ABC still turning a profit for state despite declining sales (copy) (copy) (copy)
Virginia liquor sales are continuing to decline, but somehow the Alcoholic Beverage Control Authority is still turning a profit for the state budget.
ABC leaders expect to return almost $231 million in profit to the state general fund budget by the end of the fiscal year on June 30, but the authority has lowered its net revenue estimate by more than $15 million below the forecast used for this year's budget, driven by a projected $20 million drop in store sales.
They still expect to exceed the state profit requirement by $500,000, but they're counting more on reducing operating costs than expanding alcoholic beverage sales, which have dropped sharply in Virginia and other states that control liquor sales since the end of the COVID-19 pandemic.
"We're still contributing more than $230 million back to the Commonwealth," said David Alfano, chief financial officer, in a presentation to the ABC Board of Directors on Wednesday.
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ABC is doing it by shrinking its operations — closing 10 of its roughly 400 retail stores and leaving 70 jobs vacant through the end of April. Board members made clear on Wednesday that trend will continue to reduce annual operating costs by about $400,000 per store.
"As long as we continue to get declining sales, we will get closing stores," said CEO Dale Farino, a former wholesale wine and beer distributor, who then-Gov. Glenn Youngkin appointed in 2024 after the departure of the previous CEO under cost-cutting pressure from the governor's new chief transformation officer.
For Virginia distillers, who must rely on ABC for selling their products in an alcohol-control state, the focus on reducing costs and closing stores misses the point for a state-run monopoly that exists for retail sales.
"They're a retail operator — what are they doing to get traffic through stores?" asked David Cuttino, owner of Reservoir Distillery in Richmond and vice president of the Virginia Distillers Association.
Association President Becky Harris, co-founder of Catoctin Creek Distillery in Loudoun County, said Virginia distillers are looking for more freedom from ABC to boost their sales — making it easier to sell at farmers markets, for example — as they face mounting challenges from the effects of inflation and slackening job growth on consumer spending.
"Virginia distillers are hurting," Harris said in an interview on Wednesday. "I'm talking to a lot of people who are thinking they may not make it through the year."
With about 60 home-grown distillers in Virginia, the industry is also worried about ABC cutting back on the range of alcoholic products it offers, including theirs, as a way to offset falling sales.
Small distillers can't compete on price with big national brands — Tito's vodka remains ABC's top-selling brand — but Harris said, "That doesn't mean they're not in demand across the commonwealth."
She said Virginia distillers contribute more than just store sales. They buy grain from Virginia farmers and wood for barrels from state lumber companies.
"Our economic impact is more than just store sales," Harris said.
ABC sales were strong coming out of the pandemic, but the Youngkin administration wanted the semi-independent authority to boost its net profit margins by cutting costs and raising its revenue target. It demanded almost $24 million in expense reductions in 2023, while raising revenue expectations by 5% a year, despite signs that liquor consumption was falling nationally for a variety of reasons, including competition from cannabis products.
The trends forced the state to reduce its revenue expectation by $110 million in the two-year budget it adopted in 2024, and ABC has maintained its focus on cutting costs ever since.
"That's a continuing, ongoing, daily process," Farino said in response to board questions about future cuts.
ABC Chairman Tim Hugo, a former Republican delegate from Northern Virginia whom Youngkin appointed in early 2023, said the authority is responding to the same decline in liquor sales as other states since the end of the pandemic.
"The numbers are just going down across the country," Hugo told the board.
In Virginia, the downward trend intensified in March, with store sales down by $5 million and gross profit by $1.7 million after adding excise tax collections. The authority partly offset the revenue loss by reducing expenses, but it ended the month with $1.1 million less profit than expected, a decline of 6%.
Through the first nine months of the year, store sales were down by $10.6 million, but ABC reduced its operating and regulatory costs to increase net profit by $4.3 million. Compared to 2025, however, ABC's net profit was down by $7.2 million, or 4%. Most of the cost savings came from lower salaries and benefits because of unfilled jobs.
As a result, the authority revised its budget forecast last month to reflect a $19.8 million decline in store sales, projected through the end of June, and an unexpected $2 million expense from the $1,500 bonus that the General Assembly and Gov. Abigail Spanberger awarded state employees in the revised budget she signed on Feb. 20 for the current year.
In order to meet its profit requirement for the budget, ABC reduced its operating expenses by $5.2 million and carried forward $4.8 million in profit from last year.
The next step is to adopt a new budget for the fiscal year that will begin on July 1.
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Michael Martz (804) 649-6964
