State-Backed Firm Will Help With Distribution
By Sandhya Somashekhar
Washington Post Staff Writer
Friday, April 18, 2008
Planting was underway at Willowcroft Farm Vineyards in Loudoun County yesterday, where owner Lew Parker was putting in his first crop of Albariño grapes, a Spanish variety that produces a crisp, white wine.
Parker wouldn't speculate on whether it would be a good year for his 40-acre vineyard, one of Virginia's oldest and a model for what has been hailed as the state's new agricultural economy. But he acknowledged that the prospects for selling his wines just got brighter.
Yesterday marked the launch of a state-subsidized distribution company designed to help small winemakers such as Parker stay in business. The wineries have been hurting since a 2005 court decision prohibited them from distributing their own wines.
"If it works really well and smoothly, it should be almost as good as direct distribution," said Parker, for whom direct distribution means putting a case of merlot in the back seat of his car and dropping it off at a restaurant down the street.
Now, Virginia Winery Distribution will act as a wholesaler for small wineries that have watched their once-thriving businesses struggle since the court ruling. Parker, who had to increase the price of his wine by $2 to $3 a bottle to pay a private wholesaler, said his business with stores and restaurants dropped about 60 percent last year.
The court ruling involved a state law. In 1980, the General Assembly, hoping to bolster a growing sector of the state's ailing rural economy, voted to exempt small Virginia-based wineries from a law requiring that all wine be sold through a licensed wholesaler. Today, there are more than 130 wineries in Virginia, compared with six then.
But out-of-state wineries sued, arguing that the exemption impinged on interstate commerce. In 2005, a judge ruled in federal court that the exemption was unconstitutional.
Virginia winemakers, whose picturesque vineyards and local charm are major selling points, said the exemption allowed them to develop face-to-face relationships with their customers, said Terri Cofer Bierne, an attorney for the Virginia Wineries Association. That connection was lost when winemakers were forced to work with large distributors who had few local ties.
"A lot of these small wineries are in rural areas, and they have personal relationships with shops and restaurants," Bierne said.
"It's as much marketing as anything because there are thousands and thousands of labels. For a local winery to be able to distinguish themselves . . . it's a big deal."
Nationally, the number of wineries has doubled in the past seven years, said Bill Nelson, president of WineAmerica, a trade association. Legislators have embraced the industry because of its role in revitalizing rural economies and preserving open space, he said.
"It's one of the few land uses that produce enough value that it holds off the spread of housing," Nelson said.
He said the Virginia court ruling and similar opinions elsewhere have "been devastating to some wineries, which have lost up to 30 percent of their revenue."
The General Assembly responded last year by creating Virginia Winery Distribution. Funded in part with start-up money from the state, the company is intended to serve as a lower-cost wholesaler focused exclusively on small local wineries. It will permit winemakers to market and distribute their own wine, much like they did before the court ruling.
Parker, Nelson and others said it remains to be seen how successful the system will be.
It is complicated and novel enough to be open to more legal challenges. For example, under the law, once a winemaker takes an order, the wine must "come to rest" in a part of the winery leased to the distribution company before it can be delivered. Some winemakers use a dog cage or a closet to indicate the part of their winery that is leased to the distribution company. Parker uses a small shelf.
The point, Bierne said, is to allow the small wineries to flourish without eliminating the requirement that all wine go through a wholesaler.
If successful, the system could be a model for other states, Nelson said.
"We're waiting with bated breath to see what will happen," Nelson said. "We certainly hope this will be a grand success and wineries can continue to thrive."
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