How The Alcohol Industry is Dealing with Covid-19 (and How the Government Can Help)
As Covid-19 roils America and the world, much of the focus has been on how small businesses can survive in an environment of extreme social distancing and self-quarantining. Alcohol producers and retailers—such as breweries, distilleries, and bars—have been particularly hurt by virtue of the fact that many of them are gathering-oriented businesses that make the majority of their sales through their taprooms or dining rooms. At the same time, many Americans are finding themselves shut-in at home and no doubt desiring a refreshing beverage.
Given these dynamics, how is the alcohol industry handling Covid-19? Here’s a roundup of the virus’s impact on alcohol and how entrepreneurial beverage makers are responding—as well as suggestions for how the government can help.
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Alcohol Delivery: Craft beverage producers across the country have been forced to close their taprooms as Americans practice self-quarantining measures and governments discourage public gatherings. Breweries from Virginia to Oregon are adapting to this by switching to delivery and take-out models for nearby customers. Unfortunately, while some locales allow producers and retailers to deliver alcohol, many do not. Some alcohol regulators, such as New York’s State Liquor Authority, have temporarily tweaked state laws to allow bars and restaurants to serve alcoholic beverages in to-go and delivery formats, but few have made similar changes for producers. Governments across the country can help these entrepreneurial businesses survive by allowing more robust delivery of alcohol—from producers, retailers, and third-party delivery services. Re-thinking alcohol delivery and interstate shipping restrictions generally in the months ahead would be a good idea in preparation for future pandemics, as well. (Furthermore, most states severely restrict interstate alcohol shipments, another area long overdue for reform.)
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Hand Sanitizer: As grocery stores face shortages of products like hand sanitizers, distilleries have helpfully stepped into the void. Distilleries across the country are now offering hand sanitizer to customers after the The Distilled Spirits Council of the United States (DISCUS) worked with the TTB to expedite guidance for offering sanitizer. While the TTB was smart to allow distilleries to producer sanitizer, it specified that it would still be subject to federal excise taxes for alcohol (for a primer on these taxes, see here) unless made with denatured alcohol. However, most distilleries do not naturally produce denatured alcohol, which is unfit for human consumption. The TTB would be smart to revise its rule and not impose taxes on any type of sanitizer during this time; in the meantime, DISCUS is asking Congress to fix the situation in its Covid-19 relief legislation. It also makes little sense that distilleries are not able to producer hand sanitizer as a regular part of their business, even in non-pandemic times. Local craft sanitizers from a person’s favorite distillery should be something producers can sell on a permanent basis.
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Tax and Tariff Relief: Beyond just sanitizer, a consortium of alcohol beverage trade associations and organizations have sent a letter to Congress urging broader federal excise tax relief. In addition to temporary relief, it urged a permanent extension of the Craft Beverage Modernization and Tax Reform Act. R Street has long advocated for making these tax cuts permanent to give alcohol producers much-needed certainty—a need which has only grown as economic markets are destabilizing in the current environment. The alcohol markets have also been suffering from the ongoing tariffs wars—sometimes in unexpected ways—and the federal government could and should provide relief in that sphere as well.
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Control State Store Closures: Unsurprisingly, control states in which spirits can only be purchased from government-run alcohol stores are among those struggling the most to adapt in the current environment. Alabama announced that it was closing down at least some of its ABC stores, which makes it harder for producers to get their products to costumers. While curbside service was still supposed to be available in Alabama, Pennsylvania has shut down its state-run liquor stores completely and is not currently offering curbside service. All this underscores the limitations imposed by government retailing monopolies. While private sector stores have been innovating with delivery models for years—again, where legally allowed—most control states are woefully behind on implementing delivery systems.
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Using Alcohol Delivery Trucks For Food: Texas Governor Gregg Abbott tweaked a state law to allow trucks from the alcohol industry to deliver food and grocery supplies. More states should follow suit as this is a modest change that could help prevent food shortages in the coming weeks .
The DrinksReform team will continue to monitor the news for any more Covid-19 related updates.
