Wineries Feel the Pinch

By: Michael Gorsegner
By: Michael Gorsegner

November 5, 2006

In response to a Supreme Court decision, the General Assembly passed a law eliminating the right of self distribution for wineries. That meant that local wineries would need to use a wholesaler to distribute their product. For many of the small wineries, as well as stores like VaVino here on the mall, it made doing business, almost not possible.

"I think Virginia has the potential to be world class," said Keswick Vineyards Winemaker Stephen Barnard.

Barnard is not alone. Many in the business feel Virginia has the potential to be something special on the world stage. But there is fear that some in the state will be driven away by the new self distribution law.

"The concept behind it was that we wanted to promote Virginia wines, not just Virginia wines but our wines as a whole," said King Family Vineyards owner David King.

King, also used to own VaVino on the downtown mall, says his profits shrunk after the self distribution law began on July first, forcing him to sell the wine bar. VaVino only sold Virginia wines, most of which were delivered by hand from wineries around the state. When wineries could not deliver them personally, King says it became to expensive to operate.

"It increased the costs anywhere between 30 and 40 percent overnight. That makes it very difficult economically so we took that opportunity to get out of the wine bar business," he said.

"It took it about three months to throw it all together as soon as we found out for sure the distributor law was coming down basically cutting out 90 percent of our business," said Keswick Vineyards Tasting Room Manager Kris Schornberg.

Keswick Vineyards also felt the pinch from the new law. They self distributed 90 percent of their wines to area restaurants and grocery stores. When the law went into affect, it forced them to change their philosophy. In response, they opened up a new tasting room to try and counteract the profit losses.

"It was either build the tasting room now or close. Those were pretty much our options," Schornberg said.

Their business model has now reversed. Keswick now sells most of their wines out of their tasting room with only a small percentage going to local establishments through a wholesaler. The philosophy has worked so far, but everyone says the future is unclear.

"When we were self-distributing, we knew we had a pretty regular income. It was pretty steady. Now going into the slower winter months, we are not sure what to expect," Schornberg said.

"It will affect more people as foot traffic is slower, foot traffic at the location is slower, tourist traffic is slower, then it will become a greater part of the revenue loss," King said.

Even with the pitfalls, many winemakers are still setting lofty expectations.

"I would like to have Keswick spoken about in terms of the Screaming Eagles and the Harlan's and some of the cult wines. Ambitious maybe, but if we don't aim high, we are not going to go anywhere," Barnard said.

Even though VaVino has been sold, David King says he is still working on a compromise to ease the affects of this legislation. He hopes that the wine industry, wholesalers and state legislators can come up with an agreement that will make everyone happy in the end, thus continue a thriving a business.

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