TAKE ACTION

WE NEED YOUR HELP
TIME IS OF THE ESSENCE

California craft distilleries are no longer able to ship spirits to you.

YOU should decide what spirits to purchase and businesses to support. Contact your California State Assembly person and Governor Newsome today. Politely ask them to allow you to buy spirits directly from craft-distilleries, and have them delivered (with adult signature) to your door.

 

WRITE YOUR STATE ASSEMBLY MEMBER & GOVERNOR NEWSOME
ASK THEM TO SUPPORT SB 620

 

1. Find your representative: https://findyourrep.legislature.ca.gov/
    
2. Be sure to cc: Governor Newsome on your email: https://govapps.gov.ca.gov/gov40mail/.
   

*The bill must be approved in the GO committee
before being voted on by the entire house

 

IDEA AS TO WHAT TO WRITE

Below is an adapted email sent by a craft-spirit fan. Feel free to use the parts of this letter that resonate with you to make it your own.

Subject: Allow DtC Spirits Shipments – Support SB 620

Whenever possible, I prefer to support small, local, 'boutique' businesses over big box stores and online monopolies. I am also very busy and rely heavily on ecommerce. I am writing to request the freedom to have direct shipments from craft-distilleries shipped to my door much like I do my wines, books, clothes, shoes, cosmetics, and other personal items.

It is absurd that in 2021 - in California! - I have to walk into a grocery store, liquor store, or big box store to purchase my spirits. Most of the time, they only have equally "big box" liquor brands that are sold everywhere. There are so many craft-distillers in California producing small lots of unique spirits that I want to drink. Yet, I have limited access to purchase them because they don't produce enough to be represented by distributors.

California boasts a vibrant agricultural community, and “maker environment.” I like knowing where my spirits are made and the stories of the people who put their hearts into conceiving and crafting them. I want to support these artisans by buying their products. I should be able to do this in a way that is convenient and efficient: online at any time I choose.

Small businesses are the engines that drive our economy, give our communities charm, and employ our neighbors in family-like environments. Unfortunately, heavy-handed, outdated regulations, along with special interest groups, are killing the ability for California craft-distillers to compete and ultimately exist.

One silver lining to come from the pandemic is the ability to purchase craft spirits online and have them shipped to my house (with adult signature) thanks to temporary emergency regulations issued by the ABC. I am asking you to permanently allow direct-to-consumer shipments of craft-spirits.

Thank you for your time.

THE ISSUE

One silver lining of Covid19 was emergency regulations allowing direct-to-consumer shipping for spirits. Prior to March, 2020, California craft distilleries were not allowed to ship spirits (vodka, gin, rum, whiskey) direct-to-consumer due to outdated prohibition laws. Customers had to physically visit the distillery for the ability to purchase their spirits. And, when they do visit, they are limited to purchasing only 2.25 liters (3 - 750ml bottles) per person, per day.

Starting on April 1st, distilleries will be prohibited by law from shipping on-line orders safely to consumers' front doors.

Making Direct-to-Consumer shipping permanent will prove to be a:

• WIN for consumers (convenience, accountability, safety, & choice)
• WIN for small business (revenue & employment)
• WIN for large business (revenue & employment)
• WIN for the State of CA (increased taxes)

The emergency direct-to-consumer shipping laws are set to expire on March 31st. At that time, distilleries will not be able to ship spirits to you anymore. NOW is the time to make your voice heard by asking your state senator and assembly member to support SB 620.

 

A MORE IN DEPTH PERSPECTIVE

Over the last 2 years, California distilleries have been allowed, and have proven they can safely ship spirits using common carriers, like UPS and FedEx, requiring ID Check and adult signature verifications. Currently, small distilleries ship 20-30% of their total sales Direct to Customer. This is a substantial revenue source that craft distillers cannot afford to lose.

DTC legislation for wineries created a financial boon for all stake-holders growing the industry from 700 wineries to 4,000 and increasing sales from $5 billion to $40 billion. It will do the same for distilleries. Instead of seeing DTC as an issue where someone loses and other gain, we should look at the wine industry to see that it is really a win-win proposition.

1. The Wholesaler and Retailer Benefit
   Most California distillers would love to partner with distributors and see their products on store shelves and in restaurants, but need to increase brand recognition before distributor and retailers can profitably work with them. No one profits if the product doesn’t sell though. Direct to consumer shipping is that distribution on-ramp for small distilleries enabling us to grow so we can be successful in the three-tier system.
    
2. The Labor Benefit
   Direct to Consumer Shipping is the key element that will allow distilleries to grow - creating new jobs. As distilleries grow, they will secure distribution creating new jobs for distributors and retailers. Shipping more means more jobs for UPS, FedEx, and manufacturers shipping materials. And, as distilleries grow they will buy more raw materials and equipment creating more jobs for truckers and California farmers.
    
3. The Consumer Benefit
   Direct to Consumer shipping benefits the consumer by providing them with safety, accountability, convenience, and choice. The pandemic has dramatically, and permanently, changed consumer behavior cementing on-line shopping as the dominant means of purchasing. Consumers are busy and demand the ability to buy spirits from the convenience of their computer, just like every other purchase they make. Currently customers have to visit our tasting room if they want to make a purchase. They don’t understand why there are different shipping laws between wine and spirits.
    
4. California’s Benefit
   California will benefit from increased jobs and tax revenue. Spirits excise tax is $3.30 per gallon. 16 ½ x higher than the .20 cents per gallon for wine.
    

Q & A

Q: Why are craft-distilleries unable to ship direct-to-consumer like wineries are?

A: Craft-distilleries still fall under Tied House Laws which were laws created after prohibition (in 1933) to set up a 3-tier distribution system.
 
Tier 1: Alcohol producers sells to distributors
Tier 2: Distributors sell to retailers/restaurants
Tier 3: Retailers/restaurants sell to consumers
 
Wineries have been successfully modifying these laws over the past several decades and now have the ability to sell direct to distributors, retailers, restaurants, AND consumers. Since wineries do not have to rely solely on the distribution model (which takes ½ of their profit), they can keep their businesses small with a direct-to-consumer model.

Q: How many California craft-distilleries are poised to lose the ability to ship direct-to-consumer come March 31, 2022?

A: 153 craft distilleries in the state of California will be severely impacted if they lose access to sell their legally permitted spirits direct-to-consumer. DtC sales for California craft distilleries currently represents on average 20%-30% of a distillery's total sales. This is a large percentage of our business that will evaporate.
 
Craft distilleries are defined as distilleries producing no more than 41,000 cases of spirits annually. An overwhelming majority of the distilleries in California produce a tiny fraction of this amount.

Q: Why don’t craft-distilleries just sell to distributors?

A: Small distilleries do not have the marketing budgets to create and produce point-of-purchase displays, fund sales incentive programs, to advertise, or employ “brand ambassadors,” or in-house mixologists to help distributors place their brands. The small guys are unable to compete against the marketing purse and name recognition of the national brands, therefore distributors choose not to add craft brands to their portfolios. If they do, they often don’t put much energy behind selling the smaller brands so the product just sits in the distributor’s warehouse.
 
It is extremely hard for small distilleries to make their businesses pencil out on the distribution model because the middle man takes ½ the profit right off the bat. On top of the 50% discount on goods, it requires the marketing budget (mentioned above) to be successful. When running a small business, costs are too high to compete because the craft-distilleries are not buying their goods (glass, labels, corks, etc.) in bulk like the international brands.

Q: If a craft-distillery doesn’t have a distributor, how can they sell their spirits?

A: Prior to March 2020 and starting again in 2022, they will only be allowed to sell their spirits to people who are physically present in their tasting rooms. And, even then, they are limited to selling 2.25 liters (3 – 750ml bottles) to any one person in a given day. So, if you are buying spirits for a wedding, you will need to visit that distillery multiple times in order to purchase enough for your celebration. Or, if you visited a distillery and would like to replace that bottle of [name the spirit] you bought, you would not be able to do so without another visit to the distillery.

Q: Why haven’t the Tied House laws been modified for distilleries like they have been for wineries?

A: In 1986, the California legislature made direct-to-consumer shipping legal for California wineries. At that time there were approximately 700 wineries in the state of California, now there are over 4,000. Sales have grown from $5 billion to $35 billion as consumers have access to purchase unknown gems and have them shipped directly to their door. This direct access has allowed many wineries to grow to the point where they could secure distribution and succeed with sell-through thus gaining more consumer access.

Q: Who is against giving craft-distilleries the ability to ship direct-to-consumer?

A: Big business. However, distributors and labor have recently signed onto SB620 because they understand how critical DTC is for small distilleries in their efforts to become medium-large distilleries with name recognition. They realize the DTC will build brands that will eventually funnel new spirit brands that are financially viable into their portfolios. They don't have the time or resources to help build a sales channel for brands that do not have big marketing budgets or name recognition. These big businesses need craft-distilleries to grow and the only way they can do this is through DTC.
 
Ironically, big, out-of-state distilleries are now opposing SB620. They were intentionally left out of the bill by the California legislature and are now directly opposing the ability of small, CA distilleries to grow and thrive in the state of California.
 
Direct to Consumer Shipping is the key element that will allow distilleries to grow - creating new jobs. As distilleries grow, they will secure distribution creating new jobs for distributors and retailers. Shipping more means more jobs for UPS, FedEx, and manufacturers shipping materials. And, as distilleries grow they will buy more raw materials and equipment creating more jobs for truckers and California farmers.