America's Regulatory Crisis: Virginia ABC and the Failure of Modern Alcohol Policy

State agencies abandon their core mission of public safety for wholesale protection, sacrificing both consumer rights and business innovation in a troubling display of modern regulatory failure.

I will caveat this article and frankly any writings I do, with I do support a healthy level of regulation (I helped build a business to manage it) and I do support the wholesale tier as a legitimate need within the industry. What I do not support is bad behavior by those that represent both of these areas. This series of articles will address this bad behavior.

After decades (urgh!) in the beverage alcohol industry, I continue to watch state after state grapple with modernization and it has been getting worse not better. However, nothing has shocked me more than what I've witnessed in dealing with Virginia ABC. Let me be clear: Virginia ABC has completely lost sight of its mission, instead choosing to protect an outdated three tier system at the expense of both American consumers and businesses, for which they show little care or concern.

The General Assembly spoke. Virginia ABC ignored.

Here's what fascinates me, the Virginia General Assembly actually got it right. They looked at the evidence, saw how the Virginia three-tier system was failing their constituents, and took decisive action to open up direct shipping to both producers and retailers, they were industry leaders and innovators. They recognized what every modern regulator should understand – that technology has transformed what's possible in terms of compliance and consumer protection.

There is a simple set of rules when it comes to DTC (some useless, but simple none the less):

1. DTC shipper must be licensed

2. Shipper can only sell and ship two cases per month to a consumer(useless)

3. Shipper must report the sales to the state

4. Shipper must pay sales and excise tax

5. The package must be sent via common carrier

6. The carrier must obtain an adult signature (we all pay extra for this)

7. The shipper license number must appear on the shipping label (useless – no one checks)

8. The package must have an adult beverage label on the box

That all looks simple right? But Virginia ABC's actions tell a different story. While the General Assembly sought to expand access and support local businesses, Virginia ABC doubled down on protecting a system that clearly isn't working for anyone except wholesalers. I've witnessed this firsthand. There’s no better example than watching ABC attorneys leave hearings alongside wholesale association lawyers. This wasn't a one-time coincidence, I've seen it happen multiple times. When government regulators and the industry they're supposed to oversee are walking out together, it paints a clear picture of where their true loyalties lie.

Regulators make up problems to solve

The application of technology we provide across the country achieves 100% compliance in age verification – better than Virginia ABC's own stores. We automatically collect and remit taxes, track every bottle, and maintain comprehensive records. You'd think regulators would embrace this kind of innovation. After we presented to them a couple of years ago, their board stated, “if they ran more through the system, they would have more time to focus on the bad guys that do not pay taxes.” Yet they still close ranks when the wholesale associations come knocking and argue over process rather than substantive regulatory needs of the items above.

They continue to invent an endless series of procedural hurdles that serve no legitimate regulatory purpose. They obsess over who physically applies shipping labels. They create byzantine rules about shipping locations. None of this, and I mean absolutely none of it, serves any genuine regulatory interest.

The three-tier protection racket

Want to know how deep this goes? Virginia ABC's newly appointed CEO came straight from Breakthru Beverage Group (a US alcohol wholesale business) and the Virginia Wine Wholesalers Association. Think about that for a moment. The person running the regulatory agency previously led the very industry they're supposed to be regulating.

The results speak for themselves:

• Only 24 out of 280+ Virginia wineries are carried in the ABC stores mainly due to the ABC’s take rate on the products.

• Virginia-made wines represent just 0.15% of Virginia ABC's $1.47 billion in sales. Virginia General Assembly (not the ABC) did create a funky self-distribution system for the in-state producers that has been helpful despite the original efforts by the wholesale association to try to prevent this. Another example where the General Assembly saw the failing of the three tier system in their state and the need to fix it.

• International producers get preferential treatment over American producers.

A system designed to fail American businesses

This bothers me as well – Virginia ABC claims they can't manage untaxed illegal shipments into their state. Yet when presented with technology that solves this exact problem, with perfect compliance, they fight against it. Why? Because effective compliance technology threatens their justification for maintaining wholesale exclusivity.

The Virginia ABC has wandered so far from their regulatory mission that they're now actively working against the interests of their own state's businesses. They've created a system where it's easier to sell foreign wine in Virginia than wine made by Virginia's own producers.

A warning to other states

To industry observers around the country watching this unfold: Virginia ABC represents everything that's wrong with alcohol regulation in America. They've abandoned their core mission of ensuring public safety and fair competition. Instead, they've become guardians of an outdated system that serves neither consumers nor American businesses.

When your regulatory agency starts

• Fighting against better compliance technology,

• Inventing problems to justify their existence,

• Protecting wholesalers at the expense of local businesses,

• Undermining legislative intent,

you no longer have a regulatory body. You have a captured agency serving special interests.

Time for real change

The Virginia General Assembly saw the future - a system where technology enables better compliance, wider choice, and stronger American businesses. Virginia ABC chose instead to protect the past, even when that meant actively working against their own legislature's intent.

It's time for other states to decide: Will you embrace innovation that enhances compliance and supports American business, or will you follow Virginia ABC down the path of regulatory capture and failed oversight? The choice is yours, but the consequences will affect American businesses and consumers for generations to come.

Am I annoyed by what I see? Yes, I am. I am annoyed due to the complete disregard for American business and the impacted consumers. You should be annoyed as well as these behaviors and actions do one thing – shrink and damage the US economy and family businesses.

I have more to share and will do so over the coming weeks. When you witness these dynamics firsthand and hear the false justifications, you can't help but feel compelled to expose these truths to the industry. My experiences with Virginia ABC could fill a book, and perhaps that's exactly where this journey will lead.

Shame on Virginia ABC. Their actions undermine both legislative intent and consumer choice while failing at their core mission. Instead of supporting licensed businesses and collecting legitimate taxes, they've chosen to protect an outdated system that serves neither the public interest nor the industry's future.

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