Currently, distilleries must sell their bottles to the Virginia Alcoholic Beverage Control Authority, then buy them back at full retail price before pouring samples inside their tasting rooms. The markup averages 69 percent and can be as high as 93 percent, according to ABC.
But distilleries could keep the price markup under Senate Bill 803, introduced by Sen. Bryce Reeves, R-Fredericksburg. The Senate voted 23-16 in favor of the measure Friday. It is now before the House Appropriations Committee.
ABC currently takes about 55 percent of the gross revenues that distilleries make in their tasting rooms, said Scott Harris of Catoctin Creek Distilling Company in the Loudoun County town of Purcellville. After overhead and worker pay, he said, most Virginia distilleries lose money on such operations.
Distilleries are a growing enterprise in Virginia, which considers itself the birthplace of American spirits. After serving two terms as president, George Washington returned to Mount Vernon to brew his own whiskey.
The industry does more than $160 million a year in business in terms of creating jobs, buying agricultural products and selling spirits, according to the Virginia Distillers Association.
Still, that’s just a drop in the bucket compared with neighboring Kentucky. Distilleries there have an annual economic impact of $8.5 billion, the Kentucky Distillers Association says.
Kentucky is one of the country’s largest producers of distilled spirits and, unlike Virginia, the industry is not controlled by the state government. Harris said Virginia distilleries are hampered by a “punitive landscape.”
Curtis Coleburn, a lobbyist for the Virginia Distillers Association, said SB 803 could spur major growth in the commonwealth’s spirits industry.
“When the distilleries make a sale, half of the money goes to the state through taxes and profits because it’s managed through ABC,” Coleburn said. “Senate Bill 803 would allow the distillers to keep more of the proceeds for sales at the distillery stores and will enable them to hire more Virginians and expand their plans and grow the industry.”
Virginia distillers say they would like to make and sell their products on their premises at the cost of production. This would allow them to have profitable tasting rooms and generate tourism, said Amy Ciarametaro, executive director for the Virginia Distillers Association.
“We have to educate our legislators that, in order for the distilled spirits industry to really be a powerful economic generator for the commonwealth — and it can be — we’ve got to make these distillery stores profit generators for their operators,” Ciarametaro said.
Belle Isle Moonshine in Richmond does not have a store on premise, but co-founder and CEO Vince Riggi said reducing the regulations on tasting room sales would benefit all distillers in the commonwealth.
“We want to market Virginia spirits,” Riggi said. “We want to elevate the brand and showcase it to the consumers in the state.”