Pahrump Valley’s Bill Loken on Winery Success and Nevada Grown Grapes

Things are good at the Pahrump Valley Winery.

“We couldn’t be happier,” winery owner Bill Loken told Grape Basin News over coffee in his recently-expanded restaurant.

Our table was nestled against a glass-enclosed sun room with a vineyard view, where the last of the lunch crowd lingered. Behind him, an open door revealed a small banquet room. Both spaces were added in the last three years, taking the winery’s dining capacity from 50 to 124. During roughly the same period, Loken tripled the size of the tasting room.

Gretchen and Bill Loken in their barrel room

Soon, another expansion will yield 7,000 additional square feet of production, storage, and banquet space. Under Loken’s management, and with his wife Gretchen in the winemaking role, the rural winery beneath the west-facing peak of Mt. Charleston seems poised for long-term success.

“Our goal is to become a 12 to 14,000 case winery within 10 years, and be a minimum of 80 percent Nevada grown,” he said.

In pursuit of the goal, Loken has been campaigning aggressively to persuade Nevada farmers to abandon alfalfa in favor of grapes. His aspirations for his own winery will require 60-80 acres, he estimates. Beyond that, the hope is that new vineyards will supply an increasingly robust wine region, which will in turn spur demand for more vineyards.

“Since the law changed, we’ve added between 9 and 10 thousand vines,” he said, referring to 2015 legislation that was conceived to boost Nevada as a wine destination, and changed the law so wineries can operate tasting rooms in the state’s two urban counties, Washoe and Clark.

“The growers were nervous, and when the law changed I encouraged them,” Loken said. “Now you can plant with assurance that there’s gonna be demand for your product. It’s not such a risk as it was before.”

Some of Pahrump Valley’s 434 medal winners, displayed outside the barrel room

To quell any unsettled anxiety, he shares the risk with growers who agree to put in new vineyards, promising to buy up even grapes that don’t make good wine.

Loken is unmovable on the subject of Nevada grapes, which he asserts are critical to a successful wine industry in the state. Vineyards come first, then wine. Any questions?

Firmly committed to the proposition that Nevada wine requires Nevada grapes — the more the better — he showed up in Carson City in 2015 to influence statutory requirements for fruit content. He ruffled some northern winemakers, who cast his hardline stance as simple protectionism, and came to view him as an opponent to opening up the urban counties.

Loken contends that any protectionist instincts were aimed squarely at California mega-producers, who might use an urban winery law to sweep into the state with their own juice and set up shop on the Strip. He was never intent on keeping Nevadans out of the business, he said.

“Had no restrictions been put (into Assembly Bill 4),” he said, “there would have been absolutely nothing to prevent Gallo, Trinchero, The Wine Group, Franzia, Golden State Vineyards — any of these great big conglomerates – they could have gone right into downtown Reno, they could have gone right into downtown Las Vegas, and put in large bottling plants. Had tankers coming in on Monday, bottle it on Tuesday, and then selling it in their tasting rooms on Wednesday.

“If you can do that, why would you ever invest in a vineyard in a rural area? Why would you ever encourage growers to put in grapes, because you just basically cut the industry out before you got started.”

Pahrump Valley Winery

Assembly Bill 4 was introduced by Washoe County lawmaker Pat Hickey on behalf of the Nevada Wine Coalition, a northern group that formed in synergy with a viticulture and winemaking program at the University of Nevada, Reno. In AB 4, they sought only to remove a population cap that prevented them from operating tasting rooms in the second-largest Nevada county.

In the bill’s first hearing, Loken testified that Nevada wine containing anything less than 75 percent Nevada grapes would not comport with federal law. He also said he endorsed the bill’s goal for the urban counties, but warned against becoming “a wine suburb of California.”

Loken says that as the session progressed, he relaxed his insistence on a high concentration of Nevada grown fruit. He agreed on dropping the minimum from 75 percent to 50 percent, and upon further reflection, to 25.

“We want to keep it a low bar to get in and get going,” he said, because small successes would breed demand, and would fuel expansion of both growing and winemaking in the state.

The state’s largest liquor distributor also had a hand in shaping the legislation, and AB 4 was amended to place a 1,000 case cap on sales for new wineries using less than 25 percent Nevada grown fruit.

On this year’s legislative agenda, the Nevada Wine Coalition announced it would try to raise the 1,000 case limit, arguing that the cap would hobble return on investment while new wineries wait for fledgling vineyards to mature, a 4-6 year process. The plan came under immediate attack by the distributors’ lobby. The Coalition has since retreated from a case limit amendment.

Now, as the Coalition seeks other changes to the law, Loken wonders why the state’s northern wine producers believe they need more legislation to be successful.

“It’s been two years,” he said. “Where are the vineyards? Where are they? I don’t see them going in.” He points out that southern Nevada vineyards have tripled in 18 months.

“If we’re here two more years from now and nobody’s put any vineyards in, there will not be a sympathetic ear in this state to change anything in that law.”

That’s a worry, but it does not appear to be Bill Loken’s worry. As we walk through his small barrel room, Pahrump Valley is preparing to bottle 750 gallons of Pinot Grigio. They’ve outgrown this room, but by next year, a new, larger room will house 200 barrels. In the center of the new barrel room, tables and chairs will seat 80 for meetings and special events. The expanded facility will have 12 fermentation tanks, a new high-speed, automated bottling line, and will store more than 18,000 cases of bottled wine.

All of this will take shape just in time for Pahrump Valley’s thirteenth harvest.

Bills Stalled: Nevada Alcohol Manufacturers Find Raising Production Caps is a Heavy Lift

Craft brewers and distillers are wrangling with the state’s major liquor distributors over legislation that would raise the amount of product they can legally make each year.

Proponents of Senate Bill 130, the brewpub bill, pared back a provision that would have tripled their current production limit of 15,000 barrels annually. The concession would allow 10,000 barrels to sell in the pubs, with additional barrels to be sold through a distributor, up to a cap of 30,000 barrels per calendar year, doubling the current total.

With the amendment, SB 130 passed a Senate Committee with a 5-2 vote, but an amended version has not been posted.

The Nevada Wine Coalition had hoped some of its agenda could be absorbed into the brewpub bill, including a provision that would alter the case limit scheme for wineries, but its amendment was not accepted. The coalition is evaluating other options, said Executive Director Randi Thompson.

A separate bill adds the designation “estate distillery” to Nevada law. Senate Bill 199 defines an estate distillery as one that produces 75 percent of the agricultural raw materials it uses to manufacture its spirits. The bill was brought on behalf of Bently Enterprises in Douglas County, which grows barley, wheat, corn and spelt, to make a “world-class single malt whiskey,” said Senator James Settelmeyer, who sponsored it.

Opposition to SB 199 came from Southern Glazer’s Wine and Spirits, raising questions about whether 75 percent is sufficient to earn the “estate” designation.

A larger objection stems from the bill’s proposed tenfold production limit. SB 199 seeks to raise the current in-state sales limit of 10,000 cases to 100,000, and the exportation limit from 40,000 to 400,000 cases.

“The 100,000 case number is huge,” said Southern’s lobbyist, Alfredo Alonso. “Southern’s top three brands are 100,000 or less in the state of Nevada.”

Alonso pointed out that the bill also does not cap on-premise sales.

“Does that allow for bars and other retail folks to come by and fill up their trunks with distilled spirits and sell those at their place of business, which is illegal today?”

Settelmeyer said he and Bently’s representatives will continue negotiating with opponents. He stressed economic development as the driver for the cap increase, characterizing the Bently Heritage project as an “excellent opportunity for the state of Nevada to diversify.”

Bently has undertaken a $100 million restoration of a century-old flour mill and a butter creamery in Minden to house its Bentley Heritage Estate Distillery.

The Carson Valley Visitors Authority views the project as a potential boon to tourism. Executive Director Jan Vandermade told the Senate committee that international travel and tour operators are already taking note.

SB 199 did not advance out of the committee.

State Law Roundup: Sampling Legislation from Across the Nation

Lawmakers across the nation continue to squabble over proposed alcohol laws. Many of the debates revolve around where and when to sell it, and for what price.

A legislative committee in Connecticut killed a bill that would allow retailers to discount liquor. Retailers are currently required to adhere to a price list issued by wholesalers. Governor Dannel Malloy viewed the change as a way to stimulate tax revenue by stimulating sales, but the mom-and-pop stores lined up against it, fearing unfair competition from the big guys. The story isn’t over. There are hints that Malloy will incorporate the provisions into a separate bill that’s still up for hearing.

In Missouri, the discount debate extends to telling consumers about the lower prices. Two bills – one from each legislative house – would permit advertising discounted prices in print and broadcast media, which is currently illegal. Small retailers fear they would be outspent by larger operations. The Missouri Times editorialized that advertising alcohol would be harmful to minors.

A pending federal lawsuit could disrupt price and advertising policies in both states. Total Wine & More, which has four stores in Connecticut, is suing the state, claiming its liquor price regulation is a Sherman Act violation. The same Missouri Times editorial referenced above says Show-Me State lawmakers introduced their bill in anticipation of fallout from the Connecticut lawsuit.

Pennsylvania’s Liquor Control Board told lawmakers this week that wine sales in grocery stores may be cutting into the revenue of state-run liquor stores. The state has issued 381 permits since grocers were authorized to sell wine. State stores located near grocers with the highest wine volume underperformed the liquor board’s projections by about 1.8 percent in 2016.

A grocery store wine bill is bouncing around in Arkansas. The bill would lift restrictions for grocers who stock wine. Currently, they’re required to carry only wine from small wineries. Liquor stores, which carry larger selections, oppose expanding the selection in grocery stores. The bill failed in the Arkansas House, but was resurrected and passed two days later. It reportedly awaits amendments in the Senate.

Michigan has established a “specially-designated merchant license” allowing in-state retailers to ship wine to Michigan residents. Out-of-state retailers need not apply. Lebamoff Enterprises, an Indiana liquor retailer with 15 stores has filed suit in Federal Court ahead of the law’s effective date, claiming Privileges and Immunities and Commerce Clause violations.

Observers say Michigan’s show of favoritism raises the same issues that were settled by the U. S. Supreme Court’s 2005 direct shipping decision in Granholm v. Heald. The court said in Granholm that states allowing direct-to-consumer shipping by in-state wineries must extend the same privilege to out-of-state wineries.

Illinois lawmakers are considering whether to allow minors to order beer and wine in restaurants, so long as the parents are present. The Jacksonville Journal Courier opines that more permissive alcohol laws lead to more alcohol abuse by youngsters. It’s already legal in Illinois for parents to supervise underage consumption at home.

Minnesota will end its ban on Sunday liquor store sales, effective July 2, after its governor signed a bill that gives cities discretion to maintain Sunday closures locally. Another bid to allow Sunday sales has been proposed by an Oklahoma state senator. This follows voter approval of an Oklahoma ballot initiative last fall that allows beer and wine in grocery and convenience stores.

Nevada Craft Brewers Face Off With Big Liquor on Production Cap Issue

A half-dozen craft brewers urged a state legislative committee this week to triple their annual barrel production limit. The proponents of Senate Bill 130 said the current cap of 15,000 barrels stifles investment, and has forced Nevada’s largest breweries to cease pub operations as they get too close or exceed the cap.

The Nevada Wine Coalition testified in support of the brewers, meeting with opposition when its executive director said the group will seek an amendment extending to wineries.

SB 130 is sponsored by Senator James Settelmeyer, R-Dist 17, to pave the way for a growing sector to contribute more to the Nevada economy, he told the Senate Committee on Commerce and Labor. Settelmeyer said he arrived at 45,000 barrels by averaging the production caps in other states with higher limits, and boosting the figure to put Nevada slightly ahead.

Great Basin Brewing Co. owner Tom Young told the lawmakers his operation is very close to the limit. If the brewery exceeds the limit, Young would be forced to apply for a different license, the brewer’s license, which would preclude public interaction. The company would no longer qualify for its pub license, and would lose the ability to sell on-premise.

The other route for a brewery that hits the barrel limit is the one chosen by BJ’s, which Young says still has brewpubs in Nevada, but moved its excess production to Texas.

Young compared the tap room experience to the branding of wine in California Wineries.

“If you had a restriction like this in California, you would not be able to visit the wineries in Napa Valley,” he said. “Because that’s where you go to sample the wines, and if you like them you go home and buy them more.”

Young said he’d like to continue winning customers by serving Great Basin products in the brew pub, and selling the excess to Nevada distributors, who also profit from the brand’s success.

Other brewers touted the burgeoning industry’s ability to draw tourists, and its appeal to cities as a redevelopment tool. Reno has revitalized abandoned commercial properties on its Fourth Street corridor by zoning the area for brewpubs, proponents said.

Nevada’s distributors want to maintain the integrity of the three-tier system, said a representative for Southern Wine and Spirits. Alfredo Alonso, testifying on behalf of the distributor, argued for “managed growth,” and called into question whether beer is even a growing category. He cited shrinking federal excise taxes per capita in the United States on beer. He said the distributor would not support tripling the cap as provided in SB 130.

Alonso told lawmakers raising the limit would result in an unfair business practices by the small brewers, and suggested that selling more beer on-premise would put tap rooms in unfair competition with full-service bars.

“If you are indeed a brew pub and you plan to sell beer, and try to get it to the marketplace and succeed, then you shouldn’t have several locations that basically end up being a series of bars and restaurants that can do something no one else can.

“There has to be some cap on what is sold on premise,” Alonso said, “because then you cease to become a supplier and you become a glorified bar. That’s not fair to the existing system, it’s not fair to my clients, it’s not fair to bars that also work hard to get clients.”

Challenged by Settelmeyer to find a way to help the craft brewers grow, Alonso said a separate bill is being written to loosen contractual restrictions that force distributors to favor the big beer companies over the small Nevada brewers. Currently, the big brewers can penalize distributors who don’t give primacy to their brands. The provisions of the other bill would prohibit the penalties.

Alonso also suggested the cap increase is unnecessary for Nevada.

“We’re basically tripling our cap right now and only one person in our state is even close to that number,” he said, in reference to Great Basin. “About 93 percent of the craft breweries in the country are under 7,500 barrels,” he said.

Young from Great Basin countered that there are six Nevada brewers with the capacity to produce 15,000 barrels.

”I think you have to keep in mind that every single brewer in the state wants the ability to grow,” Young said.

Settelmeyer told the panel that 10 other states have no production limits for breweries. The remainder have average of about 36,000, which amounts to 236 barrels. He said the math shows that even under the higher cap, breweries would send out less than one truckload per day.

The Nevada Wine Coalition will seek a friendly amendment to raise production caps on wineries, said Executive Director Randi Thompson.

Alonso said the distributor will be “adamantly opposed” to a wine amendment.

“That was a deal that was hard fought last session, and now they’re coming back to basically break the agreement that was made last session,” he said. “We simply couldn’t support that.”

Thompson says the objection is premature, since no amendment exists yet, and nobody knows what it will contain when it is submitted.

The 2015 legislature changed state law was changed to permit wineries to operate in Nevada’s two urban counties, Washoe and  Clark. The law still carries significant restrictions that the Wine Coalition will try to amend.