- The Washington Times - Sunday, July 30, 2006

DICKERSON, Md.

Jim McKenna hasn’t quite mastered the corkscrew and is foggy on fermentation science, but he knows the laws governing sales of his wine. In that sense, it has been a good year.

Sugarloaf Mountain Vineyard, owned by Mr. McKenna and three family members, uncorked its first bottles in May, becoming the latest Maryland winery to pour its product into a state market made friendlier to small vintners by the General Assembly.

A new law permits Sugarloaf and other wineries making less than 27,500 gallons a year to sell directly to retailers, bypassing the wholesale distributors to whom other alcoholic-beverage manufacturers must sell their products under the state’s regulated, three-tiered system.

“The idea behind the 27,500 gallons was to give a break to the little guys,” said Mr. McKenna, a retired Montgomery County Circuit Court judge whose wine knowledge was almost nil until four years ago.

“I knew there was red and white and something in the middle called rose — and that was it,” he said.

Now Mr. McKenna and his three brothers-in-law are enjoying the first fruits of a 10-acre vineyard they established on family farmland at the foot of Sugarloaf Mountain after visiting California’s Napa Valley wine region in 2002. It is the newest of 19 Maryland wineries — most of them in the same small category as Sugarloaf — with four more set to open soon.

So far, Sugarloaf has sold wine only at its tasting room — a white tent outside a glass-and-steel building where the wine is fermented and stored. If they choose, the owners could offer cases of their chardonnay, pinot grigio and Comus — a proprietary blend of five reds — to restaurants and retail shops.

The prospects for doing so looked dim in February after the state comptroller’s office ruled that Maryland wineries couldn’t sell directly to restaurants and liquor stores because it created an unfair advantage over out-of-state wineries. The out-of-state wineries were barred from doing likewise by a state prohibition on direct shipments of wine into Maryland.

The U.S. Supreme Court ruled last year that states must treat direct wine shipments from in-state and out-of-state producers equally.

But the Maryland wine industry saw an opportunity to open a crack in the state’s alcohol-distribution system, which dates to the end of Prohibition in the 1930s. The three-tiered system “is venerated by state administrators and detested by advocates of free and open markets,” said the Maryland Wineries Association, which lobbied the General Assembly for change.

The state’s beverage wholesalers and retailers resisted the movement, resulting in a compromise. Winery advocates proposed a 250,000-gallon ceiling but settled on 27,500. Maryland’s four largest wineries, including Boordy Vineyards and Linganore Winecellars, must use distributors, but smaller producers are free to sell to retailers on their own.

“We worked out a good compromise,” said Chuck Ferrar, owner of Bay Ridge Wine & Spirits in Annapolis and president of the 1,500-member Maryland State Licensed Beverage Association. He said the three-tiered system protects consumers by preventing big beverage manufacturers from taking control of the entire distribution systems.

Kevin Atticks, executive director of the Maryland Wineries Association, acknowledged that large wineries can benefit from wholesalers’ marketing muscle and close customer relationships. But he said small wineries can’t afford to sell at the discounted prices wholesalers demand and risk being squeezed out of the delivery trucks by national brands.

“For a small winery whose costs are high, it’s very difficult for them to be profitable,” Mr. Atticks said.

He said Maryland wineries don’t plan to attack the distribution system again next year but will tackle other hurdles, including establishing retail wine licensing in the four counties — Allegany, Charles, Kent and Prince George’s — that still lack permitting of wineries.

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