Are states playing Nero while distilleries bleed?

Why spirits shipping is not dangerous

As winery shipping is readily available to most consumers across the United States. One must ask why isn’t spirits shipping in this same category?

Some trying to stop spirits shipping make the case about the dangers of the devil’s rum coming into a state, and causing chaos.

The same bogeyman arguments were made about out-of-state winery shipping before the Supreme Court issued its decision in Granholm v. Heald, which prohibited states from discriminating against out-of-state wineries.

Since winery shipping became widely available, it has been successful with few if any problems existing. Winery shipping has not led to major problems of minors getting their hands-on product and it has not led to the wild west of alcohol.

Why has legalized wine shipping not experienced these supposed and potentially bad problems, one major reason is because these wineries are licensed and when licensed, they are required to comply with state legal requirements.

Licensing distilleries to ship into a state, would require them to follow the law as a condition of their license. The consequences of not obeying the state specific laws is losing your ability to ship spirits legally into the state. As such, these distilleries would have an incentive to follow the law.

Necessity of shipping

As I first covered and acknowledged the legal fallacy arguments behind stopping spirits shipping, I want to address why spirits shipping is a necessity.

Survival, Survival, Survival!

COVID-19 is having a crushing impact on distilleries across the country. Many distilleries make a substantial amount of their income from tasting rooms.

Distilleries have experienced on average a 64% decline in sales and 63% of distilleries don’t believe they can sustain their businesses for more than 6 months.[1]

Allowing distilleries to ship could help these distilleries survive. I know from first-hand experience that some of my wine DTC clients are surviving based on wine shipping. With the tasting rooms shut off for wineries, the shipping revenue has made the difference between survival and closing their business.

Unfortunately, distilleries unlike wineries don’t have the benefit of near-universal shipping access across the country. Distilleries are effectively choked off from this crucial revenue source. There is no doubt that the distilleries make a substantial investment in their business operations. With the time and money, it takes to build a business, it would be a shame to see distilleries go out of business based on unforeseen consequences, mainly COVID-19.

But what would be a greater shame, is if we all stood by and watched it happen without doing anything.

For state governments, it is time to stop playing Nero and help the distilleries out!

The Customer Side: Shipping may be the only way for some to get product

There is also a consumer angle on why spirts shipping should be legal; some people that cannot go to a retail store, because they are disabled or ill, cannot get product by delivery and shipping may be the only way to obtain product.

We hear about the amazing amounts of product delivered by Drizly. To some it would seem Drizly takes care of the problem for people that can not get to the liquor store because of a disability or because of COVID-19.

Problematically, Drizly is not a panacea for those cloistered in their house. Drizly is great if you live in and around a metropolitan area, but Drizly does not deliver into every area of the country. If you input certain towns in rural Illinois into Drizly, you may find Drizly is unavailable there.

Now there are local retailers that could deliver for someone outside of Drizly’s range, however, that is not a guarantee. In rural areas the liquor store may be a good distance from the customer’s house. For a small rural retailer, they may not want to drive the long distance to deliver the product, or they may lack the resources for a delivery service.

Shipping on the other hand, if legally allowed, would basically guarantee product for a consumer no matter how remote their residence. UPS and Fed Ex will basically ship everywhere. A consumer can be guaranteed that if they order product that the common carriers will have the resources to deliver the package.

As a society, we need to understand certain factors restrict people from going to the retail store. Some people are disabled, some people are very ill or recovering, and some people because of COVID-19, do not want to risk infection by going to the store.

By standing still on shipping, we are acknowledging that we will not take action to remedy these problems faced by certain residents. As 1 in 5 Americans resides in a rural area, this is not a small problem.

Is it the government’s role to prevent an industry from taking part in the fastest growing segment of the economy?

Since the COVID-19 pandemic consumers shift towards ecommerce has grown exponentially! In the Second Quarter of this year, Walmart’s e-commerce sales jumped 97%.[2]

Clearly, there is a sea of change on how people want to shop for goods and shipping will continue to grow rapidly.

If spirits are not allowed to be shipped, then we are preventing distilleries from partaking in the fastest growing segment of the economy.

How that makes sense I don’t know!

Conclusion

In concluding, let’s do a cost/benefit analysis. We have seen through wine’s history that shipping wine has been a major success for wineries and has led to very few problems. So, the cost of allowing spirits shipping is low.

Let’s take a look at the benefits. First, shipping could keep distilleries in business that might otherwise go out of business, shipping helps get product to those that may not have access to it, and allowing shipping will allow an industry to tap into the fasting growing market in the country.

On balance, the answer seems quite simple. The state governments should put their fiddles away and put out the fire before the damages ravage more parts of our economy!

 

[1] https://www.distilledspirits.org/news/new-survey-shows-covid-19-creating-severe-financial-hardships-for-craft-distillers/

[2] https://www.cnbc.com/2020/08/18/walmart-wmt-q2-2021-earnings.html