California and Maine Curtail Bills for DtC Spirits Shipping

Alex Koral
May 10, 2022

Despite the broad interest among Americans for direct-to-consumer (DtC) shipping of beer and spirits, there is clear reluctance among state legislators to change laws to enable these sales.

In California, the would-be DtC shipping expansion bill SB 620 was recently amended by the State Assembly in a way that will severely impair the ability of California residents to avail themselves of DtC shipments. While SB 620 had been widely hailed for what it could bring to California consumers, it appears that the Assembly instead chose to credit the fears and claims made by the most vocal of DtC shipping opponents.

Whereas SB 620 as initially introduced would have enabled California residents to receive DtC shipments of beer and spirits largely under the same conditions as they can currently receive shipments of wine, the bill as amended will only enable a much-reduced DtC market. The key changes found in the amended version of SB 620 include:

  • Completely removing any provisions for DtC shipping of beer.
  • Limiting DtC spirits  only to distilleries that produce less than 150,000 gallons of spirits per year, either directly or indirectly through any agent or other affiliate.
  • Requiring that DtC spirits shipments be made only from the shipper’s licensed premises, effectively prohibiting the use of fulfillment houses.
  • Prohibiting distilleries that sell their products to California distributors from shipping DtC more volume than they sell at wholesale.
  • Prohibiting common carriers from using contractors to fulfill shipments.

These changes show the Assembly was ready to defer to the wishes of special interests in the state. Wholesalers and other opponents of DtC shipping alleged that DtC shipping would bring rampant sales to minors and eliminate thousands of jobs related to retailing and transporting alcohol in the state. And while it is unclear how these changes will resolve those concerns (at least, if those concerns had had any real merit to begin with), it is clear that the Assembly is acting more on behalf of special interests than in the interest of their constituents.

By including these new provisions, the current version of SB 620 may be more trouble than it is worth. While any amount of legalized DtC shipping is beneficial to suppliers and consumers, if SB 620 does become law, it will establish a severely curtailed market that will not meet consumers’ expectations (even large distillers produce brands that do not get widely distributed, the main driver of DtC shipping), and will require future legislation to fix. Indeed, the restriction on not allowing DtC shipments to exceed a supplier’s wholesale distributions may lead some distillers to completely exit the California wholesale market, if they find managing the numbers game to be overly burdensome.

Across the country, Maine Governor Janet Mills signed LD 1358 on May 3, 2022, in another case of a clear, effective DtC shipping law for spirits being neutered. As originally written, LD 1358 would have established DtC shipping of spirits along similar lines as are currently available for shipping of wine in Maine. However, in its final form, the bill is merely a recommendation that the state further look into the prospect of DtC shipping of spirits.

While it is positive that the state is looking into the DtC spirits shipping market, and that it has committed the Bureau of Alcoholic Beverages and Lottery Operations to issuing a report on the subject by February 15, 2023, it still leaves Maine residents in the cold when it comes to accessing the full national market for spirits. If the state does come around to passing a full DtC spirits shipping bill in 2023, this may just be a mildly annoying delay, but there is the very real prospect that interests in the state will use this time to further influence the state legislature against DtC shipping of spirits.

Consumers continue to express their interest in being able to receive DtC shipments of beer and spirits, and the ongoing success of the wine DtC shipping market shows how those other products could manage. As such, it is a shame that states refuse to extend such permission to all suppliers. However, the best response for the industry is to double down on their lobbying efforts, engaging in grassroots campaigns by consumers to advocate for the change we all want to see.

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Author

Alex Koral

Alex Koral is Senior Regulatory Counsel for Sovos ShipCompliant in the company’s Boulder, Colorado office. He actively researches beverage alcohol regulations and market developments to inform development of Sovos’ ShipCompliant product and help educate the industry on compliance issues. Alex has been in the beverage alcohol arena since 2015, after receiving his J.D. from the University of Colorado Law School.
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