Hard Pressed: KY Winery Owners Feel Stifled By Caps On Production

Nov 14, 2018
Originally published on November 13, 2018 7:16 pm

Bourbon often takes center stage in Kentucky, but wine is vying to share the spotlight. Especially in far west Kentucky, where one of the state’s fastest-growing wineries is asking legislators to change regulations that owners say are stifling business.

Purple Toad Winery in Paducah is selling their products in 400 stores across five states. Founder and CEO Allen Dossey said their recent growth has prompted them to build a new facility and purchase a new bottling machine that will fill and label bottles faster, “We’ve only been in here 90 days, this is a brand new building. We went from 2,500 square feet to 20,000,” he said in October. 

Purple Toad’s Problem With Production Caps

Dossey never dreamed his business would grow to this size. But, Purple Toad expects to produce more than 100,000 gallons of wine this year. That’s at the brink of what the state allows under the Small Farm Winery License.“The issue we run into- there is a regular winery license, but you're not allowed to do tastings or have sales on premises and all that stuff and that’s how you… that’s what a winery does,” Dossey said.

In the same fashion as wineries, Kentucky Guild of Brewers Executive Director Derek Selznick said breweries lose some benefits when they upgrade from a microbrewery to a regular brewery license-- though they can still give out samples and fill growlers. But, Kentucky Distiller’s Association President Eric Gregory said distillers don’t lose any similar benefits if they choose to upgrade their license.

Dossey said he’s asked the state to raise the gallon limit for wineries once before. Successfully. In 2016, lawmakers passed a bill increasing the limit from 50,000 gallons to 100,000. Now, he plans to ask the legislature to raise the cap to 250,000. Raising the cap could help Purple Toad secure a deal to distribute their wines in China- a deal that Dossey said has been in the works for a few years. If that pans out like he expects, Purple Toad could grow to be “ten times larger.” He said tariffs also present a challenge to the deal.

But it’s not just the cap. Other regulations are holding back small wineries. Francine Sloan owns Rising Sons Winery in Lawrenceburg. She said distributing her own wine could help her business grow. “If you aren’t producing over a certain amount of cases, then you ought to be able to go out and distribute your wine to- for example, me- to a small, local restaurant,” Sloan said.

The United States has a three-tiered sales system, where producers sell to distributors, who then sell to retailers who then sell to consumers. Distributors generally don’t want to buy wines from small wineries. And in Kentucky, Small Farm Wineries aren’t able to distribute their own products. The Kentucky Grape and Wine Council’s Tyler Madison said in a state dominated by bourbon, it’s hard to market Kentucky wine. “Probably our biggest challenge is public perception. I’m fully aware people don’t think that there are good Kentucky wines -- and there are,” he said.

Kentucky’s History Of Wine

Madison said there’s a long history of wine in Kentucky. The state was the first in the U.S. to open a commercial winery in 1798. “We had a pretty robust wine industry through the mid-to-late 1800’s. At one time, Bracken County in northern Kentucky produced more wine than anywhere else in the country, which was awesome. And then of course after prohibition, the industry was decimated,” Madison said.

After prohibition, many winemakers in the Commonwealth found a crop that grew well and was in high demand: tobacco. And by the time prohibition ended, California was at the forefront of the country’s wine industry.

It became legal to operate wineries in Kentucky again in 1976, but Madison said the industry’s recent comeback coincides with the rise in craft breweries. “It kind of goes along with the craft resurgence, that craft movement where people are looking to buy and drink and eat local.”

Madison said traditional grape varieties used for wine have difficulty growing in Kentucky. Grapes don’t take to fertile soil like tobacco does and finicky weather patterns don’t help either. Humidity in the summertime causes disease and cold snaps in the winter can kill popular varieties like Cabernet Sauvignon and Chardonnay. “The University of Kentucky has been researching it for ten years now, so they have a lot of information. We’re still pretty young and they’re figuring out what it is we can and can’t grow and where to grow it… all of that important stuff you need to relay to growers and potential growers,” Madison said.

A ‘Meeting Of The Minds’

Kentucky winery owners will join brewers and distillers at Churchill Downs on November 16 for an ‘alcohol summit’ to outline what they would like to see change in their industries in the next legislative session.

State House Representative Chad McCoy wrote legislation in previous sessions that aimed to help the bourbon industry grow. He said the bourbon industry in his district is a huge economic driver for the state ...and wine could be too, but passing legislation to cut back on regulations can be a challenge.

“Any time you start dealing with an alcohol bill you’re immediately going to face an uphill battle. That has a lot to do with cultural and religious reasons throughout our state, you know we are very much part of the Bible Belt in Kentucky,” McCoy said. Educating the public and lawmakers about letting businesses increase alcohol production is key to passing legislation.

Back at Purple Toad, Allen Dossey has their new bottling machine up and running. Dossey said he’s designed his brand to grow beyond the confines of a small, local winery. “We have one of the few wine brands in the state that can actually transcend our local region,” he said. Dossey said along with their potential deal in China, Purple Toad wine could be sold in up to 40 states over the next several years if the cap is raised. 

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