries we work with love the American wine market and experiencing the amazing wine and restaurant culture so many Americans have worked hard to create. Right now, they’re facing difficult choices about where to sell their products and how to maintain their businesses in the face of tariffs. I think it’s important for Americans to know that the effect on European wineries isn’t money lost from paying the tariffs—because American businesses pay them. It’s from lost sales due to price increases and importers downsizing or going out of business.

  From a larger view, you don’t have to look farther back into our history than the Smoot-Hawley Act of 1930 to see the negative effects tariffs can have on our own economy and the global economy we’re part of. It turned a difficult recession into the Great Depression. It set people back 20 years and created a “lost generation” across the world. These tariffs will harm people across the globe, so by lifting them, we give small businesses—specifically here at home—the opportunity to be successful, experience growth and create jobs.  

The Domino Effect

  GV: As an example, how does an import/distribution company balance its portfolio to include both international and U.S. wine products?

  (EF): We strive to have a portfolio that represents top producers from around the world, specifically boutique producers that fit our model in terms of quality and price point. Domestic wines are the backbone of our portfolio. 

  Like most small distributors, it’s important to have a good mix of products from around the world so we can provide our accounts with a wide variety of options. Domestic wines are certainly a large part of this, and the balance is largely driven by the demands of our customers and the wine-buying public. For us to be successful, we work with producers that we believe in and that our customers have a desire to purchase. While we have very strict standards for the producers we add to our portfolio, we’re ultimately driven by the market.

  The other part of this is profitability. We typically work on lower margins on domestic wines than we do on imported wines, specifically the wines we import ourselves. The slightly-higher margins we make on European wines allow us to keep our prices on our domestic portfolio lower. This is commonplace for most companies in our industry.

  GV: What type of trickle-down effect does the tariff issue have?

  EF: The tariff has an enormous impact on importers and distributors. Many people who argue the tariffs are a penalty on the producers, or the countries on which they have been levied, are simply wrong. We pay the tariffs—not the producers and not the EU.

  A 25% tariff means prices on those products have to go up for importers and distributors to maintain their ability to function. In a state like Ohio, for example, we’re legally required to have a certain margin to our accounts to maintain state tax revenue. We legally can’t make less on the wines, so we have to charge more. This means our retailers and restaurants must raise their prices to the consumer.

  While this may not be the case in every state, no industry could suddenly take a loss of 25% or even 15% of its margin and still be successful. How do people pay employees if they don’t make any money on the products they sell?

  In terms of how this affects domestic producers, the biggest issue outside of distribution is money. Our industry works on “terms”—meaning, we pay for our products typically 30 days after receiving them. This model has been set for decades. But with tariffs, they’re paid as the product clears customs. This creates a significant problem in terms of cash flow.

  So if we’re typically paying a few thousand dollars to clear product into the country, and suddenly have to pay upwards of $25,000, that depletes our bank account in a way our long-standing model wasn’t prepared for and makes it more difficult to pay our domestic suppliers on time.

  We also have to pay our employees, our bills and our taxes. If it takes longer for our domestic partners to get paid, this cash flow problem moves on to them, then to their vendors.

  GV: If certain import relationships fail, do fewer distributors mean fewer channels of retail and restaurant opportunities for U.S. products? Why?

  EF: That’s an excellent question and raises one of the most important points of this debate. If our company relies on a mix of producers from the U.S., Europe and other countries to be successful, then eliminating sales from one of these avenues would force us to close. If companies like Cutting Edge go out of business or contract significantly less, who will sell domestic wines to restaurants or independent retailers that the wineries rely on as the largest part of their sales network? For most domestic wineries, they can’t sustain their business through direct-to-consumer sales alone.

  This leaves wineries without a home. It’s not as simple as just finding another distributor if you’re a domestic winery. Boutique American wineries need to be in a portfolio that gives their products appropriate attention to attract sales and create valuable placements in restaurants and independent retail. They have to find someone who cares about their wines and their stories, someone who can pay for the products, and who can actively promote their products to accounts and consumers.

  Larger, multi-state distributors typically don’t work with smaller domestic producers because it isn’t a part of their business model. They have obligations to their own, typically larger and more corporate, partners. This means that smaller wineries have no focus in their portfolio.

  To sum it up from the point of view of our domestic producers: if 20 Oregon producers suddenly lose their distribution in a state like Ohio, maybe 10 will eventually find a new home and those that do will likely lose significant sales because the new distributor has to essentially re-build the brand in its own portfolio. This is especially daunting when you look at the current climate in our industry as a result of COVID-19. If a producer loses representation in just a small number of states, especially now, it would likely lead to bankruptcy.

  GV: Please explain why a zero-tariff policy on wine imports benefits U.S. producers/vintners in our wine industry.

  BA: Wine from the EU is a keystone species for the health of the U.S. wine market. It represents critical profit margins for tens of thousands of U.S. wine businesses–the same businesses that sell wines from the United States. If those businesses are weak, it’s going to be harder for them to adequately support particularly small- and medium-sized U.S. producers.

  Those wines are often handsels from distributors, retailers and restaurants. That means you need more staff, more time for training, more samples. Further, there may come a point where U.S. distributors are so weakened by tariffs that they’re forced to ask for lower prices from everyone. That’s what happens when companies industry-wide are faced with such hardship. U.S. domestic producers could be one of the first impacted by this need.

  Bottom line, the entire wine industry, from producers to distributors, to restaurants and retailers, are significantly better off when there aren’t tariffs on wine.

Make Connections in Congress

  GV: At press time, the U.S. will have experienced more than 5 million COVID cases, and many wineries continue to be shuttered or downsized in production and tourism. How do you encourage them to take an active stance on this issue when so many other factors have them at a disadvantage? What immediate results will they see from their activism?

  EF: We’ve worked with dozens of domestic wineries to raise awareness of the tariff situation and how it will negatively affect them. I’ve spoken to many of them personally to get them involved, as have countless other distributors. No independent domestic winery thinks the tariffs will benefit them in the short- or long-term.

  We’ve helped provide information on how to contact their elected officials and make their case to members of Congress, the administration, and the USTR. Many have spoken out publicly to condemn the tariffs. People like Jason Lett of Eyrie Vineyards in Oregon have led the charge to raise awareness amongst their peers. They need a strong economy here at home to promote their brands and continue to operate their businesses, and strong partnerships with successful distributors to weather the current storm.

  It’s tough to say what results any of us will see from our activism on this issue because we don’t get to make the final decision. As a community, we have been able to gain support from elected officials from both sides of the aisle and raise public awareness of the negative effects the tariffs will have. Hopefully, awareness will lead to a better understanding of why it’s so important to remove the tariffs currently in place.

  Truly, if there’s anything positive from the battle against tariffs, it’s been the coming together of so many in our industry from all facets: importers, distributors, domestic producers, European producers, restaurants and retailers. I’ve even had wineries we work with in Australia and Chile ask how they can help. All see the incredibly negative outcome of these tariffs on the American wine industry and are united in standing against them. Hopefully, this will help to sway the decision-makers.

  BA: There are so many hardships right now, in every corner of our country. I would say the voices of U.S. wineries can be incredibly impactful with their representatives. We are so interconnected; I think many see how clearly that we rise and fall together. 

  We don’t begrudge the job of the U.S. government to protect our trade interests abroad, but there are better, less damaging ways to do so. We’re all trying to get back up off the mat right now. It’s the wrong time to try to pull the rug out from underneath us.

  Though the public can no longer submit comments to USTR, Congress can! Tell your elected officials, both in the House and Senate, to reach out to the USTR and voice their opposition to these tariffs. There are better ways to influence the EU than a tariff policy that does disproportionate damage to mom and pop businesses in the U.S.—particularly during a pandemic that just saw the U.S. economy contract by 33%. [Editor’s note: The carousel date for the expected USTR announcement regarding its decision, was August 12. Look for an update on thegrapevinemagazine.net]

  When the wine industry is healthy, everyone benefits. When we’re suffering, we all see the impact. Bottom line, we’re in this together.

UPDATE: August 31, 2020; Update from the U.S. Wine Trade Alliance: “The USTR published their decision regarding the August 2020 carousel for the WTO / Airbus award. The tariffs on wine remain the same, with no changes to either tariff percent or category.” Read the full statement here

Chevrolets and Chardonnays: 7 Things You Can Do To Better Manage Your Winery’s Auto Exposure

There was a television commercial a number of years ago where the owner of a famous donut shop was so frazzled  going back and forth getting the donuts made that he ran into a clone of himself coming in the door as he was leaving out the door to go to work. With all of the growing, harvesting, grape crushing, fermenting, ageing and packaging – how many of you have felt the same way? There certainly is a lot to do and manage in the winemaking business, isn’t there?

  With all you have to think about, how many of you have given much attention to managing your driver safety exposures? You’re not alone. Driver risks are a significant loss exposure for wineries – one that is often overlooked. Vehicle crashes unfortunately are on the rise – and jury verdicts for those found at fault are reaching amounts never before considered. Are you doing anything to manage these often unnoticed risks for your winery? Or are you merely telling your employees to “Be safe out there!” as you hand them keys to your vehicles?

  There are a number of things you can do and best practices you can use to lessen your exposure to this potentially serious risk. How many of these strategies are you using?

1.  Do you demonstrate management support for safe driving?

2.  Do you have a driver selection process?

3.  Do you evaluate your drivers?

4.  Do you have written driver safety policies and procedures?

5.  Do you have driver orientation and training programs?

6.  Do your drivers know what to do if they are in an accident?

7.  Do you have inspection and maintenance procedures defined?

  Yes, there can be quite a few things to help manage your driver exposures, but in the long run they can help you avoid needless injuries and losses.

Management Support

  As an old saying goes – “if it’s not important to you, it won’t be important to your employees”. There are a number of ways that you can demonstrate the importance of driver safety to you and your winery:

•    Do you have a clearly written driver safety policy with standard driver operating procedure?

Has it been reviewed by legal counsel for conformance to accepted legal procedures?

      a.  Is it consistently enforced?

            oIs it distributed to all employees?

      b.  Do all employees sign an acknowledgement

           that they will follow all these rules?

      c.  Do you hold all drivers accountable for their

           driving and any accidents sustained?

•    Is someone assigned to oversee driver safety?

•    Do you routinely include driver safety topics at employee meetings?

Selecting Your Drivers

  Having a meaningful driver selection process is an important part of managing your winery’s driving exposure. By having a good process in place, you can help avoid future losses from accidents and vehicle abuse. Have you included these practices in your selection process?

•    Use of defined criteria (in writing) to select your drivers?

•    Do these criteria include:

      a.  Background checks

      b.  Drug screening

      c.  A review of past work records

      d.  A 3-year review of each person’s MVR (Motor Vehicle Record) to rule out any disqualifying offenses

•    Do you stipulate that failure to participate in MVR screening could result in denial of employment, loss of employment or loss of driving privileges?

Driver Evaluation

  Even though most of your employees can probably drive, determining which candidates are acceptable is important in managing your driving risks. Do you:

•    Verify their drivers’ license is valid and current in their state of residence.

•    Hire only experienced drivers with a minimum of 2 years driving experience

•    Check references provided

•    Know if candidates have the ability to understand both oral and written instructions?

•    Disqualify drivers with three (3) or more violations in 3 years

•    Disqualify drivers with two (2) or more preventable accidents* in 3 years.

•    Require compliance with a drug & alcohol testing program.

•    Disqualify any driver convicted of any alcohol or drug related offences.

•    Maintain an up to date list of authorized drivers

•    Have a procedure to assure your drivers maintain an acceptable MVR during their employment.

Written Policies and Procedures

  In today’s business environment, you can serve your winery well by documenting how you expect your business to be run and how you expect your drivers to operate. Does your documentation include?

•    A written driver safety program with:

      a.  Requirements for 100% seat belt use?

      b.  Rules prohibiting distracted driving?

      c.  Reporting rules for any moving violations?

      d.  Rules on permitted use of winery vehicles?

•    Is your program written in a clear and concise manner?

•    Are these rules readily available and easy to obtain in an organized, neat and easy to use format?

•    Do you assure that all drivers are thoroughly familiar with the rules and is their knowledge tested? Do drivers sign an acknowledgement confirming they will follow all these rules?

•    Are your rules vigorously enforced?

Orientation and Training

Driver training presents some great opportunities for your winery to better manage your driving exposures.

•    In order to be effective, training should:

      a.  Be recurring.

      b.  Use a variety of methods to communicate your information.

•    Daily 5-minute safety talks.

•    Posters

•    Paycheck stuffers

•    Safety meetings

•    Training videos

      a.  Routinely reinforce safe driving practices.

      b.  Be both informal (short talks at the beginning of a shift) and more formal (classroom) in nature.

      c.  Select topics and organize content ahead of time.

      d.  Test employees on what was covered. Results should be documented and in each drivers file.

      e.   Follow a checklist to assure all topics are consistently covered.

      f.  Include defensive driving..

      g.  Include what is considered distracted driving.

      h.  Require mandatory attendance and  document each driver’s file.

      i.  Utilize driver trainers along with monitored probationary periods for all new hires.

Incident Reporting

  Do your drivers know what to do (and what not to do) in the event of an accident? An improper statement immediately following an accident could make your winery liable. It is important that you establish procedures that inform your drivers how to properly respond in the event of an accident. You may want to consider obtaining legal advice to document how your drivers are expected to respond immediately after an accident. Drivers should know: 

•    How to respond to  any immediate concerns

•    When they should  notify someone

•    Who they should  call

•    Who they should talk with

•    What they should  say (or not say)

•    What information they should  gather

•    Are there any additional steps they should take

  Consider having a checklist for your drivers to guide them through the proper steps expected of them in the event of an incident. By having all the proper procedures (and training) in place before an accident, your winery and your drivers are more apt to respond properly to an accident and not react in a way that could have a detrimental impact on your winery.

Inspections and Maintenance

  “What gets inspected gets dealt with” is a management saying often stated and one that may serve your winery well. Properly inspected and maintained vehicles have a much greater chance of operating correctly than vehicles that are neglected. It is important for you to have confidence in your equipment. Steps your winery can take in this regard include:

•    Training drivers how to do a thorough inspection.

•    Making sure all vehicles are Inspected (in writing) prior to use.

•    Having repairs and maintenance issues remedied as promptly as needed.

•    Having all physical damage reported to supervisory management.

•   In the event of a breakdown or weather related condition, assuring your drivers know who to notify for assistance.

•   Having all repairs completed by licensed shop/mechanic.

•   Having a licensed mechanic/shop inspect each vehicle on an annual basis.

•   Having all vehicles receive periodic scheduled maintenance; document this in each vehicle file

•   Keeping maintenance files for each vehicle for a minimum of two years.

•   Completing preventative maintenance within vehicle guidelines and the manufacturer’s recommendations.

  Having well-maintained vehicles will give your winery the confidence that your vehicles are as they should be and not the cause of an incident due to a mechanical failure.

Conclusion

  Implementing these kind of strategies effectively for your winery will get you off to a great start in managing your driving exposures. As a manager, you have a responsibility to your employees, your customers, and the general public to know who is driving and that they meet the driver guidelines you’ve established. You have a responsibility to implement sound business procedures.   train your drivers so they know and can follow  your procedures safely, and assure that the vehicles you have on the road are safe and well maintained.

  There may be other components that will also help in managing your winery’s driving exposures. You should also consider talking to your insurance agent to discuss your specific circumstances and what else you might do to lessen your driving risks.

* A preventable accident is any traffic accident which results in property damage and/or personal injury, regardless of who is injured, what property was damaged, to what extent, or where it occurred, in which the driver in question failed to exercise every reasonable precaution or action to avoid the accident. Driving to avoid preventable accidents is defensive driving. The fact that the driver was not charged with a traffic violation by law enforcement is not part of this definition. (Derived from the National Safety Council DDC-4 Guide)

** The National Safety Council defines defensive driving as “driving to save lives, money and time, in spite of the conditions around you and the actions of others.”

Disclaimer

  The information provided in this article is intended for general informational purposes only and should not be considered as all encompassing, or suitable for all situations, conditions, and environments. Please contact your attorney if you have any questions.

Email Segmentation: A Critical Tool in the Digital Marketing Toolbox

By: Nathan Chambers, Gaynor Strachan Chun and Susan DeMatei

Research shows that your email success can be significantly improved if you enact a campaign list segmentation strategy – MailChimp reports that segmented emails can increase open rates by +15% and click through rates by up to 100%.

  Segmenting your email list allows you to deliver more personalized and relevant content to specific groups of customers. Not segmenting your list results in higher customer attrition. On average, over half of those who subscribe to email lists end up throwing the email in the trash when it hits their inbox. 

  For your customer, there are many reasons why they will be more likely to open an email from a brand that delivers content that is more relevant to them in a timely manner. One of the most important reasons is it shows them you understand their needs and wants. In other words, it delivers a more personalized experience.

  For you and your brand, the value of email list segmentation is quite simple – increased ROI. Segmenting your email list drives increases in loyalty and lifetime value (LTV).

  Let’s look at it from your customer’s perspective. They were at the winery, they filled out a customer information card, or made a purchase and shipped bottles home; they either asked or were aware they’d be added to the mailing list and are hoping for special offers, events, or other news. This is a transaction of trust. As a payback for their trust in you, customers expect to get something of value back, on a reliable basis, and not so often that it adds to their in-box clutter. If the only thing you offer them is random, or generic, you violate that trust.

  But where do you start? Here are 7 effective ways to segment your email list and leverage other data to increase your email ROI.

#1: Demographics:  The simplest way to segment your list is by demographics. Age, gender, job title, native language, etc. These traits, individually or combined, can help you understand what products or offers they are more likely to be interested in.

#2: Survey Results:  People like being asked what they want and need. Rather than overloading your opt-in function, use your list to conduct surveys. This way you can create a more complete picture of your target audience. Ask about interests, needs, why they chose your brand.

  You can then use your survey results to segment by interest, sending content that is relevant to the different interest groups. Maybe you have a group of customers who love recipes and like to cook. Target them with an email about a new wine and include a food and wine pairing recipe element. This will greatly increase your rate of engagement with this customer segment. The more they engage, the more likely they are to keep an eye out for further emails. Repeating that engagement until it becomes a regular habit.

#3: Sending Frequency:  Nobody likes their email box to be overloaded, even if the emails they are receiving might be relevant to them. Understanding the optimal cadence for your emails can be difficult. Use your email engagement data to understand the best frequency. The ideal frequency may also vary by segment.

#4: Geolocation Segmentation:  The easiest and quickest way to segment your database is through geography. For instance, target people in a certain area for events, or shipping offers based on weather. When they joined the mailing list, they felt a connection. Your customers expect accountability, integrity, and accuracy. Geolocation segmentation offers many benefits beyond email campaigns. “Taking the winery on the road” brings the winery and the wines to those who may not make it back to your tasting room. Your winery can develop relationships with retailers or have Wine Club members host a tasting at their home in a key market.

#5: Page Views:  Where do your website visitors spend most of their time? By analyzing your page views, you can better understand what your visitors are looking for and even segment content to them. Are they looking for the hours your tasting room is open? The send them tasting room information. Are they looking at the gift set page? Send them a vertical package offer. One of the easiest segmented communications in this group is to target a resend to people who opened an email and went to the landing page of the product for sale but didn’t buy. These retargeted communications might be just the reminder they needed to complete the purchase. Whatever messaging you choose to play with, when you tie your email segmentation to website visits, these insights to create more relevant content for your emails.

#6: Purchase Cycle:  Understanding the purchase and repurchase cycle of different groups of customers is invaluable. It allows you to build customer behavior profiles and each profile type will respond to different email approaches. If a customer has just signed up for your mailing list, they will want an introduction to who you are and what you offer. A case or library magnum offer is not for this group who are just getting to know you. What you want to do with customers early in their life cycle with you is reduce barrier to trial, so give them single or double bottle offers with your best-selling wines. Save the big purchases for when they become loyal members (and then segment on their past purchases – see below). With the purchase cycle in mind, you can tailor email content and timing based on customer behavior, increasing your likelihood of conversion. 

#7 Past Purchases:  By analyzing what your different groups of customers are buying, you build an understanding of what products interest them and what products don’t. This allows you to create target segments for each product type and only send information or offers about products you know will interest them, increasingly your likelihood of securing a sale. Additionally, it signals to the customer that you care about their preferences and are not sending them emails about products they would never buy.

  For instance, imagine you decide to send a special offer email on a new vintage of a particular wine. If a group of your loyal repeat customers have never purchased that varietal, why would they care? New members will appreciate the email and may make a purchase because they’re trying new things, but most consumers show you through purchase action what they’re interested in. Send them too many emails that don’t apply and they’ll ignore it or, worse yet, mark it as spam or unsubscribe.

Implementing These Strategies

  Don’t try to tackle all these segmentation strategies at once. It’s more valuable to master one of these strategies before developing the next one than it is to fumble with implementing all of them at once. Baby-steps count. Start with one idea with a goal to try out a new segmentation each month. Then you’ll see what your database responds positively to, and you can play more in the areas that resonate. The single most important thing is to at least try segmentation in all your campaigns. Doing so will undoubtedly increase your success rates and metrics for your ongoing email marketing.

   Susan DeMatei, Nathan Chambers and Gaynor Strachan Chun work for WineGlass Marketing, a full-service direct marketing firm operating within the wine industry in Napa, California.

www.wineglassmarketing.com

Sustainable Wineries Attract More Consumers

By: Briana Tomkinson

  Concern about threats related to climate change is inspiring more consumers to make lifestyle changes like going vegan, upgrading to electric cars, reducing plastic waste and seeking more environmentally sustainable products. It’s also starting to affect how consumers select their wine.  

  Surveys of wine consumers in Canada, the U.S., Sweden and the UK are indicating a growing interest in purchasing sustainably produced wine, favorable perceptions of sustainable certifi-cation programs and certification logos, and a willingness to pay more for sustainably pro-duced wine—particularly by Millennials and Gen Z.

  For many Canadian winemakers, however, their interest in sustainable winemaking began well before consumers started paying attention.

  According to veteran British Columbia winemaker Gordon Fitzpatrick, adopting environmentally sustainable practices isn’t just the right thing to do—it also makes good business sense. “Often, sustainable choices have economic benefits. It’s not mutually exclusive,” Fitzpatrick said. “Every little bit helps.”

  Fitzpatrick has been in the wine business since 1986 when he founded Cedar Creek Estate Winery. He sold the majority of his vineyards to Mission Hill five years ago, but kept one be-tween Peachland and Summerland. In 2017, he launched a new label, Fitzpatrick Family Win-ery, using those grapes.

  The boutique winery focuses on sparkling wine and has approximately one-fifth of the produc-tion capacity of Cedar Creek, topping out at about 10,000 cases at full production. The shift into sparkling wine was a strategic choice to take advantage of the vineyard’s unique microcli-mate.

  “We lose the sun about two and a half hours earlier than most other vineyards,” Fitzpatrick said. “That’s why we specialize in sparkling wine. It creates that natural crisp acidity. I call it shade’s gift.”

  Fitzpatrick Family Winery is located in the Thompson Okanagan region, British Columbia’s pri-mary wine-growing region. The area boasts 84% of the province’s vineyards by acreage and has over 200 wineries. Wine tours are a big draw for visitors to the region. With the local tour-ism association increasingly spotlighting sustainable tourism, wineries like Fitzpatrick’s are get-ting more recognition for their environmentally friendly choices.

  The Thompson Okanagan Tourism Association recently developed a sustainability pledge to identify and feature responsible tourism providers in the region, including Fitzpatrick Family Winery. Other wineries who have signed on to the program include Poplar Grove (https://www.poplargrove.ca/), Grizzli Winery (www.grizzliwinery.com) and Meadowvista (www.meadowvista.ca).

  The region was also officially certified as the first destination in the Americas to achieve the Sustainable Tourism Accreditation from Biosphere International and the Responsible Tourism Institute. The certification criteria includes commitments to environmentally sustainable practices, including ensuring access to sustainable energy and adopting measures to mitigate cli-mate change.

  Fitzpatrick Family Winery was a pilot winery for the program last fall, Fitzpatrick said, which included a thorough audit on water, energy and waste management practices.

  “We think of ourselves as good stewards of the land, but you always want to look at how you’re doing things. They came up with some recommendations on how we can do things even better than we currently are [doing them]. It was a very worthwhile process to go through,” he said.

  Recommendations ranged from replacing big-ticket items like a 25-year-old water pump with a newer, more energy-efficient model, to less costly initiatives like installing flow meters to better monitor water usage, and expanding the winery’s compost program to incorporate food waste from the on-site, seasonal restaurant.

  The winery is also now pursuing organic certification, following a recent $40,000 investment in mechanical weeding equipment that will allow Fitzpatrick to stop using herbicides in the spring.

  In the last five years, Fitzpatrick said consumer awareness of sustainable practices has changed significantly. “People are much more aware and want to know what your practices are, and are you being a good steward of the land,” he said. “it’s nice to be able to stand be-hind what we do.”

Do Wine Consumers Care? Researchers Say Yes

  According to market research by Wine Intelligence, it’s not just hippies who are choosing more socially and environmentally conscious purchases. Interest in organic, fair trade and sustaina-bly produced wine is growing and is now considered mainstream, particularly among consum-ers under the age of 45.

  In the U.S., almost three-quarters of consumers surveyed said they would consider buying sus-tainably produced wine in the future. Seventy percent of Canadians agreed.

  Nine out of ten millennial consumers surveyed said they would be willing to pay an average of $3 more for sustainably produced wine. The research found that sustainability certifications for wine improved consumers’ willingness to buy.

  The research was presented at the first U.S. Sustainable Winegrowing Summit in Sonoma last June. In a speech at the event, Wine Intelligence CEO Lulie Halstead outlined five key concepts  to “sell” sustainability to consumers, highlighting how it’s good for people as well as for the environment:

1.   Focus on the small steps producers and consumers can take today.

2.   Frame sustainability as a positive choice: talk about positive benefits.

3.   Use groupthink for good: invite customers to be part of a larger movement to make greener choices.

4.   Appeal to feelings, not facts: logic is not as persuasive as emotion.

5.   Be brief: keep messaging succinct.

  The second edition of the U.S. Sustainable Winegrowing Summit will be held this year on May 5-6 in Long Island, New York. The event will feature tours of sustainable wineries in the area, as well as a full conference program. Tickets are $50. More details are online at https://www.sustainablewinegrowing.org/summit/.

British Columbia to Host Global Sustainable Tourism Conference

  The Thompson-Okanagan region is also hosting the 2020 Global Sustainable Tourism Confer-ence November 19-22—the first time the annual event will be held in Canada—at the Delta Ho-tels by Marriott Grand Okanagan Resort in Kelowna.

  The event will feature expert speakers and panelists from around the world. Over 500 local, national and international delegates are expected to attend, including destination marketing professionals, airlines, travel agents, international media and tourism-oriented business lead-ers.

  According to President and CEO of Tourism Kelowna, Lisanne Ballantyne, industry research indicates that interest in sustainable tourism destinations is growing. She said recent reports have found 87% of consumers want to travel sustainably, and 67% are willing to pay more for travel that has a less negative impact on the environment.

  In 2019, for the second year in a row, TOTA was named the World Responsible Tourism Award Winner at the Annual World Travel Awards.

  According to British Columbia’s Minister of Tourism, Arts and Culture, Lisa Beare, the prov-ince’s stunning scenery and unspoiled wilderness is a key draw for visitors from around the globe, and the region’s tourism strategy reflects that.

  “Our strategic framework for tourism seeks to responsibly grow the visitor economy by re-specting nature and the environment, and making sure that everyone sees the benefits of this important industry,” Beare said in a press release about TOTA’s award win.

Are More Audits Coming For the Direct-to-Consumer Market?

By Alex Koral, J.D., Senior Regulatory Counsel with Sovos ShipCompliant

Last fall, the state of Texas began the process of auditing all of their direct-to-consumer (DtC) wine shipping licensees, the biggest such audit in the history of this market.

While all states reserve the right to audit their licensees, the scope of this mass audit surprised many. More than 1,600 wineries possess permits to ship directly to Texas customers. Many have already received a notice from the Texas Alcoholic Beverage Commission (TABC) requesting to review their records. This time-consuming process began in September 2019, when the first round of notices were sent, and will continue as the TABC reviews all permit holders to ensure they are in compliance with the state’s laws.

At the heart of this heightened regulatory scrutiny by Texas is the dramatic rise in popularity of the DtC channel in recent years. Many wine drinkers have come to appreciate the DtC wine shipping market for bringing a direct connection to their favorite brands and greater access to wine clubs and highly-allocated labels, creating a $3 billion national market. 

The beverage alcohol industry has long been one of the most regulated enterprises in the country, so it is little surprise that this increased scrutiny has come to the DtC wine shipping channel. States have a vested interest in making sure they collect the full balance of tax money they are due and that their laws are followed to the letter. As Texas’s audits proceed, they could well represent a harbinger of what’s to come for DtC wine shippers, making it important to understand how and why regulators are examining this market. 

Even the Audits Are Bigger in Texas

In May 2005, Texas Governor Rick Perry signed into law Senate Bill 877, a transformative reform of the state’s Alcoholic Beverage Code that smashed open the door for wineries to ship directly to consumers in the state. Since then, wine enthusiasts in Texas have been able to purchase wine directly from out-of-state wineries, provided those wineries obtain the necessary sales tax and Winery Direct Shipper’s permits.

The state’s timing was no coincidence. Just one week after Gov. Perry signed the new bill into law, the Supreme Court held in Granholm v. Heald that the states’ ability to control their internal alcohol markets under the 21st Amendment did not supersede the general prohibition on discriminating against out-of-state interests under the Commerce Clause. 

Under the decision, states could no longer prohibit direct-to-consumer wine shipping if they allowed in-state shipping. In the years following Granholm, a wave of reforms flowed across the country. But Texas was one of the first to update its wine shipping laws. And today, the state lives up to its outsized reputation by being the second-biggest recipient state for direct-to-consumer wine shipping, according to Sovos ShipCompliant data. 

So what are Texas regulators seeking to achieve with this wave of audits? The goal appears to be ensuring wine shippers are properly licensed, paying excise taxes, reporting shipments, and not exceeding limits on how much they can send to individual Texans. The TABC has asked licensees for the sales data used to produce their Texas Excise Tax returns, including requests for copies of certain invoices

In addition to order data and invoice copies, the TABC has requested information regarding licensees’ business structures, including copies of their state and federal permits, and lists of corporate officers and directors. Contracts or other agreements that licensees have made with fulfillment houses and similar service providers have also been sought.

Finally, the TABC is looking into the specific wines that licensees have shipped to Texas consumers. Texas’s DtC statutes prohibit licensees from selling wines that the licensee does not personally produce or bottle. As such, the TABC has requested licensees provide Certificates of Label Approval (COLAs) and production records for wines shipped to Texas consumers.

These past requests, though, are subject to change at any time and any DtC wine shipper that does receive an audit notice should ensure they comply with the specific requests on their notice.

This heightened review by the state of Texas comes at a time when many states are working to ensure that direct-to-consumer shippers are complying with local regulations. For example, the Michigan Liquor Control Commission is stepping up in response to reports by the Michigan Beer and Wine Wholesalers Association alleging widespread violation of its DtC shipping laws, and the Mississippi Supreme Court recently heard a case regarding stings conducted by the state Alcohol Control Board to catch illegal DtC shippers. 

While Texas is currently the only state to have announced a review of this size, it almost certainly won’t be the last. 

As the Market Grows, So Will Regulator Scrutiny

The Supreme Court’s decision 15 years ago in Granholm v. Heald triggered a wave of wine shipping reforms across the country. Today, 45 states plus the District of Columbia permit DtC shipping, enabling over 90% of Americans to connect directly with their favorite wineries. 

As a result, direct-to-consumer wine shipping has grown from a small, niche market in 2005 into a hugely important channel worth more than $3.2 billion in 2019. According to Sovos ShipCompliant’s annual Direct-to-Consumer Wine Shipping Report, the channel grew by  7.4% percent in value and 4.7% in volume last year as more wineries invested in e-commerce, the average price-per-bottle increased, and Oregon and Washington again outpaced the overall channel in shipment growth, among other trends. 

In many cases, DtC shipping succeeds because it allows smaller wineries access to markets they would struggle to enter if they relied solely on the traditional three-tier system due to their relative size. According to the 2020 Direct-to-Consumer Shipping Report, wineries in the small winery category (5,000 to 49,999 annual case production) again dominated the winery shipping channel in 2019, accounting for 42% of the volume of shipments and 45% of the value of the DtC channel. DTC shipping has emerged as one of the best ways for these smaller producers to reach a national audience. 

This growth also reflects consumer demand across the economy for goods delivered directly to their doorsteps. Apps like Instacart and UberEats have democratized delivery, and consumer expectations for quick and convenient delivery have never been higher. This presents a tremendous opportunity for wine sellers to expand their reach, develop their customer base and increase their sales online. 

The marketplace is also likely to get more competitive in the new decade. In 2019, the Supreme Court paved a path for expanded DtC shipping of wine by retailers in its ruling in Tennessee Wine & Spirits Retailers Association v. Thomas. While only 15 states currently allow some DtC wine shipping by out-of-state retailers, many see this decision as an opportunity to challenge old laws to expand this market. Litigation is ongoing in several states that seemingly discriminate against out-of-state retailers in regards to their ability to ship wine DtC – notably Illinois, Michigan, and Missouri. Much in the same way that Granholm prompted a wave of statutory reform, observers expect consumers and advocates to push legislative changes across the country. While it may take a number of years for these changes to take effect, expanded retail shipping is something everyone should be watching closely. 

In the meantime, regulators have a vested interest in making sure all sellers—whether package stores, direct wine shippers or otherwise—are in compliance with the law. That means ensuring they are properly licensed, collecting all applicable taxes, not overselling to individuals and preventing sales to minors. So if other states see the Texas audits bring positive results, they are likely to follow suit to uncover gaps in their own systems.

Overall, the DtC wine shipping market is still young and regulators are still figuring out how to manage it. As the market grows, we can expect this trend of closer attention being paid to DtC shipping to continue at the state levels, making now the best time for wine producers to firm up their direct-to-consumer compliance processes and overall channel strategy.

Now Is the Time to Ensure Compliance

The risk of audits like those in Texas underscores the importance of closely adhering to the various laws and reporting requirements imposed by states. That the regulations can vary among states only adds to the complexity, whereas failure to comply may result in fines, loss of home state or federal licenses, and even possible criminal charges.

Wineries have a number of ways to handle this. Some are able to build in-house teams that can manage compliance, though this can be expensive. Others rely on outside consultants to manage their compliance needs. But of course, automating compliance processes is the easiest way to ensure audit success, limit compliance risk and reduce the overall administrative burden on shippers as state-by-state tax rules, rates and forms change. 

Shipping wine can be complicated, and compliance will never be a task that anyone relishes. However, as the direct-to-consumer channel grows in its importance to the industry, it’s vital that producers shore up their compliance strategy now before the next round of state audit notices goes out. 

About the Author: Alex Koral, Senior Regulatory Counsel with Sovos

Alex Koral is senior regulatory counsel for Sovos ShipCompliant. He actively researches beverage alcohol regulations and market developments in order to inform development of Sovos’ ShipCompliant product and help educate the industry on compliance issues. Alex has worked with the company since 2015, after receiving his J.D. from the University of Colorado Law School.