Getting Stomped

With its sun-washed stone walls, arched windows and domed bell tower, the headquarters of Haak Vineyards & Winery looks like an old Spanish mission. Behind the building, acres of vineyards encircle a picnic area and patio. The charming winery in Santa Fe, a small town about 25 miles south of Houston, is bringing the promise of the Texas wine industry to a region where such grapes have never been grown before.

"Texans are pioneers," says owner and winemaker Raymond Haak, a retired instrumentation engineer who did well in the oil industry. "We love challenges."

Texas A&M extension agents told Haak that the Gulf Plains were no place for wine grapes. But Haak built his operation here anyway. And the tangle of thick vegetation outside would suggest that his grapes are doing quite well. "With its warm breezes and microclimate, [Santa Fe] is an excellent location for growing grapes," brags the Haak Web site.

On this August afternoon, the crush is in full swing. Giant plastic bins full of dark red grapes are carried by forklift to a huge destemming machine. The partially crushed grapes are then piped through a wide plastic hose to a bladder press, which will squeeze out the bright red juice. It looks just like a small winemaking operation in Napa or Oregon. But appearances can be deceiving.

Haak's operation is typical of the new breed of small wineries in Texas. Owned by amateurs and retirees, they pay the rent by selling modestly priced picnic wines from their tasting rooms. You will probably never see the products from these wineries in your local supermarket. They produce minuscule amounts of wine. "We're in the entertainment industry," says Haak, whose winery produces 3,500 cases a year.

On September 1 new legislation granting wineries special exemptions from the state's liquor laws takes effect. Depending on your point of view, these new laws will bring either the second coming of the Texas wine industry or its further stagnation. Small winery owners like Haak are excited. But industry experts contend that the Texas Alcoholic Beverage Commission (TABC) regulations that have been changed aren't the ones that really matter.

This code is an exercise of the police power of the state for the protection of the welfare, health, peace, temperance and safety of the people of the state. -- Texas Alcoholic Beverage Code

The Texas Wine Marketing Research Institute is part of Texas Tech University in Lubbock. The institute compiles statistics, releases reports and issues updates to wineries and vineyards across the state. The location of the group is not as unusual as you might think; some of the finest grapes in Texas are grown in the area around Lubbock. A local vineyard once donated bottles of wine to a Texas Tech homecoming banquet; the bottles were placed on every table. But before they could be appreciatively swished and sniffed, the party was raided by agents of the TABC. The donation had been judged illegal, and the wine was confiscated.

Under the three-tier system mandated by law, a winery wishing to make such a contribution would have to first sell the wine to a distributor, who would in turn sell it to a retailer or a caterer. Then the winery could buy back its wine at the full retail price -- only then would it be allowed to give the bottles away. The three-tier system supposedly protects Texans from evil liquor manufacturers, ensures local control of the liquor business, and increases the state's tax revenues. But it's also effective at protecting the profits of entrenched distributors, reducing competition for existing retailers and maintaining the status quo.

In 1992 I asked Dr. Steven Morse, then the director of the Texas Wine Marketing Research Institute, about the irony of the state's wine marketing authority being located in a dry county. Morse assured me that although Lubbock was dry, its citizens actually drank a lot of wine. "So why doesn't Lubbock vote itself wet?" I asked, innocent of the fine points of Texas politics.

"It's not that simple," Morse told me. He proceeded to explain that the liquor retailers just across the county line would be out of business if Lubbock had its own liquor stores. And so these wealthy merchants make large contributions to local politicians to see that the matter never gets put to a vote. Wet-dry elections are extremely rare in West Texas, and whenever one seems imminent, the Baptist Church joins the existing liquor merchants in opposing it.

Alcohol is considered a tool of the devil by the Baptist Church, just as it was when prohibition was repealed. The Texas Alcoholic Beverage Code was written, in part, to satisfy the many opponents of prohibition's repeal. Its temperance-minded authors made sure that any inducements to drink (like giving away free samples) were illegal. This has long complicated the lives of wine sellers by limiting tastings and forcing competitions to buy the wines being judged.

By the same logic, the code strictly limited advertising. A winery may not, for instance, erect a billboard that depicts a bottle of wine to advertise its tasting room. Under the revised code going into effect next month, the state will perform an amusing juggling act as it attempts to provide marketing assistance to Texas wineries and simultaneously promote public temperance.

The legal problems that plague the Texas wine industry are especially frustrating to many of those who work in it, because the laws all seem so pointless, so petty and so easy to fix. But when it comes to liquor in Texas, common sense falls into the rabbit hole and emerges in TABC-land, where nothing is quite as it seems.

Established at the repeal of prohibition in 1935 as the Liquor Control Board, the TABC has had a checkered career, according to the Handbook of Texas Online. Coke Stevenson Jr., who ran the agency from 1949 until 1968, resigned amid allegations of influence peddling. In 1975 a TABC official was dismissed for allegedly accepting bribes from a Houston liquor store. Sherman McBeath, a former U.S. Marine who ran the agency in the 1980s, was accused of selectively enforcing the code against minorities.

In 1992 the agency faced the Texas Sunset Advisory Commission, a review board that assesses the performance of state agencies. Legislators from Houston and other districts related horror stories about TABC police tactics, and critics accused the beverage commission of having too cozy a relationship with the liquor industry. The comptroller's office and other powerful forces in Austin called for the agency to be disbanded. But the TABC survived the review process with little more than a slap on the wrist.

The new changes in the state liquor laws actually began as a much more ambitious attempt to bring the beverage code up to date. A proposal backed by the California-based Wine Institute would have allowed mail order and Internet sources to ship wines directly to Texas consumers for the first time -- and for Texas wineries to ship within or outside the state. The "direct shipping" law was defeated by the well-funded Texas liquor lobby. Four large liquor companies, including Republic Beverage of Houston and Block Distributing of San Antonio, distribute some 85 percent of all the wine sold in the state. These companies, according to a May article in The Dallas Morning News, are generous contributors to Texas political campaigns. Their influential lobbyist, "Butch" Sparks, has been single-mindedly promoting big liquor's interests in Austin for more than 30 years.

The changes passed by the last legislature are a consolation prize for beleaguered wineries. The laws make it possible to ship wines directly within the state (without a distributor) and to hold festivals on a winery's premises. And for the first time, wineries in dry counties will be able to sell their bottles for consumption off-premises. (Previously, such wineries had to direct you to a liquor store in a wet county to buy their bottles.) The legislation also created the Texas Wine Marketing Assistance Program, which sponsor Representative David Swinford, R-Dumas, says will help small wineries that have yet to find a market.

"The new laws will allow more small wineries to survive," says Haak. "These little wineries that make 500 or 1,000 cases are going to be able to support themselves now." It's hard for a small winery to make any money selling at the wholesale price to a liquor distributor. Selling to customers from a tasting room at full retail, on the other hand, is very profitable.

"Half a dozen new wineries have popped up since the bill was passed," reports David A. Miller, executive director of the Texas Wine and Grape Growers Association. "If you look at a map, you see that half of the state is dry. We've got a lot of wineries in those dry areas. They can make wine, but they can't sell it. This levels the playing field for them."

The Texas wine industry is headquartered in West Texas. The best grape-growing region is in the High Plains near Lubbock. The Spanish called this area the Llano Estacado, which means staked plains. It was covered with prairie grasses when the conquistadors found it; it was also completely devoid of landmarks. They had to drive stakes into the ground as they traveled to keep from getting lost. Today, the High Plains is a featureless stretch of cotton fields with no trees, no mountains and no significant bodies of water. The locals wax eloquent about the beauty of the sunsets and the wide-open spaces, but nobody will ever mistake this wine region for the Napa Valley or the South of France. Tourism is not a major factor in the local economy, either.

The coolness and the lack of humidity are why this area is best for grapes, viticulture consultant Dr. Charles McKinney tells me. In 1981, while serving as director of research at the University of Texas Lands Office, McKinney headed up the experiment that started the modern Texas wine industry. UT owned more than two million acres in different parts of the state at the time, and it was McKinney's job to come up with ways to use the acreage profitably.

On a piece of property near Fort Stockton, UT planted wine grapes. "Grapes need less water than cotton, and sell for more money," McKinney explains. More than 1,000 acres were planted with a multitude of varietals, including chenin blanc, French columbard, ruby cabernet, barbera, chardonnay, sauvignon blanc, cabernet sauvignon and muscat canelli. Many did well.

The university leased its lands to private-sector concerns, which ran the actual businesses. They contracted to lease the grapevines to a newly formed Texas winery called St. Genevieve. The winery was once well known for its sauvignon blanc. "Unfortunately there wasn't much of a market for sauvignon blanc in Texas then," observes McKinney.

Although the grapes did well, the winery did not. It was repossessed by Bank of America, which ran the winery from 1986 to 1987. Then, in a complicated lease-back agreement arranged to get around TABC regulations, a group that includes the French winery Cordier took over St. Genevieve and has run it ever since.

Wine has always been a hard sell in Texas. Thanks to our hellish summer temperatures, it's expensive and difficult to store and transport it here. And while the sales have increased in the last 20 years, we are still better known as one of the nation's largest per capita consumers of beer. For all of these reasons, a wine culture has never really developed in Texas. A high percentage of the consumers who do drink wine have unsophisticated tastes.

The varietals McKinney planted were way ahead of their time. Barbera did wonderfully, he recalls, but nobody had ever heard of it in Texas. Muscat canelli, a grape that makes fragrant aperitif wines in Europe, wasn't popular then either. Today it is widely considered one of the few varietals that really thrives in Texas, although the wine still isn't popular with the state's consumers. Most of the experimental varieties have since been torn out to make way for cabernet sauvignon and chardonnay, the only two varietals that seem to sell in the Lone Star State.

Cotton farmers across the High Plains started imitating the successful agricultural experiment by planting cabernet and chardonnay grapes of their own. Several wineries were built near Lubbock, but they were handicapped by their remote location and their inability to sell wine to visitors, since Lubbock is in a dry county.

Texas wine got a huge shot in the arm when Southwest cuisine took off in the early 1990s, making Lone Star wines a popular fad. Wineries began to spring up, but for the most part they were outside the High Plains region. "People who want to invest in a winery want a certain kind of lifestyle," McKinney observes. They want to live in an attractive place, not out in Lubbock. They also, quite sensibly, want to build near the major drinking markets. As a result, Texas wineries and Texas vineyards grew up in different parts of the state.

This dislocation has always been a source of problems. Many of the former cotton farmers who grow grapes near Lubbock are Baptist teetotalers. It is common practice in viticulture to prune away as much as half of the fruit to increase the intensity of the flavor in the remaining grapes. But when viticulturists advise Lubbock farmers to follow this practice, they are often ignored. Grapes sell by the ton, and the farmers have no incentive to sacrifice their yield for the sake of good wine. They don't even drink the stuff.

Wineries located hundreds of miles from the vineyards also have an image problem. "People like to see grapevines when they visit a winery," McKinney says. But vinifera grapes, the kind that fine European wines are made from, suffer from Pierce's disease in southern climates. To keep the tourists happy, many South Texas wineries plant hybrid grapes, a disease-resistant cross between vinifera and native American species. The hybrid grapes do well in extreme climates, but most of the sweet, foxy wines they yield are unpopular among sophisticated wine drinkers.

One wine writer described the typical hybrid flavor as "Welch's grape jelly with a shot of vodka." Nevertheless, hybrids can be quite profitable; the New York Finger Lakes region is planted almost entirely in hybrids, which are used to make wine coolers and sweet, cheap and high-alcohol wines like Wild Irish Rose.

Santa Fe is a good location for grapes -- it's just not a good location for vinifera grapes. On his acreage, Raymond Haak grows Black Spanish and Blanc du Bois hybrids, which he uses to make port and fruity white wine. In a tasting room, his wines favor well, and they sell at an excellent profit. Haak recently expanded his production by buying hybrid grapes from other local growers. The ones I watched being crushed were grown in Fulshear, 28 miles west of Houston.

"Do you think there's a movement toward hybrid grapes in Texas?" I ask Haak.

"Yes, I think so. It's a struggle to get in tune with our climate and soil. I tried to grow vinifera here. I had 150 vines planted," he says. "The vines did great for a couple of years, and then they all died from Pierce's disease."

"Do you think anybody will ever make a good wine from hybrid grapes?" I ask. My arrogance gets Haak hot under the collar.

"Wine is a business," he says. "And quality is arbitrary. The tourists that come here are not discerning buyers. But who says that your taste is better than somebody else's? The better wine is the one that sells the most. Let folks like what they want to like."

In a study conducted by Texas A&M researchers, 240 wine drinkers from around the state were asked to compare a glass of French wine with a glass of Texas wine. The subjects were asked which one they preferred, how much they would be willing to pay for each, and which wine they would be more likely to give as a gift.

The wine drinkers liked the French wine substantially better, were willing to pay a higher price for it and were much more likely to give it as a gift. The results were similar regardless of age, income, education or the subject's degree of "Texan-ness." But in fact, the two glasses contained the exact same wine -- from the Messina Hof winery in Bryan.

"Quality really isn't the problem," says Dr. Tim Dodd, the current director of the Texas Wine Marketing Research Association. Dodd doesn't think that hybrids will hurt the reputation of Texas wines. While small producers keep planting them, their wines are hardly ever sold outside of a tasting room because the grapes have no name recognition among consumers, he says. Currently hybrid wines account for only about 1 percent of the market.

Dodd, who is originally from New Zealand, conducted a quality experiment of his own during his last visit to London. He brought five bottles of Texas cabernet in the $15 to $18 price range with him. And he asked a London friend to purchase five bottles of the best Bordeaux available in the same price range. Then he conducted a blind tasting for a group of London wine lovers. "Texas wines took second and fourth in the top five," Dodd reports.

Why do Texas wines have such a poor reputation? There are many opinions on the subject. Wine writers often opine that Texas has yet to find its varietal. New Zealand made a huge splash in the world market with sauvignon blanc. Oregon has done remarkably well with its excellent Pinot Noirs. But growers in Lubbock prefer cabernet sauvignon because it draws the highest prices. Unfortunately, Texas wineries must compete in this crowded category with inexpensive imports from Australia and Chile, and highly rated wines from Washington, California and, of course, France.

Consumers also fault Texas wines for inconsistency, a problem inherent in small wineries. "Small batch wines are easy to screw up," says McKinney. "Every little effect is magnified. It's hard for small wineries to consistently make great wine." How small are Texas wineries? Consider that in the early 1980s, St. Genevieve made nearly all the wine in the state. And if you include bulk wines and grape juice sold to other wineries, it still accounts for somewhere between 50 percent and 70 percent of Texas production. Which means that the other 39 wineries in the state combined produce less than one average-sized California winery.

"Is there any hope for the Texas wine industry?" I ask McKinney.

"We may just end up growing grapes for California," he says. "Grapes make economic sense. There is already a California winery with 800 acres planted in Texas. Lubbock is so cheap compared to California!"

"And where will the wine business go?"

"For a long time, we will have a small tourist-oriented industry," McKinney predicts. "The laws are just too restrictive here for anything else." If you have a tasting room, the laws in Texas say you can sell only 25,000 gallons, he laments. That keeps anybody from getting big.

"So what would it take for Texas to really get into the wine business?" I ask the man who helped start the state's wine industry.

"I have an unpopular position," he answers. "I don't think the industry will take off until some big names get involved in Texas."

French investment and expertise helped build the wine business in California and Oregon, he observes. If a big California or French winery were to locate here, it would give us some credibility. So why can't that happen? "It all comes back to the TABC," says McKinney. "The laws in Texas won't allow it."

A winery permit is subject to the same rules as any other alcoholic beverage permit, and the law requires 51 percent Texan ownership for at least 12 months. You can't have two permits, either, so you can't run a restaurant and a winery at the same time.

Shell corporations and phony partnerships are routinely set up to get around these laws. But Rothschild, Mondavi or Gallo aren't going to get involved in those kinds of legal shenanigans. Neither are we going to get a multimillion-dollar showcase like Chandon built in Napa, with a state-of-the-art winery, a fabulous restaurant and a tourist facility, McKinney opines. "Nobody is going to invest that kind of money and take a chance on a legal battle, too."

The Texas wine industry is getting stomped. Statistics show that the industry peaked in 1997 when 27 wineries produced 1.7 million gallons. Since then the number of wineries has increased to 40, but the production level, which dropped to around 1.3 million gallons in 1998, has remained flat. A million gallons may sound like a lot of wine, but it's a stain on the tablecloth compared to the 444 million gallons California produced last year.

Fifteen years ago the business was full of visionaries who firmly believed that the state would one day become a major American wine center. They proved that Texas could grow excellent grapes. They also proved that Texans could make outstanding wines. After that, they thought everything would fall into place. But what they didn't count on was Texas politics. And the fact that for half the state, prohibition has never been repealed.

As the California-based Wine Institute's lobbyists discovered in Austin, the state's liquor interests, and the legislators who regulate them, will block any effort to reform the alcoholic beverage code. These good old boys don't lose a lot of sleep over the fact that their liquor laws suffocate the Texas wine industry. But an upcoming federal lawsuit does give them nasty nightmares.

In 1999 Mark Harwell, a Houston attorney, filed a lawsuit in federal court on behalf of three Houston wine lovers. The suit challenges provisions in the beverage code that forbid wines to be shipped into Texas from the out-of-state. The laws have become especially unpopular among wine collectors because they also make it illegal for Texans to buy wine over the Internet. Harwell argues that the constitutional rights of the plaintiffs are being violated. "The commerce clause of the Constitution prohibits the erecting of trade barriers between the states," notes Harwell.

In the spring of 2000, U.S. District Court Judge Melinda Harmon granted a summary judgment on behalf of the plaintiffs, setting off a short-lived celebration among wine aficionados. The matter was put on hold when the state of Texas filed a motion for reconsideration, and the case has been floating on the docket ever since. Some observers guess Harmon was waiting to see what would happen in the Texas legislature before proceeding.

I ask Harwell what effect the new laws would have on the case. "The recently enacted winery bill, which now allows Texas wineries to ship wines within the state, brings the whole matter into sharper focus," says Harwell. "The new law discriminates between Texas wineries and California wineries, and that's unconstitutional. I'm all in favor of Texas wine, but I'm more concerned with a Texan's constitutional right to buy rare wines by direct shipment, which is still prohibited from outside the state."

Harwell and his clients are not alone in this fight. State laws that restrict interstate commerce for wineries are also being challenged in New York, Florida, Virginia, Indiana, Michigan and North Carolina.

At issue is a conflict between two sections of the Constitution. The amendment repealing prohibition granted the states the right to regulate liquor sales. But the commerce clause prohibits trade barriers between the states. The matter may be decided in Harmon's Houston courtroom. Or it may end up being argued, along with the cases from the other states, in the U.S. Supreme Court. If the direct-shipping ban is struck down, challenges to other discriminatory provisions of the 66-year-old Texas beverage code are sure to follow. But even if the state's laws survive the suit, the issues raised promise to make the TABC's next review before the Sunset Advisory Commission in 2005 a real melee.

The high-ceilinged tasting room of Haak Vineyards & Winery is impressive. The room is decorated with old barrels and winemaking equipment. A refrigerator case is stocked with cheeses and other picnic items. A cheerful attendant sets up glasses on the polished stone bar for a couple who has just stopped in for a tasting. At least for the short term, the future of the Texas wine industry belongs to tourist-oriented facilities like this one.

Raymond Haak offers me a glass of his 2000 cabernet. Blended with 6 percent sangiovese, the red wine is unusually fruity. "I like vinifera wines myself, even if hybrids are what sell here," Haak tells me. When he started making homemade wine from Concord grapes 26 years ago, he wasn't really a wine drinker, Haak admits. His homemade Concord and other sweet wines tasted just fine back then. "But gradually my tastes started changing," he says. Now Haak prefers the taste of vinifera wines.

It's just like when you first start drinking when you're young, Haak says. You want a bourbon and Coke at first. Then, after a while, you graduate to whiskey and water. And you end up drinking Scotch on the rocks. Haak thinks the same thing will happen to his customers. They may like sweet hybrid wines now, but eventually their tastes will change, and he'll sell more of his cabernet.

Of course, Haak doesn't grow any cabernet grapes at his Santa Fe vineyards, or sangiovese either. "Where did the grapes come from?" I ask.

"The Lodi region of Northern California," he tells me. The expensive wines that Haak makes -- a crisp sauvignon blanc, a buttery chardonnay and the fruity cabernet we are drinking -- are all made with California grapes that he buys by the ton and ships across the country in refrigerated trucks. The cabernet sells for $18.95 a bottle. It doesn't compare well with similarly priced wines from other parts of the world, a fact that Haak freely acknowledges.

So why is he making cabernet with California grapes on the Gulf Coast? Hybrid wines may pay the rent, but every winemaker wants to make some wines that will be taken seriously, Haak explains. It's a matter of pride for small Texas wineries. "We're wanna-bes," Haak says. "We want to play with the big guys."


All-access pass to the top stories, events and offers around town.

  • Top Stories


All-access pass to top stories, events and offers around town.

Sign Up >

No Thanks!

Remind Me Later >