COVID-19: Supporting Direct to Consumer Wine Shipping May Be a Matter of Life and Death

COVID-19 forces us inside

During this time of great crisis our life has changed drastically. With shelter-in-place orders governing states such as California, Illinois, and New York, places of great importance in our society such as libraries, museums, houses of worship, and cultural institutions are closed for the public good.

To stop the spread of COVID-19 Virus, California Governor Gavin Newsome issued an order asking all Californians to remain at home unless they have an essential reason to go out. Illinois Governor J.B. Pritzker indicated that the stay at home order is critical to reducing the spread of COVID-19 and that “adhering to the order will save lives and it’s the responsibility of every Illinoisan to do their part.”

In essence, avoiding all but the most necessary trips outside the home in the near future, may be the difference between life and death.

Liquor in COVID-19 Virus Days

With the state and high-ranking health officials requesting we stay home; we need to think differently on how we purchase liquor.

Wine shipping provides this best option to protect the health and safety of our citizens. Shipping wine to consumer, eliminates the need for face to face purchases and does not require people to leave their home. As indicated previously, people obeying health warnings and staying in their home may be a matter of life and death and may help us get over this health crisis sooner rather than later.

Also, exercising this option will help many wineries who lost a substantial income source when their tasting rooms were forced to close. I know of one winery that lost around 80% of their income when its tasting room was forced to close. Direct shipping is their only source of revenue available.

Why states aren’t adopting the best policy

As we see that wine shipping is the best solution in this time of crisis, the unfortunate reality is states are trying to stop it from becoming commonplace, and the only wine shipping privileges were not granted by states, but forced upon them through tough legal battles which took years to conclude.

In the United States, winery shipping is legal because of the U.S. Supreme Court case Granholm v. Heald. In Granholm, the Supreme Court held that states could not allow in-state wineries to ship to their consumers, yet ban out-of-state consumers from exercising the same privilege.

Based on this decision, states had to open up their wine shipping market. Which lead to greater consumer choice and greater access to markets for wineries.

Nowadays, the fight to expand wine shipping to out-of-state wine retailers is repeating the history of the winery struggles. The states again are not accommodating wine shipping and battles to change state laws are being fought in courts. Over 10 states are being sued to overturn wine retailer shipping laws, on the grounds that they discriminate against out-of-state wine retailers in violation of the Commerce Clause.

Instead of developing laws which provide businesses access to markets and consumers fair choice, the states are fighting it tooth and nail.

What results, is we face a crisis in which the safest way to get wine to consumers is severely limited by state policies.

Black market, illegal alcohol and other concerns
Poison alcohol

The main opponents of direct to consumer shipping are the liquor wholesalers, who believe that allowing interstate wine shipping is dangerous to the health and safety of our citizens’ welfare.

However, their theory of interstate shipping leading to tainted alcohol is a theory rejected by the U.S. Supreme Court in Granholm, and the 6th Circuit in its oral argument last week on Michigan’s wine retailer shipping law.

The wholesalers utilize arguments of deaths in other countries related to poison alcohol to justify their position. But there is a distinct difference between the regulatory system in the U.S. versus the regulatory system in other countries. In the U.S. a producer that wants to sell wine, needs to obtain a Certificate of Label Approval (COLA), this COLA is traceable and allows the federal government to impose liability over a distinct producer or bottler based on the COLA. Other countries lack this rigorous regulatory system.

Nobody would deny that tainted or poison alcohol is a grave danger. Problematically, the wine shipping opponents (opponents) lack the evidence that this problem is prevalent or that wine shipping would exacerbate this problem. Since Granholm in 2005, the opponents have not come up with evidence in any court case of a single example where wine shipping caused tainted alcohol to become available in the system.

Corralling the Black Market

Many opponents of direct shipping believe that not buying liquor from in-state stores will lead to a black-market. They fear that if consumers eschew in-state stores, that they will go across state lines to purchase alcohol, or buy product from unlicensed sources. To them, in-state stores are essential and should be kept open during this crisis, because buying from in-state stores versus other options serves to protect the health and safety of state residents.

Before I get into the meat of the discussion, when Pennsylvania closed their state liquor stores, it seemed like PA residents went across to Delaware to Total Wine to purchase their alcohol. The health and safety of PA citizens was not compromised when their citizens bought product in Delaware. Buying from another state’s well-regulated market, does not constitute dealing in a black-market.

The unfortunate aspect of this situation is PA loses revenue, which is not unimportant. However, by expanding wine shipping privileges, the state guarantees that it receives tax income, as opposed to its residents shopping in another state.

The opponents focus is on the black-market activity which could occur if liquor stores are closed. One would presume opponents are including un-registered wine shippers in this group.

But there is a way to substantially decrease the black-market, work to develop a licensed and well-regulated wine shipping system instead of fighting it.

The reality is that businesses seek access to markets where there is consumer demand. Which will lead to shipments into states where the shipper is not licensed. Some shippers utilize UCC FOB terms of contract, where the sale occurs outside the state in which the ultimate consumer resides, and some sales are shipped into states without these specific contract terms.

The fact is, wine shipping is occurring and growing fast, we can sit on the sidelines and issue dire warnings about black-markets, or we can establish laws to corral the black-market and bring shippers into a well-regulated system.

Substantially all wine retailers and wineries want a well-regulated and licensed system. History demonstrates that the wine industry will voluntarily submit to government jurisdiction and terms even when it is not in their best interest. To illustrate, the recent U.S. Supreme Court Wayfair decision allows the state to impose a sales tax on a business, if the business has a certain amount of sales or performs a certain amount of transactions in the state. Wineries and wine retailers submit to pay sales tax to the state, even if they don’t meet the threshold in Wayfair.

Further, keeping state liquor stores open, does not guarantee that the black market will not exist. When I visited my local Jewel grocery store, the cashier told me that someone had over a $550 bill and most of it was liquor. Will this person drink it all or store it, or will it end on the internet for sale? We don’t know, but what we do know is even limiting the system to physical presence buying within a state, will not shut down the black-market.

We all should fight vigorously against a black-market. But we all shouldn’t fight against a system that is safe, is a growing business, and is a business that meets consumer demand.

In concluding, the opponents should not fight change but should work together to strengthen the regulatory system.

Public Health

Some of the opponents will maintain that liquor retail stores are essential and should remain open during shelter-in-place orders because “products from illegal sources can be extremely hazardous to consumers’ health.”

So let’s discuss the issue of public health. The COVID-19 virus has spread rapidly and is leading to panic and causing death on a mass scale.

Many state governments and also foreign governments have requested people shelter-in-place for the good of our society. The reason being is the virus is spread by person to person contact and could be spread by touching a contaminated surface or objects.

Hence, when we are looking at how liquor is purchased, we need to become mindful of the safest and healthiest method for purchasing liquor.

The question must be asked, is shipping or on-premise retail purchasing the safest method?

With shipping there is no person-to-person contact or potential contaminated surfaces to worry about? With on premise retail purchasing there is the potential of these two dangers. Even if precautions are taken, a business can not control who comes into their store and can not know with 100% certainty whether they are contagious for the virus.

As we are living through an uncharted time and living with something we don’t completely understand, we need to take the safest measure such as self-isolating in our house for weeks.

We all share the sentiment that the alcohol regulatory system should promote the health, safety, and welfare of its citizens. In my mind, there is no doubt that receiving wine via shipping is the healthier alternative to someone visiting a liquor store and potentially exposing themselves to the virus.

In concluding, let’s promote the healthiest way forward and embrace a method of buying which reduces the potential for spreading this God-awful virus.

Allowing and expanding wine shipping is not only the healthiest option, but it just may be a matter of life and death.

Conclusion

The COVID-19 epidemic demonstrates that a great unforeseen event could drastically shift our lifestyle and economy in an instance.

Today, we need to take drastic steps in order to avoid dire circumstances.

These circumstances require us to exercise the best and safest practice.

Wine shipping, which has proven to be safe, provides society the best method for purchasing alcohol and reducing the risk of spreading this deadly virus.

It is time we exercised this option on a mass scale and expanded its reach!

2 thoughts on “COVID-19: Supporting Direct to Consumer Wine Shipping May Be a Matter of Life and Death”

  1. It’s not clear that the virus changes anything. Given that most wine retailers will continue to sell online and ship within their state, and that supply chains continue to function, consumer choice/access is no less today than it was a few months ago.

    And even if every state opened up DTC sales to every retailer and winery, it’s not going to move the needle for the vast majority of them because the hardest part of wine remains – selling. The only winners would be a few large retailers who have the marketing clout and money to reach out to a national audience. The other 99.9% are hidden from consumers by normal market noise.

    The one entity that is going to benefit is wine.com. If they are aggressive enough, they have the opportunity to emerge as a beast when this thing is over.

  2. Disagree, once the states stop putting barriers up to this industry it will get more well known. As people are getting more educated about wine, the more choice they demand and the more options they want.

    There are numerous specialty retailers that will benefit from open markets that are not wine.com. Further, the consumer will benefit from more consumer choice.

    The needle moves every year in this industry because it is a very fast growing segment. In Illinois for 2018, there was $125,000,000 in wine shipping dollars coming in. Expanding wine retailer shipping would add millions in tax dollars. Plus, there are states where shipping is not allowed, opening up those markets would help small wineries.

    Thanks for your comment!

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