BY KYLE SWARTZ

Travis Hill , Virginia ABC CEO

“ WE INVITE THE DISTILLERIES TO NITPICK US , AND TELL US HOW WE CAN CHANGE SO THAT THE DISTILLERIES ARE TREATED AS EQUALLY AS OTHER PRODUCERS .”

– Travis Hill , ABC CEP

The organizations jointly submitted proposals for the state ’ s 2019 Legislative Agenda , including earlier Sunday times for tasting rooms and increasing the commission rate paid to distilleries for onsite sales . I recently visited the state and spoke to both organizations about their proposal .

Currently , Virginia distilleries can open tasting rooms at noon on Sundays , and earn an 8 % flat rate sales commission for retail sales .

The first issue is as much about parity as profit . “ With wineries and breweries being able to open between 10 and 11 a . m . on Sundays , a lot of folks assume we ’ ll be open then too ,” says Gareth H . Moore , VDA president and CEO of Virginia Distillery Co . “ People will line up out my door at that time . A big part of our business is tourism , and a big time for tourism is the weekend .”

Part of what ’ s held back Virginia distilleries ( and others nationwide ) from having a more even playing field with wine and beer is the youth of the industry . Ten years ago there were fewer than 10 operating distilleries in Virginia . Now there are

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70 and growing . Which means that many state legislators now have a distillery in their district , and can see firsthand the economic and employment gains .

Yet old prejudices remain . “ We have 85 years of history to overcome since Rockefeller said , ‘ It ’ s obvious that spirits should be more tightly controlled ’,” says VDA Legislative Affairs Curtis Coleburn . “ But that was from the saloon era , when people thought of spirits as stuff made in bathtubs .”

“ Today it ’ s obviously different ,” he adds . “ Craft distilleries are about premium products . And as DISCUS says , a drink is a drink is a drink , whether beer , wine or spirits . We ’ ve moving towards parity , but it ’ s been slow progress because of that history we have to overcome .”

The Sunday sales part of the proposal also ties into the commission-rate suggestion . If earlier opening times boost Sunday sales , then that can help offset money the state would lose by letting distilleries earn higher sales commissions .

“ The idea was that we ’ d put forward something that can increase cash flow for distilleries while also providing the means to pay for it with new tax revenue for the state ,” Coleburn explains . “ We said , ‘ If we open distillery stores at 10 a . m ., then look at the whole chain . We ’ re putting more money into the pockets of distilleries , but what does that also do for the ABC ’ s bottom line ?’”

When Virginia distillery retail laws first went into effect , the state paid commissions as high as 15 %, depending on the amount of product sold . Around 2016 the flat rate of 8 % became the new law . Now the ABC and VDA seek a sales commission higher than 15 %, “ something the distilleries can depend on ,” says Travis Hill , ABC CEO .

After all , brown spirits take time to age , and profit margins can be slim . New distilleries can benefit from greater financial breathing room as they try to get up and running .

While craft spirits are trendy and driving Virginia tourism , at the end of the day their success in lobbying for legislative changes will depend upon the math . “ For the legislators it comes down the numbers ,” Coleburn says . “ We have to be able to show that the state budget will not be negatively affected .”

In the meantime , the ABC and VAD continue to cooperate on ways that help distilleries without requiring legislative approval . “ We invite the distilleries to nitpick us , and tell us how we can change so that the distilleries are treated as equally as other producers ,” says Hill of the ABC . “ We want to know the things we can do to improve their day-to-day business .” •

StateWays | www . stateways . com | September / October 2018