Opinion: It’s time to legalise direct-to-consumer sales in the US

Opinion: It’s time to legalise direct-to-consumer sales in the US

The US's laws need to catch up to the drinks industry's commercial reality

Thoughts from... | 05 Oct 2021 | Issue 178 | By Liza Weisstuch

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If there is any certainty in the American alcohol industry, it’s that the laws and regulations can be completely absurd. Some of it is a hangover from the so-called ‘blue laws’, put in place in the colonial era. Iterations of some of them are still on the books in some states, like the banning of Sunday sales. Massachusetts prohibits ‘happy hours’ (read: drink specials) and, before the law was repealed, Utah required bartenders to mix drinks behind a partition, thanks to the political force of the state’s largely teetotal Mormon population.

The Distilled Spirits Council of the United States (DISCUS), a trade organisation, has worked for years to bring logic to liquor laws, helping to eliminate bans on Sunday sales and ensure that spirits are put on even ground with beer and wine. After months of lobbying the federal government to eliminate tariffs on American and European spirits, DISCUS’s latest effort is to pass direct-to-consumer (DTC) shipping laws that would allow craft distilleries, which now number more than 2,000 in the US, to freely sell their products online from their own websites.

Most states operate on the so-called ‘three-tier system’, a policy by which producers must sell to wholesalers or distributors, who then sell to retailers, who then sell to you. This is not a problem for a brand like Maker’s Mark or Four Roses, whose products are widely available. But, say, you live in San Diego and you visited a small distillery in Chicago. You bought their bourbon, you liked it, and you want to buy more. In most cases, you cannot have it sent to you.

It doesn’t take an insider to know how hard craft distilleries were bludgeoned by the pandemic. They were shut off from visitors, so the revenue that came from on-site sales fell off a cliff. DISCUS has been hard at work throughout the pandemic, pushing for allowance of to-go cocktails in many states and, in particular, to make any new legislation permanent. (Importantly, it also pushed for federal relief for distillers.) Unfortunately, DTC shipping rankles the distributors, whose revenue comes from their middleman status, and it upsets retailers, too. But customers love it.

In July, DISCUS released the results of a national survey conducted by IWSR Drinks Market Analysis. It showed that 80 per cent of consumers supported distillers shipping their products to legal-aged consumers in any state. At least 76 per cent would consider purchasing spirits online directly from the distillery, and 75 per cent of consumers agree that wine and spirits should be subject to the same shipping laws as other alcoholic beverages.

That last point warrants explanation. Wineries already have the privilege of direct-to-consumer shipping. According to an analysis by Sovos ShipCompliant and Wines Vines Analytics, wineries shipped more than $3.2 billion worth of wine directly to consumers in 2019. It also showed that consumers are willing to shell out more per bottle in the DTC channel.

“Our nation’s craft distillers are deeply, profoundly impacted by Covid-19, and our community is facing a potential industry-wide collapse without further assistance,” Margie Lehrman, CEO of the American Craft Spirits Association, told Forbes in September. “Immediate federal relief through a reduced FET is no longer just an optimistic request but an urgent, critical need, and we are optimistic that we will be able to work collaboratively with Congress this fall, as together we build a lifeline for our nation’s 2,000 craft spirits producers.”

That was a cry of desperation, a cry that comes from small distillers – especially those start-ups still in their infancy that haven’t landed agreements with distributors yet. If DTC was allowed, they could work with local restaurants to help customers know that they can buy the product without having to figure out the limited outlets that sell it. They could also operate on equal footing with the wine industry, which has had DTC sales for nearly 30 years, and the restaurant and grocery industries that have seen delivery sales skyrocket since last March. They’d stand a far better chance of survival. It could, maybe, even be a rare law that we can all reasonably call logical.
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