The Legislative rollbacks

Victory in Granholm led to a massive growth in interstate winery shipping. Before Granholm DTC wine shipping was available in 27 states, when winery shipping becomes legal in Mississippi that number will stand at 48 states.[1]

Granholm became the dominant force in the expansion of winery direct shipping when it broke down protectionist state laws that kept interstate wine shipping out of their state.

But the opponents of winery shipping did not go away and put up their hands and surrender. Instead, they have advocated for shrinking the market on the edges as much as they could.

Legislative path

With the goal not to eliminate but to limit the scope of DTC interstate winery shipping, the anti-DTC side has been successful.

Fulfillment house legislation, which requires a non-three tier licensed entity comply with numerous state laws, will make the administrative process so burdensome that some fulfillment warehouses will call it a day and many will not enter the marketplace because of the high barrier to entry. Similar to the three-tier system where a bottleneck is created, there will be less players to serve a massive industry.

With less competition in the industry, the remaining players can charge a higher price for services.

For small wineries, it may not be cost effective to ship their products into numerous states. As a vast majority of the wineries in America are considered very small to limit production wineries[2], a cost prohibitive shipping environment could destroy their businesses.

The small and limited production wineries are not traditional candidates for out-of-state distribution, so the only way to access out-of-state markets is through DTC shipping. Fulfillment house laws make this more difficult and will lead to a shrinking DTC market.

The other way the DTC opponents intend to limit DTC shipping is by restricting what is a manufacturer. States such as Tennessee and Massachusetts have passed laws on exclusivity of production and brand ownership. The purpose of these laws is to limit who as a winery shipper can access the state.

Conclusion

Granholm is law and although DTC opponents are mandated to accept its result, they have not gone quietly in the night. With each passing year they attempt to limit the reach of Granholm. At twenty years old Granholm remains strong. The fight will be not whether Granholm remains, but whether its opponents can minimize its influence.

[1] https://www.winespectator.com/articles/us-wine-shipping-laws-state-by-state-50258#:~:text=But%20then%20the%20Supreme%20Court,and%20Washington%2C%20D.C.%2C%20today.

[2] The Sovos DTC report for 2024 puts the percentage of very small to limited production wineries at 82.1% of American wineries