Irish Liquor Lawyer’s Predictions for the New Year

The New Year and new decade are upon us. Flower Power and epic battles in liquor will highlight this year.

Here are some of my predictions for 2020:

Epic liquor battles are coming and will result in a changed marketplace

2020 is the year of important legal battles. The calendar will only turn 15 days before the Mississippi wine shipping case goes for oral argument before the Mississippi Supreme Court.

In this case California and New York retailers pursuant to UCC (Uniform Commercial Code) terms of contract sold wine to Mississippi residents in California and New York and then helped arrange for common carrier shipping into Mississippi. The Mississippi AG who ordered wine from numerous retailers pursuant to UCC terms of contract brought an action against these retailers claiming they shipped wine into the state, wine retailer shipping is illegal in Mississippi. A lower court judge disagreed with the State of Mississippi and held that the contract was entered into in California and New York and it was not a Mississippi sale. For more on this case, http://irishliquorlawyer.com/mayhem-in-mississippi-irish-liquor-lawyer-writes-amicus-brief-in-wine-express-v-hood/ .

Prediction 1: The outgoing Mississippi Attorney General Jim Hood got way over his skis on this one and the California and New York retailers prevail.

The Mississippi Supreme Court can’t ignore the valid terms of contract under the UCC, state jurisdictional issues, and the absurd results in contract certainty that would result if Mississippi wins.

Prediction 2: In the 6th Circuit Lebamoff case the wine retailers win and Michigan loses another case. In the 8th Circuit Tennessee Wine precedent will influence a retailer win.

Sometime in 2020 Lebamoff v Snyder, will be decided at the 6th Circuit and Sarasota Wines v. Schmitt will be decided at the 8th Circuit. These are the first wine retail shipping case to go to a Federal Appellate Court. And they are the first wine shipping cases since the U.S. Supreme Court’s Tennessee Wine decision.

If the Circuits split expect a Supreme Court case. If the retailers win than retailer wine shipping becomes more commonplace and people start pushing the envelope. If the state wins retailer wine shipping could be dealt a blow. But don’t forget the Mississippi case, a win by the retailers could make wine shipping laws harder to enforce.

In the 6th Circuit Michigan loses again. The original Lebamoff decision from the Federal District Court held that Granholm extended to retailers. In Tennessee Wine the Supreme Court came to the same conclusion on Granholm protections extending to retailers. Try as they may to re-reason the Tennessee Wine decision, the State of Michigan’s position will not carry the day.

In the 8th Circuit, this is a closer call. The 8th still has the Southern Wine and Spirits precedent which upheld an in-state residency requirement for wholesalers, which unlike the 6th Circuit case provides the state with some strength. Nevertheless, Tennessee Wine is a game changer and with Granholm extending to all out-of-state economic interest, I don’t believe that the Southern Wine and Spirits card plays as well.  Plus, listening to the Missouri Broadcaster’s Association v. Taylor oral argument, it seems the 8th Circuit judges are pushing back harder on the state’s 21st Amendment justifications. http://irishliquorlawyer.com/8th-circuit-hears-oral-arguments-in-the-most-important-liquor-case-of-the-year/

A win for the retailer at the 8th circuit.

There are numerous other wine retailer shipping cases going on in numerous district courts throughout the country.

In Illinois, another Lebamoff case challenging Illinois’ wine retailer shipping laws is at the district court. In this case, the state originally won at the district court level and the case was appealed to the 7th Circuit. The 7th Circuit reversed and remanded blasting Illinois’ law as protectionist and discriminatory. If this case does make it to the 7th Circuit, Illinois loses.

Prediction 3: DTC will continue to grow and states will continue to fight

The DTC arena will continue to grow. Consumers are demanding their wine be shipped to them and the market is meeting this demand. Pushed on by the wholesalers, the states will continue to challenge direct to consumer shipping and try to significantly reduce its presence in the market.

Prediction 4: The wholesalers will try to make laws more protectionist

The wholesalers seeing that they will lose court challenges to state statutes prohibiting out-of-state wine retail shipping, will try to either ban wine retailer shipping completely or significantly limit its reach by restricting in-state wine shipping to a small geographical area within a state such as a county or within a specific mile limit.

What will happen?

Will the states go against their own consumers who desire increased direct to consumer shipping? Will they be more concerned with expanding the marketplace and collecting increased tax revenue v. protecting the market?

Since this is a political issue and not a legal one, it is hard to tell. The wholesalers have great political resources to overcome, but will changing times lead to a change in landscape.

Prediction 5: Seltzers are here to stay

Seltzers are not a passing fad like wine coolers and Zima. They will experience robust growth rates and continue to soar. The low-calorie count of 100 calories and the low amount of carbs, 2gs of carbs per drink, makes seltzers an attractive option for those that are weight conscious.

The calorie and carbs factors are the appealing factors which makes this product go.  Consumer are looking for a drink on the lighter side. To illustrate, Michelob Ultras explosive growth even when big beer brands are experiencing falling numbers shows the power of low-calorie drinks. [1]

Seltzers are well positioned in this space and will become a dominant player. Bet on Seltzers, the trends favor them

Cannabis Predictions

Prediction 6: Flower Power

In Illinois medicinal marijuana dispensaries are running short on marijuana flower to serve their medicinal base. With recreational marijuana becoming legal, shortages are going to grow more acute. Especially since medicinal user have a priority for use. (The first legal recreational dispensaries in Illinois are required to have a medicinal license. Subsequently, solely recreational dispensaries will be approved).

There may not be room at the inn for recreational users. And looking at this long term when recreational dispensaries come online. Illinois will still have a shortage of flower.

So, who will succeed in Illinois, those that have access to flower! For the bigger companies this is not a problem as they have enough growing capability in the state. For the smaller players, they may face substantial barriers to success that may lead to ruin. If customers experience shortages or no flower at all, they will take their business to a more reliable party.

In Illinois, Flower Power wins the day, and those without will simply wilt!

Problematically, this is not just an Illinois problem but extends to numerous other states. States must get ahead of this problem soon!

Prediction 7: States will tax to the benefit of the black market

In Illinois the tax on cannabis products ranges from 10-35%, a high tax rate opens up the black market.

And let’s be honest, common cannabis users, before legalization have been buying from the same source for years. And there is loyalty to their drug dealer, who may have delivered product they are happy with!

If the legal market puts a high tax on product is the common cannabis user going to switch to the legal market. Not likely!

Black Market will be a problem, at least 15-20% of cannabis use will be from the black market.

 

Conclusion

2020 will become a groundbreaking year in the liquor space. By the end of the year, numerous cases will strike down state laws restricting wine retailer shipping. The markets will either open up and consumers get more choice, or the wholesalers will use political muscle to shut down the marketplace.

One way or another, liquor laws are going to pivot in 2020.

I look forward to covering these happenings during 2020 and only 15 days a way until the Mississippi Supreme Court oral argument. Liquor never rests.

[1] https://www.pastemagazine.com/articles/2019/06/michelob-ultra-sales.html

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