In 2020, the door cracked open a little further for direct-to-consumer shipping of spirits in a few key states, including California and New York, with temporary provisions enacted to support small, craft distillers. Distillers, and trade organizations, would like to see those temporary provisions made permanent.
Indeed, DTC spirits was widely discussed at the recent American Craft Spirits Association convention in Louisville, KY, with three sessions dedicated to the topic. Not to mention, it's been on the priority lists for ACSA and the Distilled Spirits Council for a few years now.
California and New York are two major markets considering bills that would permanently allow DTC spirits.
CA BILL NARROWLY PASSES OUT OF COMMITTEE. The California Senate Committee on Governmental Organization held a hearing yesterday on the DTC bill, SB 620, narrowly passing it out of committee.
DISCUS chief Chris Swonger testified, noting DISCUS has been working in concert with the ACSA, the American Distilling Institute, and the California Artisanal Distillers Guild to support the measure. Chris said they "fully support" retail and wholesale partners, but that the three tier system "should modernize," adding that DTC ultimately helps the three tier system by providing small producers with an "on ramp" to build up their brand before pitching to a wholesaler.
Alex Villicana of the California Artisanal Distillers Guild added that DTC has been a "substantial revenue source for craft distillers that we cannot afford to lose." Several craft distillers in the state also called in to voice their support of the bill.
The following testified in opposition: Marlon Mansour of the Neighborhood Market Association; Matt Broad of the California Teamsters Public Affairs Council; Joe Lang of Republic National Distributing of California; and Dennis Loper of the California Beer and Beverage Distributors. Some major concerns they raised were that the bill would hurt small businesses (retailers) and could result in a loss of jobs at the retail and wholesale tier. Many distributor reps from RNDC and Southern Glazer's called in to voice their opposition.
All in all, there seems to be two main points of contention: 1) how much distillers can sell directly; and 2) whether the bill can just be limited to those small craft distillers. On that second point, most of those who testified in opposition said they would be more likely to support the bill if it was limited to craft distillers.
The bill almost didn't pass. They were one vote short, and one Senator changed her mind and voted for the bill with the understanding that there is still work to be done, namely on those two aforementioned issues. Indeed, Sen. Bill Allen, the bill's author, repeatedly said they are more than willing to work with the opposition to address the issues raised, emphasizing the goal of the bill is to help small craft distillers.
Granted, this is just the first step in the process, but Avalara gm, bev alc Jeff Carroll tells WSD: "I do think this was a big hurdle." The bill now heads to the California Committee on Appropriations.
WHAT ABOUT BEER? Under current California law, in-state brewers are allowed to ship directly to state residents, while out-of-state breweries are prohibited from doing so. SB 620 would open up DTC shipping for out-of-state brewers as well.
Lori Ajax of the California Craft Brewers Association testified in support of the bill, saying the current "inequity in treatment poses a significant legal risk to California's craft beer industry" as it could be considered to be in violation of the Commerce Clause. To treat both in-state and out-of-state brewers equally, California can either 'level up' and allow both to ship directly or 'level down' and remove the privilege for in-state brewers.
Aside from Lori's testimony, the focus at the hearing was on spirits.
THE BIGGER PICTURE. As mentioned, New York is considering similar legislation to permanently allow DTC spirits after allowing the temporary provision to expire.
Currently, just about 10 states plus D.C. allow spirits DTC shipping, and Jeff thinks 2022 "will be a big year for this." However, he adds that "I don't think these groups are trying to boil the ocean," and "I think it's going to be pretty targeted to a handful of states."
"California would be a big prize," says Jeff, and that could "create some momentum going into these other legislative sessions."
