Kane's Beverage News Daily

Catoctin Creed Distilling Co., Purcellville, Va., saw its on-premise sales plunge 70% during the Covid-19 pandemic, Becky Harris, co-founder and chief distiller, told the Distilled Spirits Council/American Craft Spirits Association Public Policy Conference.

That pain was eased a bit after the Commonwealth of Virginia allowed Catoctin Creek to “reach out to our customers and ship direct to them during the pandemic,” Harris said.  Direct to consumer (DtC) is “increasingly important in the modern marketplace when our customer expects to be able to order online,” she said.

But direct shipping is full of legal and regulatory landmines, and Harris sought to help fellow distillers avoid them with a panel she chaired during the conference.

Spirits DtC Growing Faster Than in Wine

Spirits 360 has been working with distillers since 2019, when the Kentucky Distillers Association and UPS invited it to provide cloud-based shipping compliance services, according to Gary Friedman, vp-sales.  The pandemic accelerated the company’s growth, he added, explaining that within four months after March 2020 eight states had passed emergency shipping legislation enabling small to medium distilleries to ship direct from the distillery.

“This is growing so much faster than what we saw in the wine business,” Friedman said.  “The challenge is to make sure spirits are delivered in compliance with each state’s requirements.  We work with UPS to make sure appropriate signatures are obtained, and we can now deliver those bottles to UPS service centers so if the customer can’t receive the shipment at home, he can go to the UPS service center to pick it up.”

Five to seven states are considering direct shipping legislation this year, Friedman said, adding that twice that number are expected to consider it next year.

Few States Allow Spirits DtC

Only six states plus the District of Columbia currently permit spirits DtC, Alex Koral, senior regulatory counsel for Sovos ShipCompliant told the conference.  Two of those states – Alaska and D.C. — don’t require licenses.  As for all other states, distillers need to make sure they are licensed.

“Wine DtC has been very successful for suppliers and consumers,” he said, adding that wine DtC is about 10% of total off-premise wine sales.  “Successful DtC shipping demonstrates value to wholesalers,” who may choose to carry brands that demonstrate high consumer interest, “and gives consumers access to rare and higher allocated brands,” he said.

But it’s tricky:  Some states, such as Kentucky, require only that the shipping be done by the brand owner.  Others, such as Michigan, doesn’t license the brand owner but rather the manufacturing facility for DtC shipments, and a facility can ship only what has been produced at that particular location.