Changes On The Vine

by Holly Falk

Have you had a harder time finding Virginia wine in your favorite local restaurant or wine shop? The reason why is as clear as a fine Champagne.

In July 2006, Virginia legislators rescinded those portions of the farm wine bill that made it legal for Virginia wineries to sell their wine directly to retailers and restaurants. Although wineries have still been able to sell wine to consumers via tasting rooms and at wine festivals, the change greatly impacted smaller wineries, including several in the Smith Mountain Lake region.

In the most recent Virginia General Assembly session, legislators recanted somewhat, passing a bill in favor of limited self-distribution.

“It’s better than nothing, but it’s certainly not a great bill,” said Roger Furrow, owner of Hickory Hill Vineyards and Winery in Bedford County. “It’s not even a compromise, but it will allow small wineries like us to stay in business by distributing to grocery stores, restaurants and retail wine shops.”

Why is self-distribution important? In many cases, it is not profitable for a large, traditional distributor to add a small winery’s products to its portfolio. Marketing costs, along with small productions of wine, make many Virginia wineries a hard sell. Therefore, traditional distributors do not want to distribute the wine form small wineries, but do not want laws which allow wineries to self-distribute. They are fearful it will lead to competition from large, out-of-state wineries selling direct to large retailers and warehouse clubs. The new legislation allows small in-state wineries to self-distribute through the Virginia Department of Agriculture. It caps distribution in this manner at 3,000 cases per year for each winery.

Furrow said Hickory Hill generally produces about 1,500 cases per year, only about 25 percent of which is wholesaled.

“But it’s important to us because that’s where the potential growth is,” he said. “In order for us to become profitable, we need to be able to grow in that area.”

Prior to July 2006, Virginia wineries had been allowed to self-distribute their own wine. However, out-of-state wineries were required to use a distributor. These distributors – powerful corporations compared to the Virginia Wineries Association – went to state lawmakers and explained that if out-of-state wineries were allowed self-distribution as well, their business would be hurt.  The discrepancy in the laws between in-state and out-of-state distribution eventually led state lawmakers to side with distributors and ban self-distribution for Virginia wineries as well. 

“He who has the gold makes the rules,” explained Danny Johnson, owner of Peaks of Otter Winery in Bedford County.

Many Virginia wineries, including those in the SML area, are small and family-run. Many consist of families who have followed their dreams and invested much money and years of hard work into producing their wines. The inability to self-distribute significantly hurt many of them financially. With the new law, wineries will continue to incur additional costs through the Virginia Department of Agriculture, which makes it less than ideal.

“There are more fees and paperwork for wineries and it will end up costing the taxpayer more, too, because it takes money to run the organization and administer the program,” Furrow said. “Some of the additional cost – probably not much, but some – will eventually be passed on to the consumer.”

Not all winemakers are convinced that this bill is the answer.  Johnson said he feels very let down by the government and was willing to suffer another year for another bill that would be more favorable for small wineries. One of his concerns is the fact that other businesses in Virginia do not have to operate under such strict government regulations.

“Virginia wineries attract visitors to our state and further support growing agriculture with their products,” Johnson said.