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Legislation aimed at bringing winemaker Gallo's East Coast hub to SC gets Senate approval

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Wine giant Gallo is eyeing Fort Lawn near Lancaster for s $400 million distribution hub, but the deal is tied up in legislative red tape. File/Warren L. Wise/Staff

COLUMBIA — Senators approved changing South Carolina’s liquor laws April 8 to lure winemaking giant Gallo to the Palmetto State, despite concerns of competition with small retailers.

The California wine producer, E&J Gallo Winery, is in talks to open its proposed East Coast bottling, canning and distribution hub in Chester County as part of a $400 million economic development deal expected to bring nearly 500 jobs.

The county, an hour north of Columbia, has given initial approvals for tax incentives.

But Gallo also asked lawmakers to shake up its so-called three-tier system, which subdivides the industry into producers, wholesalers and retailers, and OK the opening of satellite tasting rooms around the state. Under current law, samples and retail sales for wineries are limited to where the beverages are produced.

The Senate obliged by passing the legislation, though there were several changes to the original proposal: Gallo would only be able to open three, not four, tasting rooms, could only sell six bottles of the product to each customer and they must close at 5:30 p.m. so as not to compete with local restaurants. The company also will be required to purchase back its own wines from wholesalers in order to serve them at the tasting rooms.

The bill will now be sent to the House for its consideration.

Still, liquor stores' hopes were disappointed when a last-hour amendment, brought by Sen. Richard Cash, R-Anderson, to remove any retail element from the tasting rooms failed to pass. 

"My amendment says, you can have your tasting rooms, which is a change in the law," Cash said. "But we're not going to let you infringe upon the three-tier system and be the retailer. It's not fair to the ABC stores."

Multiple other lawmakers rose to voice similar concerns but their objections were ultimately overruled. 

Retailers say they have harmoniously coexisted with smaller South Carolina-based producers, like Duplin Winery, which sells bottles for take-home consumption at its North Myrtle Beach tasting center, since exceptions were carved out in state law two years ago.

But Lock Reddic, president of Green’s Beverages, a wine, beer and liquor retailer in the Columbia area, calls the massive Gallo bottling operation "a winery in name only" that now will be able to bring in any of its 130 wine brands produced around the globe and sell them directly in a retail setting.

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"We recognize everyone needs to win here," Reddic said. "We want to see them come here. We think they'll be a great corporate citizen.

"We just can't have the biggest, most powerful supplier in the world come in and ask to change our laws," he added. "They’re a $5 billion-a-year company."

Four of every 10 bottles of wine sold in South Carolina are owned by Gallo Wines, Reddic said.

The company controls more than 30 percent of the U.S. wine market, Karl Storchmann, New York University economist and American Association of Wine Economists executive director, told Wine Enthusiast magazine. Its major brands include Barefoot, Apothic, Dark Horse, Arbor Mist and Mark West. Gallo is also in the low-cost hard-liquor business, with brands like Amsterdam Vodka and E&J Brandy.

Reddic also raised concerns over comments made by Gallo that it wants to be able to bring in exclusive wines to its tasting rooms not available to other retailers to sell. 

The bill was supported by Senate Judiciary Committee Chairman Luke Rankin, R-Myrtle Beach, co-sponsored by powerful Senate Finance Committee Chairman Hugh Leatherman, R-Florence, and received a further boost from the governor.

A Gallo spokeswoman did not respond to a request for comment by The Post and Courier.

The law change comes with an investment and jobs requirement tailored directly to the Gallo facility. The company also must pay an annual $5,000 fee per location.

The full details of Gallo's proposed tax incentive deal with Chester County are still unknown to the public.

In addition to county incentives, the company would also likely be eligible for state tax credits for jobs created at a rate of $25,000 per position annually, up to five years.

Reach Jessica Holdman at Follow her @jmholdman on Twitter.

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