State stores to carry only Virginia wines

Wines & Vines, Nov, 2006

The Virginia wine industry is celebrating a Sept. 12 Federal Appeals Court decision overturning a law that required state ABC stores to stock wines made outside of Virginia. The state Attorney General's office successfully appealed an earlier decision that declared the Virginia-wine-only monopoly unconstitutional. The state argued, and the Appeals Court agreed, that as a retailer, the state-owned ABC system should be able to decide for itself what wines it would stock.

Ann Heidig, president of the 73-member Virginia Wineries Association and co-founder of Lake Anna Winery, told Wines & Vines that she does not expect the recent ruling to be further appealed to the U.S. Supreme Court.

She explained that Virginia wineries produce an average of 2,500 cases each per year, below the 3,000-5,000 cases needed to attract attention and service from distributors, and that most had relied upon sales through ABC stores to augment direct sales at wineries and festivals. When ABC was ordered to open its shelves to wines produced elsewhere, "The loss was ... devastating," Mitzi Batterson, manager of James River Cellars, told fredricksburg.com.

The effects were aggravated by a ruling that prohibits wineries from "self distribution," which took effect July 1, reinforcing the three-tier distribution system by barring wineries without a distributor from wholesaling their own products to restaurants, grocery stores and other vendors. Although the ABC is itself a retail outlet, it also serves as a wholesaler, allowing it to purchase directly from the producers.

Interestingly, in addition to Virginia-only wines, ABC stores also are the state's sole retail source for spirits. They are not limited to sales of Virginia-produced spirits. Wine and beer are both sold in grocery and other retail stores, but Virginia wines, many of which are produced from native American and hybrid grapes as well as vinifera varietals, are hard-pressed to find available shelf-space, and of course, must be represented by wholesale distributors. (The Virginia Wine Wholesalers Association appeared as a friend of the court during the appeals process.)

With an annual production of about 5,000 cases, Heidig's winery does have distributor representation, she said, and Virginia has approved direct-to-consumer shipments with a direct-shipment license. The wineries association is, "looking at a variety of options," to further improve the sales situation for its members, including the legality of banding together to form some sort of co-operative distribution program for smaller producers, Heidig told Wines & Vines.