Virginia Distilleries Want to Keep Profits from Tasting Room Sales, but ABC Fighting It

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Virginia craft distillery owners say they want their fair share of the profits from bottles sold in their tasting rooms.

But a pair of bills proposed in the General Assembly that would have helped with that died in the final week of this year’s session.

“The biggest thing for us, is it would put us on a level playing field with the breweries and wineries,” said Derek Ungerecht, the owner of Dead Reckoning Distillery in Norfolk. He opened a rum tasting room in January.

The bills would have allowed distilleries to keep the markup – imposed by the Alcoholic Beverage Control Board – from bottles sold in their tasting rooms.

Breweries, cideries and wineries don’t have markup added to retail prices by the ABC.

“Essentially we have one sector of the alcohol industry being treated completely different than the rest of the industry,” said Del. Nick Freitas, who sponsored one of the bills.

The markup on spirits is 69 percent on average, based on the bottle size and proof, according to the ABC. There are other fees, too – a state excise tax, a case handling fee, and other factors that go into setting the price of the bottle.

In an emailed statement, ABC CEO Travis Hill said allowing distilleries to keep the markup from bottles sold in their stores would create private retailers of distilled spirits. Also, the ABC would lose money to the tune of $4 million over the next two years. How much money would be lost after that is disputed by different groups.

“Virginia ABC supports the continued growth of Virginia distilleries, but believes continuing to implement policies that benefit the entire industry is the better approach than putting a $4 million hold in the state budget, especially as the General Assembly seeks to find money to fund important state programs,” Hill wrote.

Hill added that the ABC has already done a lot to help distilleries, like lifting restrictions that didn’t allow them to have stores. Since that move in 2015, the number of distilleries has tripled from 20 to 60, and distillery stores have grown from 15 to 40.

He also notes that last year the ABC started allowing distilleries to sell to restaurants directly, and ABC gives Virginia distilleries “greater consideration” than out-of-state brands when deciding to stock their products in the 370 stores.

But distillery owners want more.

Keeping more of their profits would make Virginia craft distilleries more competitive with ones around the country, said Josh Canada, an owner of Tarnished Truth, the distillery inside The Cavalier. It would be “an absolute game-changer for Virginia distilleries,” he said.

To read more of the story visit the Virginian-Pilot.

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