Despite a court ruling that will put Virginia wines back on the shelves of state-run liquor stores after an extended absence, Virginia’s smaller wineries still face an uncertain future as new distribution laws take effect, wine industry officials said.
A federal court of appeals overturned a lower court ruling Monday that prohibited Virginia’s liquor stores from carrying Virginia-produced wines exclusively.
But the ruling also upheld legislation that requires all wineries, including those in Virginia, to use a distributor when selling their products to retailers.
The law, which took effect in July, will hurt smaller wineries that can’t afford to hire a distributor, said Ann Heidig, president of the Virginia Wineries Association, which represents about 75 of the state’s 100 wineries.
“I think the ruling will have a chilling effect on the industry,” Heidig said. “I think [sales] growth will slow down or stop because a number of wineries intended to use self-distribution to build their market.”
The Department of Alcoholic Beverage Control stopped selling wine in state-run stores in April when a lawsuit was filed by several out-of-state wineries.
In May, they were permitted to sell wine again, but were not allowed to restock the supply during the ongoing lawsuit, which led to a loss of revenue for many of Virginia’s wineries.
The ABC board is expected to meet sometime during the next two weeks to come up with a plan for working with local wineries.
Heidig said that though wine will be back on ABC shelves, many wineries can no longer afford to stock their wine with Virginia retailers, such as grocery stores and restaurants.
There are 317 ABC stores in Virginia. There are 10,000 retailers licensed to sell liquor in the state.
Lew Parker, owner of Willowcroft Farm Vineyards in Leesburg, said he has already lost profits because of the new distribution laws.
“About 30 percent [of our revenue] came from direct distribution and now our profits will be lower,” Parker said.He stocks his wine in Leesburg restaurants, as well as Wegman’s grocery stores and Total Beverage.
“It’s going to be difficult for wineries in certain categories to survive. The jury’s still out on whether the Virginia wine industry will survive.”
