WSWA: DTC shipping in NY ‘defies common sense’ – The Spirits Business

The governor of New York has signed a bill to allow direct-to-consumer (DTC) spirits shipping, however it has been ‘strongly opposed’ by a trade body representing wholesalers.

Governor Kathy Hochul has signed Senate bill 2852-A, making New York the ninth state and district to pass DTC legislation.

Under the legislation, craft distilleries within New York will be permanently allowed to ship directly to its customers.

Additionally, small out-of-state distillers that already enjoy the privilege of interstate DTC will have the ability to obtain a license to ship their products to New York consumers.

The American Craft Spirits Association (ACSA) said the law includes adequate safeguards to ensure alcohol is received by adults of legal drinking age.

But the Wine & Spirits Wholesalers of America (WSWA) is against the bill, urging lawmakers to ‘consider the damaging impact of the DTC market on state tax revenues, counterfeit and illicit sales’. The WSWA also voiced concern that alcohol could fall into the hands of underage drinkers.

“Allowing every New Yorker to ship up to 432 bottles, or the equivalent of more than 85 gallons, of spirits to their home defies common sense,” said WSWA president and CEO Francis Creighton.

The new law permits the shipment of up to 36 cases per year from specific spirits licensees, including: Micro Distillers License (75,000-gallon limit), Micro Rectifiers License (75,000-gallon limit), Fruit Brandy Distillery, and Farm Distillery License (75,000-gallon limit, requiring 75% New York state ingredients in its products).

The WSWA also highlighted data from the Texas Alcoholic Beverage Commission in October 2023 that showed ‘significant issues’ with DTC shipping in Texas, such as an estimated loss of tax revenue between US$15 million to US$20m per year.

The WSWA also pointed to a report from the Vermont Department of Liquor and Lottery, which conducted a sting operation into DTC shipping in the state. Investigators attempted 116 online purchases of alcohol, of which 40 shipments were delivered. Among those deliveries, the investigators claimed that no purchase was delivered completely lawfully.

The investigation found that age verification was conducted only 20% of the time upon delivery by a common carrier, while two deliveries were made to a minor who wasn’t asked for identification.

Creighton added: “Despite clear evidence of negative economic impacts and serious public health concerns, New York state legislators chose the market route they believed best suited New Yorkers, as is their right under the 21st Amendment.”

Creighton called on New York’s legislative body to “closely monitor this law’s impact and consider WSWA as a resource to better understand regulatory and enforcement measures needed to address the known and expected negative consequences of DTC”.

The move to enable DTC shipping has been welcomed by trade groups the ACSA and the New York Distillers Guild.

‘Modernise market access’

Margie AS Lehrman, CEO of ACSA, said: “This is an excellent step in the right direction, and we applaud the state of New York for their continued efforts to support our community of small businesses and for recognising our close connection to local agriculture.

“New York State has long led the way with the creation of their Farm Distiller’s (Class D) license in 2007, which made it easier for small businesses to open and operate and created an indelible link between distilling and agriculture.

“While this is certainly a moment to celebrate, our work to modernise market access is far from over. Today, craft distillers are faced with incredible challenges with both a complex marketplace and intense economic headwinds.

“We are looking forward to continuing to showcase how states like New York can serve as a model for others to follow as together we advocate for a modern spirits marketplace on a national scale.”

Brian Facquet, president, New York Distillers Guild said: “Through governor Hochul’s leadership, New York State has provided craft distillers across the nation with a framework to support our small businesses.

“Her signature on the landmark manufacturer direct-to-consumer shipping bill is an investment in the future of the New York State craft distilling industry and brings hope to an industry that has long struggled to gain fair market access.”

Alex Koral, regulatory general counsel at alcohol compliance company Sovos ShipCompliant, also praised the bill.

“This move recognises and meets the strong demand for DTC spirits shipping from producers and consumers alike,” he said.

According to the 2023 Direct to Consumer Spirits Shipping report by the ACSA and Sovos ShipCompliant, 82% of regular craft spirits drinkers believe that US laws should be updated to allow for DTC shipping.

Furthermore, 87% of regular craft spirits drinkers want to be able to purchase products via DTC shipping, up from 80% in 2022.

“Not only do spirits drinkers support legalising DTC shipment of spirits, they’re willing to pay for it,” Koral added. “The DTC spirits shipping report also found spirits drinkers are willing to spend about US$114 each month on craft spirits via DTC.”

‘Fair and modern beverage alcohol market’

Koral also highlighted how wine has benefitted from DTC shipping across the US, while spirits have been restricted.

“More than 15 years of compliant DTC wine shipping across most of the US have paved the way for the healthy expansion of DTC beverage alcohol shipping,” he added.

“The well-regulated, compliant US$4B DTC wine channel provides a ready model for how DTC spirits shipping can be a success. It’s encouraging to see New York State creating a more fair and modern beverage alcohol market, carving a path for more states to follow.”

DTC spirits shipping is currently available in North Dakota, Nebraska, Arizona, Washington DC, Kentucky, Rhode Island, New Hampshire and Vermont.

The WSWA, which represents 80% of all wines and spirits sold at wholesale in the US, has been a vocal critic of allowing DTC alcohol shipping nationwide.

In November last year, the trade association slammed a report in support of DTC spirits shipping for providing a ‘misleading conclusion’.

Earlier this month, the ACSA and WSWA released duelling statements after an article claimed craft distillers are being hampered by the three-tier system.

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