Saturday, March 17, 2007

Saving Private Wine

It's a fascinating solution to the small wineries vs. the distributors conflict (and toss in a Supreme Court decision about direct sales).
The Virginia General Assembly has passed a bill in the current session (which now awaits the governor's signature) which creates a quasi-governmental non-profit corporation to serve as the wholesale distributor for small wineries.

Virginia had previously allowed in-state wineries and retailers to sell and ship wine directly to Virginia consumers, while prohibiting out-of-state wineries and shops from doing the same. This was struck down in federal court. Also made illegal, forced by federal court decision, was self-distribution of wine by the Virginia wineries themselves.

The state Department of Agriculture will create this corporation which will process paperwork, pay taxes, and collect payments for participating Virginia wineries. It will work with a lower markup than private-sector distributors. The wineries themselves will deliver the wine. Once a winery exceeds the 3,000 case per threshold established in the legislation, it must rely on a wholesaler for distribution. That size will be attractive to most distributors. Smaller than that is not.

There's a similar situation but slightly different solution in Maryland. A bill, passed in April 2006, allows wineries that produce less than 27,500 gallons a year to avoid having to sell to a wholesaler.

Related to this, the Fourth Circuit Appeals Court has recently reinstated the ability of Virginia ABC stores to only sell Virginia wines (in addition to booze, of course) in its outlets. More.


The Supreme Court decision referenced above does not concern itself with direct beer shipments, a seeming illogical omission. Thus, direct shipments of beer are allowed in some states, forbidden in others (e.g., Virginia, Maryland). I believe that the Supreme Court will revisit that. Previous story

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