By Stephen Peck
The accolades and money keep rolling in for the Virginia wine industry, but life isn’t easy for the people who actually make and sell the product.
“The state treats wine like a Class Five controlled substance rather than a farm product,” said Mike Ohleger, owner of Uncorked, a Buena Vista wine shop.
The number of Virginia wineries has nearly doubled in the last five years, to 200. Ohleger said that despite the rise of the commonwealth’s wine industry, numerous regulations stifle the potential for more growth.
“It’s amazing the hoops Virginia farm wineries have to go through to process and distribute,” he said.
Virginia was recently named one of the 10 best wine travel destinations in the world by Wine Enthusiast magazine. Only three domestic wine-producing areas made the list: Virginia and two in California. The rest of the list was dominated by wine heavyweights, including France, Italy and New Zealand.
Virginia, the fifth-largest wine producer in the United States, set a record last year, selling more than 462,000 cases, according to a news release on Gov. Bob McDonnell’s website.
Ohleger said that if regulations were eased, Virginia could experience more growth.
“You put ‘Napa Valley’ on a bottle of wine and all of a sudden the price goes up,” he said. “I think we could do that here in Virginia.”
Calvin Hale, owner of Lexington Valley Vineyards, said complicated licensing requirements and shipping restrictions make up the bulk of the problems that Virginia wineries face.
“Virginia is one of a handful of states that never quite recovered from Prohibition,” he said, referring to the ban on the manufacture, sale and transport of alcohol from 1919 to 1933. “When repeal came, a set of very archaic laws was put into place in Virginia.”
Hale said that many of the “archaic” laws, such as those regulating the shipping of wine, remain in place today.
“I can’t ship wine within the state of Virginia, which I think is just crazy,” he said.
Hale said he would need a shipping license to distribute in Virginia. He said the license isn’t worth the $95 yearly price tag or the processing time.
Ohleger said he had a shipping license but returned it.
“I was only shipping about a half-dozen bottles of wine a year. It wasn’t worth my while to pay for a license to do that,” he said. “It’s just too big of a hassle to ship within the state of Virginia.”
Private businesses in Virginia that sell wine and beer – either by the glass or retail — must also sell $1,000 worth of food per month. If they also sell liquor, 40 percent of their sales must be for food.
“Virginia doesn’t have bars,” Hale said. “Virginia has restaurants that have liquor license privileges.”
Ohleger said he also must sell $1,000 worth of non-alcoholic products a month, something the retail stores operated by the Virginia Department of Alcoholic Beverage Control do not have to do.
The ABC operates about 330 liquor stores in the commonwealth.
The ABC stores have contributed $1.5 billion to the state’s general fund in the last five years, according to the department’s website.
“Virginia ABC stores sell Virginia wine. And in many cases they sell it cheaper than I can buy it wholesale, because they are their own wholesaler,” Ohleger said.
In Virginia, only ABC stores can sell liquor. Wine and beer stores must buy liquor from the ABC stores.
Ohleger said he wants the state to get out of the business of selling alcohol and leave it to private companies.
“You don’t regulate the number of convenience stores that sell beer and wine. You don’t regulate the number of restaurants that have mixed beverage licenses. Why would you want to regulate the number of outlets that sell spirits?” he said.
Ohleger said if more private stores sold alcohol, the state would reap the benefits through greater sales tax revenue.
In September 2010, McDonnell proposed privatizing liquor store operations. His plan would have closed 332 state-run ABC stores and would have led to the auction of 1,000 liquor licenses. That proposal met considerable opposition, though, and has not moved forward.
Hale said he doesn’t believe deregulation is necessary, but he said current liquor laws should be reworked.
“I think what’s really needed is a panel of people that don’t have axes to grind, to sit down… and redo the Virginia liquor laws,” he said.
Room to Grow
Ohleger and Hale said McDonnell has had a positive impact on the Virginia wine industry in other ways by promoting the commonwealth’s vineyards.
“We are well on our way to being recognized as the premiere wine destination of the East Coast, which is one of my administration’s top agricultural and tourism priorities,” McDonnell said after Virginia made the Wine Enthusiast Top 10 destinations ranking.
“Our industry takes our hat off to him,” Hale said.
But Hale said he is not content.
“We are hoping that the governor after that and the governor after that will continue to make changes to bring [wine regulations] in Virginia out of the 1930s.”