Predictions for 2021
Today, I pay ode to the late John McLaughlin and make predictions for the new year. Enjoy it will be a wild one!
Prediction 1: The Supreme Court makes a move on wine retailer shipping. Lebamoff v. Whitmer, which appeals the 6th Circuit’s ruling allowing Michigan’s discriminatory wine retailer shipping law to stand, is still sitting in the Supreme Court’s cue. The Court requested that the Respondents file a response to the Petitioner’s petition. Subsequently the Court distributed the case for conference and then rescheduled.
Clearly, the Court is giving close consideration to this case. But what will drive the decision on whether the Supreme Court grants cert in Lebamoff? There are numerous important factors of influence.
First, the Sixth Circuit’s decision misapplies Tennessee Wine, especially with regards to the evidentiary standards and the lack of utilizing a reasonable nondiscriminatory alternatives test. Second, the Court may feel the need to step in to settle the legal chaos. There are numerous wine retailer shipping cases in lower courts throughout the country. The 7th Circuit in Lebamoff v. Rauner, reversed and remanded a decision upholding Illinois’ wine retailer shipper law. The case is now at the district court. The 8th Circuit held oral arguments in Sarasota Wine Market v. Schmitt, although the decision has not come out yet, the 8th Circuit’s panel aggressively attacked the state’s position.
The Supreme Court waited nearly fifteen years to settle the issue of whether Granholm’s nondiscrimination principle was limited to producers or whether it applied to retailers.
I don’t think the Court wants to recreate the murky waters it created in the aftermath of Granholm. Hence, I think the Court grants cert in this case and rules that discriminatory wine retailer shipping laws violate the Constitution’s Commerce Clause principles.
Prediction 2: This year will represent a battle royale on the direct to consumer (DTC) shipping front. There are numerous facts that are indisputable. One, DTC shipping of liquor has increased greatly in popularity and is not going to slow down. Two, a majority of the country puts strict prohibitions on DTC shipping of liquor.
We will see states aggressively go after many DTC shipping companies, the wholesaler tier hates these companies and they will aggressively request that the state pursue these companies. As the wholesaler tier controls many states, expect them to press for this course of action.
We will also see more legislative proposals brought forward expanding DTC shipping. DTC shipping is growing and will keep growing, the demand is there.
But it is not just about meeting consumer demand, many brewers and distillers need to obtain DTC rights as a matter of survival. Presently, beer and spirits, do not enjoy the same privileges as wine, they can’t ship their product DTC. Like wine, beer and spirits producers make much of their revenue from tasting rooms. With the tasting rooms severely reduced and in some cases completely closed because of COVID, these liquor producers lost a major source of income. The wineries have an additional source of income not available to distillers and brewers. Without this source of income, brewers and distillers will be unable to survive.
This will influence many legislatures to think differently and expand DTC shipping. Providing brewers and distillers with DTC shipping rights may be the difference between a business that can survive and one that goes out of business.
Prediction 3: Cocktails-to-go legislation faces opposition but eventually expands in many states. During the pandemic cocktails-to-go legislation was passed in numerous states. In some states the legislation provided a temporary right for cocktails-to-go, in other states the right to deliver cocktails-to-go became permanent.
Although, the National Beer Wholesalers Association and Center for Alcohol Policy are against cocktails-to-go, and may make a push against making it permanent, I think states see cocktails-to-go as necessary to help businesses earn an extra source of income during this difficult time.
Again, without cocktails-to-go many bars and restaurants would shut down.
So, like DTC shipping, the state legislature must decide whether it is preferable to maintain the status quo, or make changes to the system which will allow its businesses to survive?
Finally, there is no glaring evidence that cocktails-to-go has resulted in major safety issues and a threat to the public. If the retailer is not taking the right precautions, a state can sanction its liquor license. Utilizing the potential harm scenario is becoming less effective and will not work to stop progress in the liquor field.
Prediction 4: Sadly, many small producers will cease to exist. The COVID crisis has devastated the number one source of income for small producers, their tasting rooms. For wineries, a substantial amount of their revenue comes from tasting rooms, for distillers and brewers substantially all their revenue comes from tasting rooms. Without the ability to earn revenue from DTC sales, brewers and distillers are essentially choked off from their income.
Prediction 5: Expect acquisition activity to pick up in the new year.
Liquor like every other market, saw a noticeable gain for the biggest companies. With stock prices coming back, low interest rates in the near horizon, and lots of cash available. We can expect to see some consolidation in the liquor industry, and some of the big players will buy the up and comers.
Who will be a target, that I can’t predict!
Conclusion: 2020 has finally left us, it has been a year like no other. I lived through September 11th, which changed our lives forever. Now we all lived through and are still living through the COVID pandemic, and yes this has changed our lives forever.
2021 looks to bring more hope and prosperity. Everyone take care and I hope you and your family have a healthy and prosperous new year.