The Future of Market Access for Brewers and Distillers —and Wineries Too

There is an unusual collaboration and coherence among America’s alcohol beverage producers at this moment when it comes to politics. Just about everyone, from distillers to brewers to wineries—of every size—are lobbying federal lawmakers seeking an extension or permanent status to the current federal alcohol excise tax. It’s about the money, as it usually is.

I don’t have a strong opinion on the propriety of making permanent the lower federal alcohol excise tax rate arrived at two years ago. However, I am interested in which political battles America’s craft producers—brewers, distillers, and wineries—ought to focus on going forward. That battle, to give it a phrase: expanded market access.

Market access: Direct-To-Consumer Shipping; In-State Self Distribution; Cross Border Self Distribution. Achieve these three market access goals and all of a sudden craft brewers are poised to compete on quality and consumer support, instead of relying on the state and wholesalers to determine which products consumers get to enjoy.

Self-distribution rights are particularly important for America’s best and most ambitious craft producers. It’s the extra margin producers make on being able to sell directly to restaurants and retailers that enable them to invest more in their operations. This is critical for a small start-up operation as well as more established producers.

Legally, it’s clear by now that a state may not allow it’s in-state producers to either self distribute or to ship direct to consumers in the state without allowing out of state producers to do the same thing. In those instances where such discrimination exists it would take no more than the filing of a lawsuit by local consumer and out of state producer interests to see a change in the law. A decision would end the case at the summary judgment phase since such types of discrimination are so patently unconstitutional.

However, those seeking to change the laws via the courts will need to be wary as winning in the courts does not mean a victory. Wholesalers in some state who still believe the best policy is to funnel all sales through them would likely react to a loss in court on direct shipping of beer or spirits or a loss on the issue of self distribution by attempting to change the law to revoke the rights of in-state producers from self distributing or shipping directly to consumers in the state.

That said, while wholesalers still have significant power at the state level, the arguments they make to support the suppression of producer rights are almost always viewed by lawmakers today as cursory positions holding very little weight. Just as often these arguments that producers ought not to be allowed to self distribute or ship spirits and beer direct to a consumer are viewed as entirely self-serving and disingenuous. Still, some lawmakers will wrap themselves in those arguments for the sake of staying on the receiving end of campaign contributions from wholesalers. Thus, careful attention would need to be paid to what happens after courts render their judgments against protectionist laws.

For now, there is great attention being paid to preserving the lower excise tax rates. But this battle will eventually pass and be over. This is when state-based brewer and distiller organizations will turn their attention to more fundamental political battles that more directly impact how they do business. I give the restrictions on producer self-distribution no more than a decade before they are mainly washed away. And if we face a recession at any time in the near future, that roll back in restrictive and protectionist market rights will occur even sooner.

One Response

  1. Jim Bernau - October 22, 2019

    Absolutely, producers and consumers benefit by removing these barriers. Producers need to tell their story with their products to consumers where ever they live to foster in-person visitations. This is the best way for long term connections to be made, friendships established and an appreciation for the values and vision behind the work and products.

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