Last month, Sovos ShipCompliant hosted its 16th annual Wine Summit. The virtual event featured sessions and keynotes devoted to regulatory updates, education and how the industry has continued to make adjustments in the wake of the pandemic. We gathered some Summit highlights and fast facts from a few sessions.
Industry & ShipCompliant Product Updates
Larry Cormier, VP, GM Sovos ShipCompliant, shared updates and perspective from a challenging year that was also filled with growth. Even with the COVID-19 pandemic, the direct-to-consumer (DtC) wine shipping market saw record spikes, proving to be “a silver lining in the pandemic cloud.”
- 2020 had a 27% year-over-year increase in DtC shipment volume, while shipments of wines priced under $30 per bottle soared.
- Napa origin growth had double digit dollar and volume gains in March 2021 compared to one year earlier.
- For the first time since pre-pandemic months, dollars (+16.5%) grew faster than volume (+9.6%); the average bottle price shipped was $45 versus $42 one year ago.
- ShipCompliant processed over 145,000 brand registrations through Product Registration Online (PRO) and Market Ready.
State Regulatory Updates
Steve Gross, VP State Relations, Wine Institute, presented his 16th annual Wine Summit address, detailing how the Wine Institute works to expand DtC shipping options in new states, improve existing statutes and protect existing shipping privileges.
- Several states have passed bills related to DtC shipping, including Alabama, Kentucky and Tennessee. However, other states had DtC bills that failed, such as Mississippi.
- The Kansas state legislature overrode a Governor’s veto to pass SB 50, which adopted economic nexus rules and has remote sellers face sales tax liability on their sales to Kansas residents if they make over $100,000 in total annual gross revenue in the state. Gross noted that they are working out how it would specifically impact wineries.
Kentucky ABC’s General Counsel Joshua Newton discussed Kentucky’s recent DtC alcohol shipping program with Alex Koral, Senior Regulatory Counsel, Sovos ShipCompliant. Newton explained that while Kentucky had had a DtC permission for many years, it was not largely adopted. However, when HB 415 passed in 2020, the Kentucky Alcoholic Beverage Control began to issue approved licenses to applicants for the new License to Direct Ship to Consumers.
- A second HB 415 that was passed in 2021 removed a previous provision that prohibited DtC alcohol shippers from using third-party fulfillment houses to help with their shipping logistics needs. DtC shippers of all sizes can rely on fulfillment houses to manage the complexities of readying packages with alcohol and bringing those packages to the designated carriers. Newton said that one of the biggest issues to tackle in the 2021 bill was to create pathways to allow for that to happen.
- Sponsors and supporters of the recent bill testified that they received near-constant requests for the ability to ship into or from the state.
In a separate panel, Matthew Botting, General Counsel, California Alcoholic Beverage Control (ABC), spoke with Sovos ShipCompliant’s Alex Koral about California regulatory updates. The COVID-19 pandemic greatly impacted how California approached the sale and delivery of alcohol.
- When businesses were forced to shut down, ABC issued 18 individual items of regulatory relief, largely detailing the laws it would not be enforcing as long as certain parameters were complied with. For example, many wineries took advantage of the “outdoor model” and expanded premises operations. As long as they were authorized by local governing bodies, licensees could get a temporary permit to expand into a nearby park or road.
- When businesses shifted to delivery-only models, the ABC was not forcing them to charge for delivery. Unless specifically authorized, free delivery is normally prohibited.
- Charitable donations were also something that the ABC needed to consider. Retailers cannot market alcohol with the promise of donating funds, but Botting explained that such efforts that were specifically for COVID-related relief were permissible. For example, money could be donated toward retail organizations or non-profits, rather than specific retailers.
- In a normal year, ABC has 15 to 18 bills on the legislative front. This year there were 35, which has since dropped to 25 that “still have life in them,” according to Botting. One that is looking to be made permanent is California’s “cocktails to go” option.
DtC and the Future of Wine
Bahaneh Hobel, Partner, Dickenson Peatman & Fogarty and Teri Quimby, former Commissioner at the Michigan Liquor Control Commission presented a session titled, “The Shifting Beverage Alcohol Regulatory Landscape.” The two discussed changing regulatory requirements, potential licensing issues and compliance concerns in the bev alc industry.
- Over the past year, more states have been looking to expand their regulations of fulfillment houses and other third-party services in DtC shipping. There are many in California, for example, but not all states allow for them. Because fulfillment houses do not sell wine themselves, or make shipments without authorization of licensed DtC shippers, increased regulation of them does not make sense, according to Hobel.
- The pandemic further showed that consumers are living in a world where nearly everything can be shipped to your front door and fears of alcohol shipping are overblown. The DtC wine shipping market has exhibited its commitment to maintaining a healthy and safe alcohol market, acting to prevent sales to minors.
Will Blackmon, Founder, The Wine MVP, explained how his background in professional sports helped him create and develop an educational service for everyone from wine aficionados to wine novices who simply want to learn more.
- After 12 years in the NFL, including a Super Bowl win, Blackmon originally entered the wine world because he was curious about the beverage and believed he was good at connecting people with one another.
- Millennials desire natural wines, seltzers and craft beers, but they also seek authenticity. “I’m not trying to influence or trick people…I’m here to learn, to help, to educate and to build [knowledge]…I’m trying to be another asset to help build the wine industry, keep it fun and make it more approachable.”
On-demand access to the event’s recordings and slides will be available soon. And mark your calendar for the 2022 Sovos ShipCompliant Wine Summit, April 13-14 at the Napa Valley Marriott. We look forward to seeing you there!
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