Josh Hammond
Tom Wark
ping alcohol illicitly , states nationwide face legal challenges from out-of-state producers and retailers who claim discrimination that they cannot sell products across state lines .
“ These people want to get rid of the three-tier system altogether ,” says Renee C . Metz , Assistant General Counsel North Carolina Alcoholic Beverage Control Commission , during a recent panel at the 2023 National Alcohol Beverage Control Association Administrators Conference . “ But we have to discriminate in some way , because we only have jurisdiction [ that extends ] so far . The 21st Amendment Enforcement Act is not an either / or . It gives leeway in alcohol-related issues to rule in favor of public safety measures .”
Metz points to the large number of lawsuits claiming discrimination against out-of-state producers . For states that have not yet been sued in this area , Metz suggests , “ Take a look at your statures for anything potentially discriminatory , and get your data sets ready about what ’ s coming in and out of your states .
“ Have a cease-and-desist letter ready to go ,” she adds . “ And when you get no response from that , know who in your Attorney General ’ s Office will take this on .”
For all the concerns expressed about the spread of alcohol DTC , the question remains : are these fears legitimate , or overexaggerated ?
“ While we recognize that states need to maintain laws , it does seem that states have been overbearing at times focusing on DTC ,” says Koral of Sovos ShipCompliant . “ We ’ re in contact with state regulators , talking with them all the time . We absolutely want to support regulators and abide by the laws . But many of the fears with DTC are unfair and unjustified ."
" There ’ s a lot of fearmongering out there that doesn ’ t reflect the actual compliance in shipments ,” he adds .
One commonly cited criticism of DTC is that alcohol could potential end up in the possession of underage consumers . Koral believes this concern is overblown .
“ Our website has age verification services ,” he says . “ And more carrier services are getting signatures with IDs now , as well .”
Moreover , underage consumers — like college students who obtain alcohol illegally — want the product immediately , Koral points out . These individuals do not want to order an alcoholic product and have it show up days later .
“ And these people are looking at the lower end , not a $ 40 bottle of wine ” shipped across the country , Koral adds . “ I don ’ t downplay the potential for risks , but the risk of underage purchase through DTC seems less than the risk of it happening at a corner store or something like that .”
Agreeing with him is Tom Wark , Founder of Wark Communications , a marketing communications firm specializing in solutions for the wine industry ’ s needs — including assistance with legal shipping .
“ Minors can walk into liquor stores and buy alcohol ,” he says . “ Are minors ordering alcohol over the internet ? The fact that they could doesn ’ t mean that they are . It ’ s simply not happening . DTC is the safest way to sell alcohol without minors getting their hands on it . And the local delivery services have way more issues underage consumers buying alcohol than DTC .”
Like Koral and Correia , Wark sees the rise of DTC as having less to do with underage consumers purchasing lower-end items , and correlating more with legal-age consumers wanting greater access to premium products .
“ Why is illegal shipping happening ?” Wark asks . “ Because consumers clearly can ’ t get what they want in the states where they reside . Consumers want access to a greater number of products , as opposed to the small selection wholesalers provide in the marketplace .”
Wark pushes back at criticisms leveled against DTC by the middle tier ( as covered in part 1 of this series ).
“ No one likes to deal with competition ,” Wark says . “ That ’ s what WSWA and the middle tier is complaining about : anything that puts a crack in their monopoly .”
“ The consumer knows what products they want better than the wholesaler , and the consumer should have access to those products ,” he adds . “ There is always going to be more illegal shipping when the states protect the wholesaler .”
While not as critical of the middle tier , Koral also believes that wholesalers should reconsider their DTC protest .
“ I don ’ t think DTC is going to hurt the middle tier ’ s bottom line ,” he says . “ In fact , I think it can help increase three-tier sales . When alcohol brands can get into more states , they can get a foothold there , and then start getting into retail stores . It ’ s about creating more options by raising the water for everyone .”
“ I think we need to partner with the wholesaler to create a compliant marketplace ,” Koral adds . “ We want to meet the consumer demand that ’ s out there and make sure we do so in a safe , regulated marketplace — rather than a free for all .”
10 Beverage Dynamics • November 2023 www . beveragedynamics . com