Sunday, January 21, 2007

Making a Case: Small wineries seek Virginia's help

Date published: 1/4/2007

Two Virginia legislators plan to introduce a new bill that would allow small wineries to self-distribute.

Wine lovers may get the chance to again find Cabernet Francs, Nortons and Syrahs from Virginia's small wineries in their favorite restaurants and retail shops.

Del. Chris Saxman, R-Staunton, and Sen. John Watkins, R-Midlothian, will introduce a bill in the upcoming General Assembly session that would allow winery owners to self-distribute up to 3,000 cases of wine to such places as the Virginia Wine Experience in downtown Fredericksburg.

"We don't want to hurt distributors," Watkins said yesterday during a Virginia wine industry press conference in Richmond. "We want to grow small wineries large enough so there's enough to distribute regionally and nationally."

The legislators chose the 3,000-case limit, Saxman added, because that's the tipping point where wineries need to get a distributor if they plan to grow. Currently, the annual median production at Virginia's 120 wineries is 2,500 cases, according to the Virginia Wineries Association.

Charles Duvall, vice president of the Virginia Wine Wholesalers Association, said he hasn't seen the bill, but his organization will probably oppose it. The legislation extends self-distribution to small, out-of-state wineries, something wholesalers were successful in persuading the General Assembly to reject last year.

Virginia's wineries were free to sell directly to shops and restaurants until last July 1. The U.S. Supreme Court ruled that state laws allowing in-state wineries, but not out-of-state businesses, to self-distribute was discriminatory. States had to level the playing field, and Virginia decided not to allow wineries to sell directly to stores or restaurants.

They can, however, still sell their products at winery tasting rooms and wine festivals.

The change has hit some wineries and related businesses such as vineyards hard, although no figures are available yet, said Ann Heidig, association president and co-founder of Lake Anna Winery in Spotsylvania County.

David King of King Family Vineyards in Crozet, for example, told the 40 or so supporters and journalists at the conference that he had to close Vavino, a wine bar in downtown Charlottesville, because his costs increased 30 percent to 40 percent once he had to buy Virginia wines from distributors.

"Wine bar margins being what they are, we couldn't afford to stay in business," he said. "I support this bill strongly. It's too late for Vavino, but it will be part of the rising tide to help the Virginia wine business."

Marcie Siegel of Acorn Hill Vineyard in Madison County said said their original business model was to produce 2,500 cases a year at first, then get a distributor once they were turning out 4,000 cases a year. They had planned to be producing up to 10,000 in five years.

Acorn Hill now averages 2,800 cases annually and has had to rethink its plans as a result of last year's General Assembly decision.

"We wanted to learn our market and see who is best to distribute our wines," Siegel said. "Now we're having to put the cart before the horse."

Russ Amrhein of AmRhein Wine Cellars in Bent Mountain, which is near Roanoke, said his wholesale income has dropped $90,000 since the new law went into effect, and he's got 5,000 cases of wine worth about $500,000 sitting in a warehouse until he can find a distributor.

"Competition for distributors is tough right now," he said. "That's one reason I'm here in Richmond today, to find a distributor."

Saxman and Watkins said their bill will not only benefit Virginia wine makers, but will help farmers continue to use their land for agricultural purposes instead of selling to developers, and encourage tourism just as the state prepares to celebrate the 400th anniversary of the first successful English colony at Jamestown.

"It'll be a tough sell," Watkins said, "but I think it will work."