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general observations on the wine situation as it now exists in the United States.

Senator King. Very well.

STATEMENT OF MARION DE VRIES, REPRESENTING THE WINE

INSTITUTE

Senator King. You may proceed, Judge.

Mr. DE VRIES. Mr. Chairman and gentlemen of the committee, I represent the Wine Institute.

That the committee may have before it a true picture of the wine industry and thereby more advisedly weigh the merits of the legislation proposed by the Wine Institute, a very brief statement of the wine situation in the United States will be made.

The Wine Institute comprises within its membership the production of more than 80 percent in gallonage of wines produced in the United States, and in its membership more than a majority of the owners of the vineyards of the United States.

The grape industry, which embraces as its avenues of distribution fresh grapes, raisins, wines, and grape brandy, includes all these as integral parts of a single industry, purely agricultural. Compared with other agricultural industries it is one of the first magnitude and importance. Thus the value of the basic commodity of the grape stock of the United States as fixed by the Year Book of the Department of Agriculture for the year 1934 is $35,500,000 as compared with an apple stock likewise estimated of $56,900,000, of barley likewise estimated at $65,095,000, sugar beets likewise estimated at $58,900,000, beans $23,226,000, and oranges at $53,625,000. Therefore the grape industry as a basic commodity takes its place among the agricultural industries of major national importance.

This industry represents an investment of between three and four hundred million dollars. It employs direct labor of from 60,000 to 100,000 employees and indirectly employs labor far in excess of those figures. It shares its gross income with perhaps the greatest variety of industries in the country. In earlier days, practically half thereof went for railroad shipments. Its products contribute to commerce and employment in every State of the Union and its

gross income is accordingly distributed.

Wherefore, as an industry conducive to the commercial general welfare of the United States, by its promotion and development there is no industry, agricultural or otherwise, which thereto contributes more in proportion to its magnitude.

While during the 3 years antedating 1935 the annual grape crop was, owing to elemental conditions, short; during the year 1935 there was an average crop. The forecast of the California agricultural outlook, which has since been confirmed by the actual production of grapes in 1935, fixed the national production at 2,327,000 tons, of which 2,053,000 tons were of California production. This is divided into 362,000 tons of table grapes, 448,000 tons of wine grapes, and the balance of 1,243,000 tons of raisin grapes. Of these 362,000 tons of wine grapes, 135,000 tons of table grapes, and 260,000 tons of raisin grapes, making a total of 757,000 tons, were crushed in the

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production of wine and brandy in the State of California in 1935. It is estimated that there were left on the vines in California alone during 1935, 60,000 tons of wine, 30,000 tons of table, and 30,000 tons of raisin grapes, making a total of 120,000 tons of surplus grapes in California alone which were not consumed by any of the three

commercial grape outputs. Since the California production is apX proximately 90 percent of the United States, in order to complete the estimate, 10 percent should be added

to the foregoing figures, wherefrom the unconsumed and therefore surplus 1935 grape crop of the United States was approximately 143,000 tons or the equivalent of 19,600,000 gallons of dry wine.

There was on hand in California on January 1, 1935, approximately 75,000,000 gallons of unconsumed wine. There was produced in California during 1935 about 55,000,000 gallons of wine. The eastern production added about 5,000,000 gallons or a total of 60,000,000 gallons. There was consumed in the United States in 1935, upwards of 35,000,000 gallons of tax-paid wine, leaving wine stocks on hand in bonded wineries and warehouses on January 1, 1935, of near 90,000,000 gallons, not including imported wine.

The average annual consumption of tax-paid wine in the United States for 10 years preceding prohibition was 51,000,000 gallons. With the tremendous surplus of wines on hand the question is, Is there a market for the same in the United States?

The potential field of consumption of wines in the United States may be illustrated by the fact that while France consumes on an average of 42 gallons of wine per capita per annum, Italy 25 gallons, Spain 22 gallons, Portugal 21 gallons, Chile 21 gallons, and the Argentine 71 gallons, the United States, outside of California, consumes less than one-half gallon per capita per annum. California, during the last year, consumed approximately 3 gallons of wine per capita.

Therefrom is drawn a valuable economic lesson. An unoccupied wine field is before us in the United States, the occupancy of which any

reasonable measure means a tremendously augmented commercial activity and an extremely extended tax basis. If all or a majority of the States reached only the goal attained in California, the wine consumption of the United States would be far in excess of the accumulated stocks and production in the United States, and the grape fields and wineries not alone of California, but of New York, Michigan, Missouri, New Jersey, Ohio, and many of the Southern States now rapidly developing grape and wine industries, would be scenes of renewed and great commercial activities.

It is obvious that of wines in California alone there was an accumulated added surplus during 1935 of several million gallons. Since the years preceding 1935 were exceedingly dry it is probable that that will be greatly augmented.

The raisin demand may be said to have reached its highest point. Discriminating tariffs and quota restrictions of foreign countries have decreased foreign markets and are limiting our foreign distribution. The consumption is not substantially increasing the market for fresh grapes. That market has reached its limit. Wherefore if the tremendous fresh grape and wine surplus of the United States is to be absorbed it must be through the channels of wine and grape brandy.

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The long-established and presently continued policy of the Government has been to rehabilitate and develop the grape and wine industry. Long before repeal the Government made extensive advances running into millions of dollars to develop legitimate outlets for the product of the grape. During repeal many millions of dollars were invested in buying up grape surpluses. Since repeal that policy has been continued. Millions of dollars have been invested by the Government in the building of new and the rebuilding of old wineries and plants and generally in the development of outlets for this product of the grape. It therefore may be said that the development of this great agricultural industry is one which has received the distinct approval of and to which the Government is definitely committed on account of the vast investments it has.

As an agricultural industry worthy of the Government's support in the interest of the public welfare, the Wine Institute officered by a president, Mr. A. R. Morrow, one of the best-informed wine men of the country, of long years of wine experience and knowledge, and a board of directors thoroughly experienced and versed in the industry, has undertaken the rehabilitation and development of the industry. The Institute has made a survey of the wine industry of the United States and thoroughly explored every possible avenue of distribution and ascertained the impediments thereto with a view of rehabilitating the industry and placing it in a position of commercial success. In that effort in which neither labor nor expense has been spared, notwithstanding the financially crippled condition of those therein engaged owing to prohibition, it has been determined that the impediments to the development of the industry rest to a great degree in excessive taxes, State and Federal regulations antique and modern, which impede commerce in wines throughout the Union, and between the several States.

It was ascertained that taxes upon wines have been frequently laid without any regard to their true character as food products but as a high-powered alcoholic beverage. State taxes or State write-ups at from 50 cents to $1.10 per gallon were not uncommon. Very few States had the same tax rates. To this was to be added the war-time Federal tax on wines presently effective of 20 cents per gallon on sweet and 10 cents per gallon on dry wines. It should be explained that dry wines are those containing 14 percent or less of alcoholic content, usually about 11 percent, and sweet or fortified wines are those containing over 14 percent and not more than 24 percent alcoholic content.

These taxes were far in excess of the price at which millions of gallons of wine could be purchased naked at the winery, but necessitated a market selling price far above the ability to purchase wines by our great wine-consuming population. Accordingly, the Wine Institute undertook a Nation-wide campaign of education of the true character and dietic values, a reduction of taxes, State and Federal, and the removal of the harsh and wholly unnecessary restrictions upon and discriminations against the distribution of wines. These efforts have been predicated upon the sound economic doctrines that commerce and not taxes will restore prosperity; that high tax rates do not insure the greatest public revenue; that the tax rate which does not obstruct but permits commerce raises the most revenue. The wine-tax rates, State and Federal combined, were and

. are so high that in many cases they resulted in an embargo upon any appreciable commerce in wines in certain States. These plain truths can be mathematically demonstrated.

Witness, those States having the lowest tax rates have consumed far more wine per capita in 1934 and 1935 than those States having high tax rates. In this particular, they may be broken down into several heads.

I will here insert a table showing the population, wine-tax rates, and consumption of wines for the several States for the first 10 months of the year 1935, such being all the presently available statistics for that year.

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In other words, 38,296,000 people of equal wine-consuming populations in States of high wine taxes and State write-ups ranging from 10 cents to 50 cents per gallon, consumed but 2,686,000 gallons of wine in the first 9 months of 1935, while 31,632,000, or about 7,000,000 less people in States having wine taxes from 2 cents to 10 cents per gallon consumed in the same time 30,513,000 gallons of wine, or approximately 15 times more.

From the foregoing, we deduce the following mathematical conclusions :

That the 12 low-tax rate States of the United States with a population of 50,000,000 people consume more than 90 percent of the wine consumed in the United States; that the amount of the consumption in different States, bearing in mind the character of the population thereof as natural consumers of wine, is dependent upon and controlled by the taxes thereupon laid, State and Federal.

Complete demonstration of the foregoing is had by the State of California wherein the tax upon all wine is but 2 cents per gallon, the consumption of wine in said State, with approximately 6,000,000 population, is approximately 50 percent of the consumption of wine in the United States. Of course, bearing somewhat upon this proposition is the low cost of transportation to consumers in the State of California and the low cost of wine therein and other elements such as the sale thereof in bulk and the absence of heavy freight rates. All of these factors, however, conduce to the conclusion here sought, to wit, that the success of the wine industry of the United States which is distinctly an agricultural industry, is dependent upon bringing home to the wine consumer quality wines at reasonable prices.

California thus graphically illustrates the tremendous possibilities in the development of the grape and wine industry of the United States. By low taxes, high quality of production, and reasonable methods of distribution effecting the lowest possible cost to the consumer, California has increased the per capita consumption of wine to approximately 3 gallons.

Senator KING. Is not that in part due, and I ask for information, to the fact that California has as its inhabitants a large number of persons who have come from wine-growing countries of Europe, and their children, of course?

Mr. DE VRIES. In a measure that may be true, but I think it is not any more so than it is in the State of Pennsylvania and in the State of New York.

In the State of Pennsylvania with a write-up of 50 cents per gallon of the State store system, with a population of 9,000,000 people, very near that of New York, the people there consumed in 1934 only about 450,000 gallons of wine, and in 1935 only about a million gallons of wine.

Nor is this development of the industry in the United States and its benefits confined alone to the agricultural interests of California. The States of New York, Michigan, New Jersey, Missouri, and many of the southern States are extensively engaged in grape culture and wine production.

Therefore I say if we wish commerce in wines with its incidental results to the welfare of the Nation and greater revenues to the Government, reduce the wine taxes to a reasonable basis.

The truth of the fact that greater commerce and consequent revenues will be obtained by lesser tax rates upon wines is the lesson learned by the several States, largely indicated by the efforts of the Wine Institute. That such is true is witnessed by the fact that in the past 2 years no State has increased the State tax rate upon wine, dry or sweet but many States have reduced the State tax rate or write-up on wines, both dry and sweet.

Thus, the State of Connecticut has reduced its rate of 10 cents per gallon on both dry and sweet wines to 5 cents per gallon on dry and 6 cents per gallon on sweet. The State of Wisconsin has reduced its uniform rate of 25 cents per gallon upon wine to 5 cents per gallon on dry and 10 cents per gallon on sweet wine. The State of Missouri has reduced its rates from 20 cents per gallon on dry and 40 cents per gallon on sweet wine to 2 cents per gallon on dry and 10 cents per gallon on sweet. The District of Columbia has reduced its rate, having no tax upon dry wine, from 35 cents to 10 cents per gallon

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