Does Size Really Matter, the DTC Spirits Shipping debate
The California DTC spirits shipping bill really has brought to life the issue of whether size matters. In the bill to allow DTC spirits shipping, it seems the Teamsters, which once objected to the bill, now favors it because there will be a supposed provision, which does not allow a distillery producing over 150,000 gallons of spirits from shipping to California consumers.
One must ask the question, are size limits a good idea and do they serve public interest?
Being an active observer of this bill, it seems the arguments for the 150,000-gallon limit is based on the evil big alcohol company gaining too much power, which will put people out of work and result in minors getting their hands on alcohol.
But those who advocate for limits should look at history and determine if their preferred course is the best answer.
As always, to look to DTC shipping history, we must look at wine, the only alcohol where DTC shipping is prevalent and where most states have allowed DTC shipping.
At one time, history will show that numerous states set production limits for wineries that could ship into the state. Today, those limits are a thing of the past. After Ohio passed legislation lifting its ban on wineries producing more than 250,000 gallons of wine per year from DTC shipping, New Jersey remains the only state to have such an odious law.
Several states faced lawsuits on their production limits, mainly Arizona and Massachusetts. Massachusetts was on the losing end, which precipitated a change in their laws. Arizona won in court but eventually got rid of the production limits.
History shows that production limits for shipping don’t work well and have become unpopular. So, it begs the question why would the present state of affairs want to repeat bad history?
All production limits do is keep certain distillers out of the marketplace. Why should we care whether certain distillers are prohibited from the DTC shipping marketplace? Because quite simply, consumers often times desire brands from these companies, and production limit laws will block consumer access to products they desire.
Here is the simple solution to the problem, follow history. Winery shipping laws throughout the country, don’t run markets by limiting market participants, they regulate carefully and even limit the amount that can be ordered by an individual. Now I personally, don’t advocate for personal shipping limits, but at least there is a limitation compromise people can live with. It provides limits to the power of the big alcohol producers and puts them on an equal plain with the little guy, yet at the same time allows consumers access to a broader array of goods.
Interesting thing about limits
What is interesting about limits, is we never limit the rights of wholesalers based on the size of their operations. Imagine if we limited the brands a wholesaler can carry based on the size of their operations, or put in other arbitrary limits on wholesalers’ powers based on size.
Really, if you asked Bryan Henderson of Boardwalk Distribution Co. of Oklahoma who is suing Southern and RNDC for using their power and size to squeeze him out of the market, maybe he would believe that limits based on wholesaler size would be healthy for the marketplace.
In concluding, does size matter, yes, but it depends on whose ox is being gored. If it is the wholesalers, size is irrelevant, and there are no limits to the powers exercised or any restrictions.
If it is manufacturers in a burgeoning DTC shipping matter, we are led to believe that size matters and bigger suppliers will ruin the market with DTC shipping and squeeze people out. Quite honesty, the opposite is true, DTC shipping while providing access to larger players, will provide greater benefits to smaller suppliers, who couldn’t access the state marketplace without DTC shipping.
How do I know this, because history has already provided me the crystal ball!