Shipping Beer Straight to Drinkers: Greater potential on the horizon | Brewing Industry Guide

Shipping Beer Straight to Drinkers: Greater potential on the horizon

State laws often stand in the way of direct-to-customer shipping. Perhaps not for long.

Joe Stange a month ago

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Beer drinkers are hard to please these days. This is the on-demand era, when people widely assume they should be able to get whatever they want, when they want it—if they have money and the Internet.

Why shouldn’t it be the same with beer?

Artisans of all sorts are able to hawk their wares online and reach customers directly, getting them what they want in as soon as a day or two with minimal fuss. Even wineries, in many places, are able to ship cases directly to customers.

Brewers, on the other hand, face a raft of obstacles. The most obvious of these is a minefield of state laws that complicate the selling and shipping of alcoholic drinks. These laws undercut the deceptively simple idea that breweries ought to be able to ship fresh beer directly to thirsty people.

State Laws Are Like State Flags—All Different

The differences in rules from state to state are not cut-and-dried, but the scattershot reach of a nationally active retailer is instructive. According to Liquorama, an online store based in Upland, California, there are five states where it can ship no alcoholic drinks: Mississippi, North Dakota, Oklahoma, Utah, and Wisconsin. In six other states—Connecticut, Florida, Illinois, Maryland, New York, and Virginia—it depends on the locality.

Then there are another twenty-six states that only allow the shipping of wine—but not beer. Those states are Alaska, Arkansas, Colorado, Delaware, Georgia, Hawaii, Iowa, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Mexico, North Carolina, Pennsylvania, Rhode Island, South Carolina, South Dakota, Vermont, West Virginia, and Wyoming.

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That leaves only twenty-three states in which beer might be sold and shipped by an online retailer—but not necessarily a brewery, since other laws (such as those that preserve the three-tier system) can get in the way of direct sales.

California is an unusual case. The state issues permits for smaller breweries (60,000 barrels or less) to sell package beer directly to customers. Regulators have interpreted that in a way that allows direct shipping—but only to customers in California. Notable among those who have taken advantage is the Bruery, which—besides its Preservation Society rare-beer club—has an online shop where Californians can order the latest releases.

Bear in mind that these laws can change from year to year, in one direction or another, so that states may jump categories as laws become more or less restrictive.

A useful reference for checking state-by-state requirements is the Brewer’s Guide to Compliance, a webpage run by the software service ShipCompliant. A division of Sovos Compliance, ShipCompliant specializes in the direct shipping of alcoholic drinks—specifically, in software meant to help navigate the myriad legal and tax obligations.

Alex Koral, regulatory counsel for ShipCompliant by Sovos, says the company started by helping a few wineries manage the headaches of interstate shipping, and it grew from there. These days it tracks an increasingly diverse set of clients in beer, wine, and spirits, including producers, retailers, and even some distributors.

However, wine has been leading the charge for at least two decades.

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Wine’s Head Start

In many states, wineries can get permits for direct shipping to customers, while virtually no such permits exist for beer.

Why does wine have an easier time at this?

Partly it’s because wineries—concentrated on the West Coast—have been more focused on getting bottles to people around the country. A coalition of California winery groups launched the Free the Grapes campaign in 1998. Since then, they have worked state by state to lobby for the lifting of restrictions on direct shipping of wine.

A couple of key Supreme Court decisions also have helped (see below). Both cases centered on wine, but according to Koral, there is legal no reason why they should not also apply to beer and spirits.

In terms of legal doctrine, Koral says, “really there is not a whole lot standing in the way of breweries doing [direct-to-customer] shipping in the way it works for wineries.”

Still Fighting Prohibition

The 21st Amendment to the Constitution repealed Prohibition, but its Section 2 also granted states the power to regulate alcohol as they saw fit. It’s not a great exaggeration to say that fifty states have developed fifty different ways to regulate beer and other alcoholic drinks, often in the name of “public health and safety.”

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However, there is tension between Section 2 and the Constitution’s Commerce Clause, which limits the ability of states to interfere in interstate commerce.

A couple of Supreme Court decisions may have helped to change the landscape.

The first was Granholm v. Heald in 2005. That’s when the Court held that states could not stop out-of-state wineries from shipping directly to residents if in-state wineries were allowed to do so.

The second decision, Tennessee Wine and Spirits Retailers v. Thomas, came more recently. In June 2019, the Supreme Court held in a 7–2 decision that the state of Tennessee could not discriminate against out-of-state wine retailers by imposing a residency requirement. In the June decision, the Court again cited the Commerce Clause.

It remains to be seen how lower courts will heed that ruling and how state legislatures will respond. But the upshot is that recent legal precedent is leaning toward liberalizing the interstate shipping of alcoholic drinks, and against the states’ power to restrict that shipping.

“There has to be a shake-up,” Koral says, “and we’re just not sure how it’s going to come out.”

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Among those waiting to see the legal fallout are big-box retailers such as Wal-Mart and Total Wine… as well as the producers of spirits and beer.

“There was just real focus in the wine world to do that,” Koral says. “And there is nothing to say that brewers couldn’t do it as well.

“They just haven’t.”

Why Not Beer?

The current legal landscape is in many ways a relic of when the largest beer companies dominated the marketplace. Their products were everywhere; there was no need to ship it directly to consumers (very unlike the niche of a wine collector in Florida who wants a bottle from California). Beer also is (generally) less expensive, while also (generally) sold in larger quantities. It was not as economical to ship it.

Higher-margin specialty beers arguably change that equation—more expensive but potentially sold in smaller (easier-to-ship) quantities. Meanwhile the growth of a secondary market in rare beers—where beer-speculators profit instead of breweries—may add urgency.

So far, lobbying for laws more favorable for direct-to-customer beer shipping has not been a major priority for craft brewers. The Brewers Association and various state brewers’ guilds have been more focused on more immediate problems such as legalizing brewery taprooms, growlers, and higher-ABV beers—and again, the situation in each state is unique.

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Paul Gatza, the BA’s senior vice president of professional brewing, says that a few members have brought up the direct-shipping issue. He says the BA Government Affairs Committee “weighed the value of involvement and chance of success” against other priorities. “The fact that the USPS doesn’t allow for shipping through that venue adds a complication. Private carriers have had various attitudes of being warm or cold to the idea depending on the year, the business climate, and person involved.”

On the Horizon

Gatza notes that Congresswoman Jackie Speier, a California Democrat, introduced a bill (HR 2517) in May that would allow the U.S. Postal Service to ship alcoholic beverages to legal adults, wherever state laws allow it. However, Gatza says, “it hasn’t been a big priority for brewers or lawmakers to date.”

Gatza also mentions the Free the Grapes campaign, saying that it was a “multi-decade effort that emerged in a political climate when the wine wholesalers were not strong enough to fight back. You’ll note that wine and spirits exist in a climate with far fewer state franchise laws than beer.”

However, Gatza says that the direct shipping of beer is likely to become a bigger priority for brewers, sooner or later. “People are concerned about there being a re-sale market,” he says. “That gets beyond the idea of a brewer selling online to people who want to enjoy that beer.

“In the long run though, public access and choice usually win out even if it takes many years. Today’s buyers want what they want delivered to their door, so it is hard to see any other final result.”

Joe Stange is Managing Editor of Craft Beer & Brewing Magazine® and the Brewing Industry Guide®. Have story tips or suggestions? Contact him at [email protected].

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