CALIFORNIA DTC SPIRITS SHIPPING: TIME FOR A REFERENDUM

California’s referendum system allows the chance to put a question to the voters on whether they want changes to state laws or to even recall governors. After the latest version of the spirits DTC shipping bill, maybe it is time to admit that the only way forward, is to put this issue in the hands of the voters and not the legislature.

What started off as a great model DTC shipping bill has morphed under political pressure from the liquor wholesalers and their Teamster allies, to a bill that gutted the positives of DTC spirits shipping and turned it into a useless exercise. What is more concerning is the new version of the bill makes changes that really don’t serve much of a regulatory purpose, but are put in there to make DTC spirits shipping unattainable for the large majority of distillers and maintain the status quo for the wholesalers.

The facts are the facts, the legislatures succumb to the political influence of the middle tier and their deep pockets that influence the legislatures. Let’s look at some of the new changes and how they don’t serve a regulatory interest.

  1. Under the new proposal, a spirit’s producer can’t utilize a fulfillment house to ship. A fulfillment house allows a small producer the ability to ship at a cost-effective rate. A small producer shipping 5 bottles from New York to California would be expensive. Utilizing economies of scale, the small producer can utilize the fulfillment house’s FedEx account to save money. Without the benefits of a fulfillment house, it may not be worth it for a small producer to ship. Hence, making it more likely to eliminate them from the marketplace. What is even more absurd is fulfillment houses exist for many years and serve the industry well. Yet, the legislation desires to cut them out, why because it wants to make DTC shipping harder to achieve.
  2. DTC sales can’t exceed wholesale sales. Tell me, what regulatory interest does this serve! If Distillery A signs with a California wholesaler and the DTC sales exceed the retail sales, then they somehow need to cut back on their DTC sales to comply with the law, really?
  3. Common carriers can’t use contract employees. Again, why do we care who common carriers utilize as long as the common carrier is delivering and the product is on the state manifest.
  4. Production limits on those that can engage in DTC, any distiller producing above 150,000 gallons of spirits can’t DTC ship. Again, what is the regulatory interest in making this change? I can’t find it. The only reason for this rule is to cut off marketplace access for bigger producers with no regulatory interest coming back in return.

Sadly, based on the legislative about face, the legislators, whether Democrat or Republican are beholden to an entrenched special interest, to the point where they would pass a law that makes no sense and is anti-growth. The only solution I see is to put the issue directly to the voters and let them decide. False advertising may play a role in a referendum campaign, but at least the individual voters can’t be bought off!