Self-Distribution is Fundamental for Craft Wineries

By Published On: July 14, 2023

The Craft Wine Association (CWA), in association with Vinoshipper, has responded to proposed rulemaking under consideration by the Alcohol and Tobacco Tax and Trade Bureau (TTB).

Over the past two years as a part of our advocacy program, the CWA has convened regular meetings with craft, independent wineries to develop consensus on important topics that have a direct impact on our industry.

The Biden Administration has raised an important and timely question of whether the market structure allows for proper competition in the markets for beer, wine, and spirits, particularly for small craft producers. Large corporations and distributors  dominate the markets, challenging small businesses and restricting consumers from abundant sources of craft products that wholesalers avoid for their own economic reasons.

Competition and innovation are important drivers of economic growth, and while not every craft producer desires mass distribution for their products, there are unique markets across the nation that attract specialized wine, mead, cider and other alcohol brands that are not possible without direct access to consumers. According to recent data from Massachusetts, there were 1,238 direct shippers serving consumers in the state in 2022. This suggests that the three-tier system is not meeting the demands of consumers in the state, as more and more people are choosing to bypass the middleman and purchase alcohol directly from the source. 

In fact, DTC shipping in the wine industry has allowed small producers to innovate and survive. This became most apparent during the recent pandemic. Licensed producers should be allowed to ship their products directly to consumers utilizing a modern digital marketplace that ensures age verification, licensing compliance, tax collection, and auditability. It is fundamental for small producers to have the ability to also self-distribute to trade accounts to compete in local and national markets. 

The three-tier system, as a mandated layer of bureaucracy in most states, increases costs and administrative hurdles to an already complex process, making it more difficult and costly for new brands to establish and compete in the market. 

In the perennial battle between prohibition-era institutions under the three-tier system and modern markets created by online commerce, the following points demonstrate our support of small producers to provide consumers with more choices, and underscore how technology enhances the accurate and timely collection of taxes. 

  • Direct shipping is safe and necessary to producers who are competing against large corporations. We are currently witnessing a historic consolidation designed to benefit wholesalers and threaten the livelihood of small businesses across the nation. A thorough review of competition in the markets is critical for healthy modernization. Learn more here
  • Safe communities and legal sales are top of mind for every responsible producer, and despite the scare tactics promoted by wholesalers, pre-purchase electronic age verification has proven to be the safest and most effective way of preventing sales to minors. Simply put, underage buyers are not using DTC as a way to gain access to alcohol products and if they do try to purchase, their transactions are cancelled. Read this study  
  • With model language championed by wholesalers, the Uniform Law Commission (ULC) is sponsoring legislation in a growing number of states to create administrative challenges and generally make it more difficult for direct shippers to do business.  Learn more.
     
  • As a comprehensive solution to the above-mentioned DTC-related topics, we present a Bill of Rights that has been developed by consensus throughout the alcohol producer community. It serves as a set of principles for the much-needed modernization of the industry. Read more

American consumers have become well-accustomed to transactions through the convenience of technology. They expect more from their institutions and have less tolerance for rhetoric and politics from prohibition-era institutions that are fighting inevitable change. 

Craft producers are committed to modernizing the industry and the Biden Administration should continue to take important steps to improve competition in the markets for wine, beer and spirits.  

About the Author: Staff

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The Wine Bulletin keeps up with trends and topics for the wine industry.