The Year the Battle begins
2020 and 2021 were interesting years in the liquor world, so what kind of encore will we have in 2022. Only the future will tell, but looking into the crystal ball, I see a year of great activity that could turn the liquor markets into different directions.
- There are eight wine retailer shipping cases running through the system right now. Presumably, one of these cases will go against the state and a Circuit Court will determine that the state’s wine retailer shipping law is unconstitutional. This will result in a circuit split. The 6th and 8th Circuit upheld discriminatory wine retailer shipping laws, and at present the states and their wholesaler allies hold the upper hand. But the wind of change could be coming very soon. In 2022 expect to see the beginning of the battle play out. Now, I will caveat one thing, because the legal system moves slow, a favorable decision for the free marketers may take us into 2023 to finalize. Several of these cases are at the district court and decision would be expected in the second half of the year. Which means we could be looking at a Circuit Court decision in 2023. But I expect the eggs to hatch sometime in 2022.
- The wholesalers will do everything they can to limit direct-to-consumer shipping. Their goal will be to make DTC shipping more expensive and also to increase the barriers to entry to the marketplace. These notions bubbled up to the surface in 2021, when the wholesalers led the push to require a fulfillment house become licensed to ship into certain states. The goal of these laws is to make the compliance process so burdensome that some fulfillment locations will not ship into a state because it is too expensive to comply. Which means small wineries become limited to a smaller number of fulfillment houses, which increases the cost to do business.
Second, the fulfillment house compliance expense will work to keep investors from entering the field because of the burdensome compliance expense. Which also means less options and higher prices for small wineries. The goal is to make the cost so expensive for small wineries that they can’t afford to ship.
WSWA (Wine and Spirits Wholesalers of America) has formally made it known that wineries producing under 1,000 gallons should be eliminated. Any legislation covertly aimed at DTC is also aimed at the little producer. Expect WSWA to target small and innovative wineries and try to eliminate them through legislation. The big question with DTC is when will WSWA get into the game and begin buying businesses involved in the DTC game, I will imagine they will see the writing on the wall one day and come to that conclusion. By the way Drizly is not DTC, and let’s not kid ourselves that it is!
In the end, this will be an active year, liquor never sleeps, but especially in 2022, one should always be awake for what happens this coming year.