There has been a long history of government regulation related to wine marketing activities in the United States, and many regulations have been state-specific. For example, fifteen states currently have laws that restrict wine sales in grocery stores. Several of these states have recently proposed changes that would expand the distribution of wine; however, the economic implications of such changes are not well understood and the proposals have met significant resistance from key stakeholders. A simulation model is developed here to assess the likely effects of introducing wine into grocery stores in New York State. Results suggest that benefits would be generated for out-of- state wineries, government revenues, and in most cases the in-state wineries; wine sales at liquor stores would fall by 17% to 32% with this policy change. Simulation results are subsequently used to develop a framework for evaluating various proposals that would provide compensation to liquor store owners.