Analysis of the Impact of A1943/S2683 in New Jersey


This report analyzes the likely impacts of passage of the New Jersey bill currently being considered by the Assembly and Senate, known as A1943/S2683 (the “Bill”).

The Bill would expand the offering of direct-to-consumer (“DTC”) shipping permits to wineries that produce more than 250,000 gallons of wine per year. New Jersey has allowed DTC shipping by wineries for the last nine years, but it has limited permits for those shipments to only wineries that produce less than 250,000 gallons of wine per year. Removing that restriction will benefit New Jersey by providing a significant, annual, new revenue stream to the state –$3.0 to $4.4 million after two years, and up to $6.0 million in four years–in the form of taxes and fees paid by DTC shippers who were previously excluded. Excluding larger wineries from the original DTC law has most likely already cost New Jersey near $30 million in lost revenue because the excluded wineries comprise a large portion of DTC wine shipping volume nationally. Taxes and fees from this segment were previously lost, and not shifted elsewhere, either because shipments ultimately bound for New Jersey consumption were sent to neighboring states (who collected the taxes and fees) or were simply lost sales.

Local New Jersey liquor stores should not be adversely impacted in any meaningful way by the Bill because, as is the case with the DTC shipping law that has been in effect for nine years, the market segment served by DTC wineries has marginal overlap with liquor store sales. Even in states allowing DTC shipping from wineries of all sizes, DTC sales constitute only two percent of off-premise wine sales by volume. Wine sales make up about thirty percent of total alcohol sales from New Jersey liquor stores, and the wine segment largely served by DTC shippers (domestic wines over $15 a bottle) are a minority component of these sales, as quantified further in this report. Non-DTC wine sales have grown at a steady rate nationally even as DTC shipping has become commonplace. Liquor stores have developed their own e-commerce and delivery capacities and have seen huge growth in these areas, particularly in the COVID environment during the last year, establishing themselves as a capable presence within the online market that DTC wineries pioneered. Expanded DTC wine shipping will continue to familiarize new consumers with the online purchase and delivery of alcohol, benefiting all participants, including local retailers. DTC wineries will also continue to develop consumers’ interest in quality wines, which will benefit liquor stores online and in brick-and-mortar retail, since alcohol consumers, and their preferences, tend to utilize multiple platforms and sales channels.

New Jersey consumers will also benefit by finally being able to purchase DTC from all wineries that offer the service, in line with the offerings of neighboring states and nationally. This will both significantly expand the DTC channel in New Jersey and increase availability in the channel of more affordable offerings. The net result will be more DTC choices to New Jersey consumers at a lower average cost-per-bottle than is available to them today in the DTC channel. Expanding the DTC shipping channel will also provide consumers with more options for home delivery during the COVID pandemic and strengthen this important outlet for safe, at-home transactions if and when conditions require it in New Jersey in the future.

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