PA Wineries Try To Expand Through State Stores

Sep 11, 2015

 


Pennsylvania’s terrain might not look much like France or California, but it’s home to more than 200 wineries brimming with grapes grown both here and out of state. A number of those wineries want to expand, and that means working with the Pennsylvania Liquor Control Board.

 

If you told Patrick Walsh six or seven years ago that state liquor stores would be carrying his wine, he’d probably think you had a few too many glasses. In the not so distant past, he was making wine with a friend. As a hobby, he said. But when their dads retired around 2011, the pair agreed they had the manpower to invest in a tasting room for their Harborcreek-based 6 Mile Cellars.

 

“It really kind of made sense in terms of trying to turn a profit instead of spending our money making some good home-brew wine," said Walsh.

It's a modest operation, Walsh said. They make 14 types of wine and a couple ciders worth about 1,200 cases annually. Early last year, he heard about PA Preferred, the Pennsylvania Liquor Control Board program that gives local products a leg up in the vast and powerful statewide store system.

 

PLCB marketing director Dale Horst said it allows in-state producers to apply to have up to 10 different wines sold in 10 state stores. Horst said those first 10 stores is just the starting point.

“Some of the Pennsylvania wineries have grown quite large with us and we have them statewide," he said. "In 2014, we sold 134 different Pennsylvania wines, which generated nearly $5.5 million in sales, and it continues to grow.”

 

Pennsylvania is one of the largest buyers of wine and spirits in the world. Because the state owns the system, there’s only one gatekeeper accepting or rejecting the products that make it into the stores. With that kind of clout, why have a PA Preferred program at all? Horst says it gives customers the ability to buy local.

 

“Pennsylvania wineries, a lot of times they’re a small Pennsylvania business and they’re trying to get established and they’re trying to grow," Horst said. "And we just think it’s a win-win for both Pennsylvania businesses and the LCB to highlight Pennsylvania products.

 

Indeed, Walsh and his partner decided it made economic sense to sell in state stores where people could buy their wine any time, rather than during tasting room hours alone. He said the application process was fairly easy.

 

“We submitted two wines to the program, our Derby Red, which is a sweet red wine, and then a Riesling-blended wine, Winsome White," said Walsh. "I chose two different product price points, and we paid a fee for them to review the wines.”

 

Walsh said last summer they received notice out of the blue that their wines had been accepted.

 

“Which was really exciting because you never exactly know how some wine from Pennsylvania is going to stack up for a buyer who buys from Gallo and Mondavi and worldwide wines.”

 

While it used to be the case that wines made in the Commonwealth competed against national suppliers for shelf space, Horst says that’s no longer true. Through PA Preferred local wines compete against each other.

 

“We’re looking for quality; we’re looking for taste," Horst said. "The Pennsylvania wines have done very well here and almost all of them are accepted, and then we let the customers make the choice with their purchase.”

Walsh said when they were accepted into the stores they had to decided their price point, which factors in how much it costs 6 Mile Cellars to produce the wine, plus the cut taken by the state. In the case of one of his products, $4 of the $12 the customer pays goes back to the state.

 

That system can be a non-starter for some wineries. Reduce their profit margin too much to offset the state markup and they won’t make any profit; sell the wine at a higher price and potentially turn off customers. Some Pennsylvania wineries are simply too small to provide enough wine to sell in stores, while others only want their product available at their home-base, liquor lawyer Mark Flaherty said.

 

“They may find that their niche market are people that come for their tastings, for the events at their premises, will taste the wine at their premises, will like the wine, will want to take a case with them.”

Wineries don’t have to go through the PLCB to sell to restaurants, and even with advantages offered through PA Preferred, it’s not easy to compete with the rest of what’s available, Flaherty said.

“Perhaps there’s still biases against Pennsylvania wines," he said. "People who buy wine: do they buy local? Is it organic? Do they buy it based on taste?”

He says he thinks the best predictor of whether local wine will sell is if it has a following. Walsh at 6 Mile Cellars is learning a lot about their following now that they’re in the state stores. For example, they now know they sell more wine in Erie stores than in Pittsburgh stores -- the opposite of what they’d predicted. But despite their success, Walsh said they’re not exactly living on easy street.

 

“I have two full time jobs," he said. "One from 8-5 and one from 5-8.”

 

So if you want to make and sell wine in Pennsylvania, don’t quit your day job just yet.