Hot News

3.21.2006

By SEAN CLOUGHERTY

LUSBY, Md. — Ken Korando wants to expand his vineyard and winery.
He’s looking for acreage in Calvert County to add to his 10-acre vineyard. He’s even made plans to move his winemaking equipment from his basement into a larger building because the demand for Maryland wine grapes and his brand, Solomon’s Island Winery, is there to support the expansion.
But all those plans are on hold until the Maryland legislature decides how the state’s wineries will be able to sell their product.
Currently, Maryland wineries can sell wine directly to in-state retail outlets and restaurants without a distributor’s licence.
In May, 2005, the U.S. Supreme Court decided it was unfair for states to require other state’s wineries to sell through a distributor but not its own. Following a lawsuit, in November last year, against Maryland by a Pennsylvania winery, Comptroller William Donald Shaefer issued a regulation requiring Maryland wineries to sell through distributors and not directly.
The regulation caused a stir among small wineries and grape growers who say the regulation will cause deep profit losses that may send some wineries out of business, shrinking the market for grapes.
Bills in both the House of Delegates (HB1122) and the Senate (SB 812) propose that wineries producing less than 40,000 gallons of wine per year can become their own distributor and continue to sell their own wines.
Another bill, Senate Bill 877, would make Shaefer’s regulation into law.
At a hearing of Senate Bill 812, sponsored by Sen. Thomas McLain Middleton, D-28th District, before the Senate Education, Health and Environmental Matters Committee, Bruce C. Bereano, lobbyist for Maryland’s wholesale liquor distributors, said the distributors are willing to work with the small wineries to develop marketing strategies better suited for them.
“Give us a chance over the next six months to show we can do it,” he said.
Bereano said the bill allows out-of-state wineries to sell directly to wine stores and restaurants which will hurt in-state wineries.
Al Kopp, an owner of Woodhall Wine Cellars in Baltimore County, has had first hand experience with distributors, having worked with three in the last 20 years. He said the first one went out of business, the second decreased Kopp’s sales by two-thirds. The third approached Kopp, saying he could triple his business. After three years, the wholesale dropped Kopp, who said his business dropped 55 percent.
The winery hired it’s own salesperson and “within a year we had more than half that market back,” he said.
Kopp’s winery produces about 10,000 gallons of wine a year and though he grows his own Chardonnay grapes, he buys most of the wineries’ grapes from 12 Maryland growers. Kopp says the growers he works with are just as concerned.
“They know if I go out of business they loose their market,” he said.
Hans Schmidt, who grows three acres of wine grapes said his family started growing as a way to diversify their operation.
“There’s a demand for grapes here, so we thought it was a good oppurtunity,” he said.
Schmidt said the family researched growing grapes for about 10 years before adding it to their buisiness of corn, soybeans, hay and vegetables. Wine grape is a fast growing industry in Maryland agriculture, Schmidt said, with the potential to gross $3,000 to $5,000 per acre, depending on variety and yield.
With substantial profit potential, come substantial costs, said Korando. It takes about $10,000 to establish an acre of grapes and maintance, like orchards and other farming operations can be very labor intensive.
Schmidt said he would have to look to other states to sell his grapes which could mean a drop in price.
“If that happens, we’ll have to reevaluate whether or not we want to keep doing this.”
He also said the requirement to sell through a distributor would not coincide with the state’s marketing scheme.
“For a long time, Maryland, from the top down, had promoted Maryland. Wine grapes in Maryland can grow and it gives Maryland identity. When someone takes that bottle of wine home, they remember where they were and where it came from,” he said.
Bill Rohrer, president of the Maryland Grape Growers Association agreed that growers are “nervous” about what could happen.
“Clearly, our interests are close to those of the wineries,” he said. “I don’t think it’s going to destroy us, but it’s not going to help us and it is going to continue to push investors away.”
Rorher grows five varieties of wine grapes on his five acre vineyard in Marydel.
There are 22 wineries in Maryland with four selling through distributors and about 230 wine grape growers in the state, Korando said.
Last year, Korando made and bottled about 5,000 gallons of wine from the 10 acres of grapes he maintains.
He sells nine different wines to 85 customers in 13 counties.
He said he visited with every distributor in the state and all told him his production was too small and they would not profit from selling his wines. He estimates that paying a distributor to sell his wine would raise his costs 25 to 30 percent.
“What would happen is I would go from 85 customers to one who quite frankly doesn’t have my business interest at heart,” he said. “The wine gets taken in and goes to the back of the warehouse and you die a slow death from there.”