Legislation Stalls but the Time is Right for DtC Spirits Shipping

Lizzy Connolly
April 19, 2022

Direct-to-consumer (DtC) shipping is increasingly becoming a hot topic in the craft beer and spirits worlds, with both producers and consumers pushing for greater access. However, while 47 states and the District of Columbia allow wine to be shipped DtC, just six states and D.C. do so for spirits.

Several states have bills that could expand DtC shipping for spirits products. New York and California have received a lot of attention for the legislation they have in the works that could potentially vastly expand the market for DtC spirits shipping. We’ve highlighted some of the key points for each bill, as well as what expanded spirits DtC shipping actually means for the beverage alcohol industry.

What’s happening in New York?

New York Senate Bill 4245A would allow for intrastate and interstate shipment of liquor. In January 2022, it was referred to the Commerce, Economic Development and Small Business Committee.

Sovos ShipCompliant spoke with Brian Facquet, president of the New York State Distillers Guild, to understand how the legislation would impact the market.

The three-tier system has a clear distinction between suppliers, wholesalers and distributors, and then retail businesses. The system is wonderful, Facquet said, but it was created in the 1930s following Prohibition.

“We’re not saying anything about the world not needing a distributor or a retailer,” he said. “But the manufacturers have less power and less rights.”

Wineries across the country can directly ship their products to New York consumers, and have been able to do so for years. The state allowed for temporary DtC spirits shipping by New York producers during the height of the COVID-19 pandemic, and distillers were able to prove that it could be done appropriately and safely, Facquet said. However, that measure expired in June 2021.

What’s happening in California?

California also had a temporary measure in place that allowed distillers to ship products directly to consumers. However, that expired on March 31, 2022. California Senate Bill 620 aims to instill permanent DtC shipping for liquor.

“The bill was recently passed out of the Senate with substantial amendments,” according to the California Artisanal Distillers Guild. “We have to see what the amendments change, but it is hoped that small craft distillers can ship to our customers.”

Currently, California only permits out-of-state suppliers to shipping wine and cider DtC.

Dispelling the anti-DtC arguments

As with most legislation, there are parties in favor of the bills and those who stand in opposition. With DtC spirits shipping, opponents often stress their feared impacts on jobs, safe delivery, impacts on minors, and the proper payment of taxes.

On the contrary, Facquet stressed that more jobs will be created, as more shipping equals more jobs for common carriers (e.g., UPS and FedEx). Additionally, retailers have seen job growth from the increase in demand for local products. Data from the U.S. Bureau of Labor Statistics shows that since 2005 (when Granholm v. Heald allowed the wine DtC market to flourish) New York wholesalers had a 53% increase in jobs. Retailers added more than 3,600 jobs for an increase of 38%.

Common carriers have also already proven with DtC wine shipping that alcohol can be safely delivered. The sizable market for DtC wine shipping has also shown that the number of minors purchasing alcohol will not suddenly skyrocket. Third-party carriers are required to check IDs upon delivery and some states do in fact mandate age verification at the point of sale. Additionally, a recent Treasury Department report advocating states to further alcoholic beverage shipping noted the lack of evidence of problematic shipping related to minors.

Finally, DtC alcohol shippers have already proven to be compliant taxpayers. Sovos ShipCompliant alone has facilitated states’ securing hundreds of millions in tax revenue; from 2017 to 2020, there was $438 million in DtC tax revenue paid to states via Sovos ShipCompliant. More states opening up for DtC spirits shipping would only help those revenues continue to grow.

Local demand and beyond

DtC spirits shipping will also bring other benefits, Facquet noted. For example, New York distilleries are allowed tasting rooms, which are an important part of how smaller spirits producers build local fans. From there, consumers then go into retail locations and ask for those local brands. Essentially, tasting rooms are part of building demand for products to be sold through the three-tier system.

Beyond being a beloved local brand, distillers desire parity in the beverage alcohol world. With over 15 years of compliant, tax-paying DtC wine shipping, producers and consumers have shown that brands can be adored (and safely consumed) across state lines. The numbers also show that there is a strong desire for expanded DtC shipping options.

The Distilled Spirits Council of the United States (DISCUS) found that eight out of 10 consumers think distillers should be allowed to directly ship their products to legal-age consumers in any state. Approximately three-quarters said they would consider purchasing spirits online shipped directly from distillers to them from outside or within their state.

It’s difficult to know for sure how these pieces of legislation (and those yet to come) will play out. Stay tuned to Sovos ShipCompliant for the latest updates, and reach out to your local state representatives to learn more about the importance of consumer voices pushing bills forward.

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Author

Lizzy Connolly

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