New Wine Law Hurting Small Wineries

By: Lindsay Puccio
By: Lindsay Puccio

July 5, 2006

A new law regulating the sale of Virginia wine has left some local winery owners with a bitter taste in their mouth.

Under the new law, Virginia wineries are no longer allowed to sell their products directly to customers. For the smaller vineyards, this new law means a decrease in profits that could possibly lead to many businesses going under.

The fresh grapes at Jefferson Vineyards has been used to make wine for the past 25 years, but starting this year it will be much harder to sell. The new law that started July1st does not allow wineries to sell their products directly to the local restaurants and retailers.

"It makes it very difficult to do business," said Chad Zakaib, the General Manager of Jefferson Vineyards.

The struggle started last year when the Supreme Court decided that the state law was not fair. It said only in-state wineries, not out-of-state wineries, can ship their products to customers.

So, to solve the problem this year the General Assembly chose to tighten the laws to bar all wineries from selling to customers. Wine makers are now being forced to go through distributors.

"Distributors in this state hold a state-mandated monopoly," said Zakaib.

The only way wineries can sell their wine directly to a customer is through their tasting rooms. For wineries like Jefferson Vineyards, this law means almost a 40 percent decrease in profit. However, for the less established wineries in Virginia, it could mean bankruptcy.

"For wineries that do not have a distributor relationship, the impact will be severe and the ability to grow your brand and to reach out to customers will be severely limited," said Zakaib.

This also means bad news for wine drinkers. By putting a distributor between the winery and its customers, the availability of the wines will go down while the price goes up.

A bottle that would normally cost $15 directly from the winery, will now cost about $7 more because the winery, the distributor and the retailer selling the product all need to make a profit.

The Newsplex tried to reach several distributors in the state for comment but the phone calls were not returned.

Next year the Virginia Winery Association will push legislation that would allow all wineries to distribute wine themselves.

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