Will the Illinois Legislature listen to the Biden administration’s view on the liquor industry?
The Treasury Department authored a report about the alcohol industry named, Competition in the Markets for Beer, Wine, and Spirits.
The report harped on the challenges facing smaller producers, and how markets must become more open and friendly for the small producers.
According the report, one of the biggest challenges facing small producers is access to effective distribution. Specifically, the report noted that consolidation on the distributor tier makes it harder for small suppliers to get to market and get to market on favorable terms. As the Treasury report states “[t]he market for wholesale spirits distribution in the US is effectively closed to new entrants.”
In Illinois a bill was introduced to increase self-distribution privileges for wineries. The current law allows only wineries producing less than 25,000 gallons to self-distribute up to 5,000 gallons. Illinois SB 2976, introduced by Senator Rachel Crowe would raise the production threshold to 250,000 gallons and allow these wineries to distribute up to 50,000 gallons.
For frame of reference, a case of wine contains 2.378 gallons of wine. Under the current Illinois law, only wineries producing around 10,500 cases and under, can self-distribute. In the Sovos analysis on the wine industry, a small winery is considered a winery which produces between 5,000-49,999 cases per year. In essence, Illinois’ self-distribution privileges are limited to the lower end of small wine producers, many small wineries could not earn self-distribution rights in Illinois.
Under Senator Crowe’s bill, winery eligibility shoots up to those that produce an estimated 105,040 cases. In the Sovos report a medium size winery, are those wineries producing between 50,000-499,999 cases.
SB 2976 attempts to substantially change the game for winery self-distribution.
The question is, do small wineries really need an increase in self-distribution?
If the answer is no, it shows the plight of small wineries is either not recognized or is ignored. During COVID, small wineries, which rely on their tasting rooms to bring in the majority of revenue, suffered greatly. Their main source of revenue for a time period was eliminated and then after that greatly restricted.
Small wineries need a break! The Treasury report went through great lengths to highlight the plight of small wineries, especially when it pertains to distribution.
But SB 2976 allows small wineries the ability to gain some economic freedom and maximize revenue.
The Treasury report is out there, and the message is loud and clear, the system needs to reform to help the small producers.
The question is will Illinois legislators do nothing and maintain the status quo, or will they glean some valuable information from the Treasury’s report and take action!
Even if the self-distribution number does not go up to the proposed amount, but increases beyond the status quo, then the legislature has effected positive change. The interesting question is, will a very liberal legislature listen to their Presidential ally’s position, or will they simply ignore it like it never existed!