Wednesday, May 28, 2008

Virginia Assists Small Wineries, not Breweries, in Overcoming Three-Tier System

The Virginia Department of Agriculture and Consumer Services (VDACS) has created the Virginia Winery Distribution Company (VWDC) to help small wineries overcome the hardships imposed by the three-tier distribution system. In an April 18, 2008 press release from VDACS we learn:
Using VWDC, winery workers will continue to market their wine to shops and restaurants. However, they will act as agents of VWDC when placing orders and making wholesale deliveries of their wine. The VWDC will provide electronic purchase orders and invoices, collect and remit all taxes, and submit necessary government reports. By contract, VWDC and the winery are sharing delivery workers, bonded warehouse space and delivery vehicles. The cost to Virginia wineries using the services of VWDC will be $5 per transaction initially.

According to Todd P. Haymore, Commissioner of the Virginia Department of Agriculture and Consumer Services, the Virginia wine industry credits self-distribution with being the single most important factor in the growth of the number of farm wineries from six in 1980 to more than 130 today. “Losing the capability to self distribute was a major blow to many of our farm wineries,” said Haymore, “and winemakers and wine wholesalers recognize VWDC as a creative alternative for small wineries.” He added that the wine industry is a fast-growing and important part of Virginia agriculture, not only because of the products produced but because of the added value of wineries as tourist destinations. “Our winemakers are good stewards of the land,” he said. “They produce a product that is renowned worldwide, and draw many tourists into Virginia. Last year, Travel + Leisure magazine named Virginia as one of the Top 5 Wine Destinations in the World.”

The VWDC is governed by a Board that consists of two winery owners, two wine wholesalers and the Commissioner of VDACS. David King, owner of King Family Vineyards in Crozet, Virginia, is Board Chairman. “We are excited to launch this new company to support the Virginia wine industry,” King stated. “This new wine wholesaler provides a distribution option for many Virginia wineries, especially smaller wineries that may not have other wholesale representation. It’s exciting for all sectors of the industry - wineries, wholesalers and retailers - to finally have this wine wholesaler in place. On behalf of the wine industry, I thank the Virginia General Assembly for creating an alternative to the Virginia wineries' loss of self-distribution.”

Virginia breweries are also prohibited from self-distribution. Granted, self-distribution was once allowed for Virginia wineries, a benefit the courts ended in September 2005. However, that seems insufficient reason for Virginia to fund a "creative alternative" for just one part of the alcoholic beverages industry. In contrast, Virginia breweries have not had this privilege since the repeal of Prohibition. For all intents and purposes this legislation allows the wineries to continue to self-distribute. And there's an additional benefit for the wineries. Under the new arrangement, the VWDC assists with the labor involved in distribution as well. The savings in warehouse and delivery expenses would certainly be welcomed by brewery startups. One retailer I contacted said he felt the "addition of products to the legislation already in place" would benefit small brewers. Beer distribution laws are more complicated (ie, restrictive) than those applied to wine so it's probably a complicated matter to adapt the laws, but certainly not impossible.

The industry credits the ability to self-distribute as "the single most important factor" in the growth of Virginia wineries. I would suggest that the craft beer industry in Virginia could benefit from this as well. Extending this state-funded cooperative to breweries might encourage more startups. One certainly cannot fault the wine industry for pushing for this privilege and the wine lobby is well-established. I'd like to see the same sort of organization by craft beer folks; brewers, retailers, and consumers. This is not just a brewer's interest. There was at one time a regional effort by underway by the brewers. However the Mid-Atlantic Association of Craft Brewers is no longer active. (The Maryland contingent split off into the The Brewers Association of Maryland.)

It's not just the brewing industry that stands to benefit, but tourism related industries as well. One Virginia brewer I spoke with told me that his local tourism bureau is very interested in working with his brewery to promote the region to visitors. Beer tourism is an important industry to many areas of the United States and indeed the world. The Virginia Tourism Corporation has a page devoted to Virginia breweries. Last updated in May 2007 the information currently posted is limited and outdated.

Is the time right for the Virginia brewing industry to demand equal representation?

The complete VDACS press release is here.

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