Direct-to-Consumer Sales for Distilleries
I WANT THE PRODUCT, AND I WANT IT NOW! Written by Lauren Voke & John P. Thomas, II
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or many distilleries, the start of a new year is often a time to reflect on the prior year’s successes and focus on capitalizing on consumer trends and maximizing profits in the coming year. However, between creating products, fulfilling orders, negotiating distribution agreements, and maintaining active licenses, it can feel overwhelming to venture into additional business models by expanding operations, such as opening a direct-to-consumer (DTC) revenue stream. Yet, engaging in DTC sales may be more attainable than a distillery owner may think.
DELIVERY vs. SHIPPING The push for new delivery options has accelerated since the COVID-19 pandemic when consumers sought the convenience of ordering alcohol beverages and consuming them within the safety and comfort of their homes. As a result, the pandemic triggered a series of emergency executive orders where states would temporarily authorize restaurants and bars to fulfill alcohol delivery orders as a creative business mechanism, helping retailers remain profitable in a time of mandated social distancing and limited in-person occupancy. Following the pandemic, many states passed legislation formally enacting laws authorizing some of the privileges extended to licensees during the pandemic. These W W W . ARTISANSPIRITMAG . C O M
laws often formalize delivery Engaging in DTC sales may be more attainable rules and the functional rethan a distillery owner might think. quirements that licensees and third-party services must meet to be able to facilitate alcohol sales and deliver alcohol directly to the consumer. While this may seem While exploring whether shipping or delivery oplike a welcome development for distilltions are available, there are significant restrictions that eries, it is important to distinguish bea distillery must keep in mind. Like most alcohol bevtween delivery and shipping privileges. erage laws and regulations, each state regulates spirits The DTC shipping of spirits is a sepshipments and delivery differently. The jurisdictions arate and distinct issue from spirits dethat allow spirits delivery only sometimes allow DTC livery. DTC shipping generally involves spirits shipping, and a few even prohibit any shipment a distillery selling its product directly or delivery of alcohol beverages. While many states have to the consumer and fulfilling the shipenacted legislation authorizing the delivery of alcohol, ment from inventory on the distillery’s only a fraction of jurisdictions have statutorily autholicensed premises. The distillery is the rized interstate DTC shipping of spirits. Even jurisdicmerchant of record and is responsible tions that have authorized interstate spirits shipping still for getting the shipment to the conset parameters that may nonetheless impact a distillery’s sumer through a nationally recognized ability to facilitate interstate DTC sales of spirits.1 third-party carrier, such as FedEx or For example, Alaska allows resident and nonresiUPS. dent distilleries that produce less than 50,000 proof Spirits delivery, on the other hand, gallons annually to obtain a manufacturer direct shipgenerally involves a distillery selling ment license, which permits the licensee to ship spirits its product to a consumer and utilizto Alaska consumers.2 Similarly, Arizona allows craft ing a third-party delivery service, such distilleries (defined as distilleries producing less than as Uber Eats or Thirstie, to pick up the 20,000 gallons of spirits annually), whether resident product from the distillery’s premises or nonresident, to ship spirits to Arizona consumers.3 and deliver it to the customer’s resi1 Note that this list is not an exhaustive list of all applicable laws dence. It is essential to understand the and regulations relating to DTC shipments. This list, and the indistinction between DTC shipping formation contained in this article, is not legal advice and should and alcohol delivery when reviewing not be relied on as such. Always consult with an attorney before engaging in DTC spirits shipping. state-level restrictions and guidelines 2 Alaska Stat. Ann. § 04.09.370. because each method has challenges and nuanced regulations. 3 Ariz. Rev. Stat. Ann. § 4-205.10.
OBSTACLES AND RESTRICTIONS
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