California becomes ground zero for booze by mail again
The California Senate Government Organization Committee recently held a hearing on a bill that would allow distilleries and breweries, both inside and outside of the state, to ship directly to consumers’ doors. Senate Bill 620 squeaked through the committee by one vote, but the final fate of the legislation could determine when and if America at large is ready to unshackle its overregulated alcohol markets.
Direct-to-Consumer (DtC) shipping allows alcohol producers to ship their products right to our doorsteps via the mail. The online delivery economy may be old news in nearly every other industry in America, but antiquated rules have largely prevented alcohol from joining the 21st century. While Americans are well familiar with DtC wine shipping, as nearly every state in the country allows wine to be shipped directly from vineyards, only a few states allow liquor and beer to be shipped directly to consumers.
During the pandemic, some states—including California—temporarily allowed in-state distilleries and breweries to ship to consumers, but just a tiny handful of states allow both in-state and out-of-state shipments on a permanent basis. By our analysis, only seven states plus the District of Columbia allow interstate DtC liquor shipments, while just nine states plus D.C. allow interstate beer shipments.
Despite these bleak numbers, hope for a more robust alcohol delivery economy could be on the horizon. In the midst of the COVID-19 pandemic, Kentucky passed a trend-setting DtC reform bill, which put breweries and distilleries on equal footing with wineries in allowing them to ship to Kentucky consumers. Given America’s 50-state republic, however, other states will need to follow suit to create a truly nationwide alcohol delivery economy.
Right on cue, the reform push appears to be expanding now to the “big four” markets of California, Florida, New York and Texas. If DtC bills can pass in Kentucky—the epicenter of America’s bourbon economy—and a few of these larger markets, it would set the country on a faster track toward a modern, streamlined marketplace for alcohol.
Unfortunately, opposition in California has been fierce. Alcohol wholesalers in the state have a government-mandated middleman role where alcohol producers must sell their products first to wholesalers, who then turn around and sell it to retailers. Finally, retailers, like grocery stores and liquor stores, are then permitted to sell to consumers.
DtC shipments act as a bypass to this convoluted system by allowing producers to sell right to their consumer base. Wholesalers in California, as well as the Teamsters union, are resisting efforts to cut them out of the sales process, even though a government-mandated wholesaling tier is virtually unheard of in any industry outside of alcohol.
The wholesalers’ resistance is also misplaced since wholesalers and retailers often do not even carry many of the products produced by breweries and distilleries from around the country. If a Californian wants an obscure IPA from Vermont, chances are it’s not carried by the local grocery store, but DtC shipping could allow them to order a few cases directly from the brewery. Because of this, DtC alcohol shipments are extremely popular among consumers, with 75 percent of Californians in favor.
Opposition in California is particularly ironic given the state’s foundational role in ushering in the robust DtC wine shipping market that America currently enjoys. After the famous 1976 Judgment of Paris wine competition, in which California wines took top place over French wines—shockingly, the event was even mostly judged by French judges—the American wine industry enjoyed an unprecedented boom. American consumers started looking to California to source their wines, rather than Europe.
As agritourism took off in places like Napa Valley, out-of-state visitors increasingly began clamoring for the ability to order their favorite California Cabs and Merlots back home. In 1986, California became the first state to pass a law allowing DtC wine shipments. The rest, as they say, is history: California’s wine industry exploded to become a global dynamo, and American consumers from Idaho to Maine now enjoy a phenomenal choice of California wines at their doorstep.
Now, over 35 years later, it makes little sense to resist expanding DtC shipping arbitrarily to breweries and distilleries. California has led the way on alcohol shipping before, and now it can do so again.
Image credit: New Africa