Wine may be fine but beer and spirits may die

The Christmas season often times allows one to reflect on what happened during the past year. Clearly, this year has been difficult and many businesses may not survive.

The liquor space is not immune to the difficulties faced by society in general.

Especially hard hit are the craft producers. Companies like Budweiser, Bacardi, and Gallo may take a hit but will survive and will meet up with the good times in the near future.

Craft producers in the beer, wine, and spirits realm are devasted by the COVID outbreak. These businesses rely heavily on tap rooms and tasting rooms to drive business. With many states shutting down on premise activities, these businesses lose a substantial amount of revenue.

For breweries this problem is exacerbated as beer, unlike spirits, has a shelf life. If the beer is not sold or consumed, it goes stale and needs to be destroyed. Breweries are not only losing revenue from shutting down tap rooms, but are incurring extra cost of destroying product.

It is a helpless situation for many breweries that will cause them to go out of business.

Wine’s ace up their sleeve

Wine has one advantage over beer and spirits, wineries can sell their product direct to consumer (DTC) in a vast majority of the country. On the other hand, beer and spirits DTC shipping is limited to a very small area of the country. Breweries can only ship to 10 states and Washington D.C., distilleries can ship to 7 states and Washington D.C[1]  In contrast, a winery can ship to 46 states.

In my discussion with numerous wineries, they have indicated to me that the DTC business has allowed them to survive. With tasting room sales nearly eliminated or severely reduced, the income from DTC sales will allow them to whether the storm and remain open.

But what about breweries and distilleries that are not allowed to ship product DTC. The income a winery can utilize to survive is not available to them. With tasting rooms closed, the prospects for many looks bleak.

Sadly, the closing of a distillery and brewery is not an isolated event just impacting that specific business. The shutting down of this industry impacts the agricultural industry that feeds the inputs for distilleries and wineries to produce product. Further, breweries and distilleries employ people in the hospitality industry.

Some may believe that a business will replace one that goes under and it is a zero-sum game. But that is a simplistic view of things, as these businesses leave, they are not coming back, and other who might desire to enter the field, may pass on an opportunity when they see what happened to their predecessors.

Is there a solution?

The time is up for the liquor industry to embrace change. These businesses are in dire need and we are shutting off survival income for no good apparent reason. Winery shipping has been legal in most states since Granholm in 2005. There have been no major safety issues occurring and no evidence of major problems leading to underage access to alcohol.

Wineries can weather the storm during this difficult time, we owe it to breweries and distilleries, to afford them the opportunity to survive!

Merry Christmas everyone, may these holidays bring joy and a renewed sense of hope.

 

[1] https://www.avalara.com/blog/en/north-america/2020/08/states-where-breweries-distilleries-retailers-and-wineries-can-ship-dtc.html