Why is Retailer DTC Shipping So Restricted?

Why can wineries ship to 94% of the adult population, but retailers only 22%? The short answer: commitment to a long-term, national solution.

For more than three decades, wineries across the U.S. have worked to implement a legal, regulated DTC sales channel. This channel was never intended to replace, but to augment, the traditional 3-tier system – that is, to work within the system for change.

And that strategy has proven successful for consumers, wineries, state regulators and tax collectors. Is it perfect? Of course not; this is legislative politics. But back to the question – why the discrepancy?

U.S. Wineries Agree on a Model. Four key wine industry associations* co-developed the Model Direct Shipping Bill back in the late 1990s. The Model DTC Shipping bill was a simple, concise document with important provisions, including:

  • Allowed wine shipments from not only wineries but retailers, wholesalers and importers, so it was very inclusive of licensees
  • Included a state-issued licensing system, so it put licensing authority in the state’s hands
  • Included the option for wineries to collect and remit both excise and even sales taxes, so it removed some objections regarding tax collections
  • Required wineries to consent to the jurisdiction of the state issuing the license, so it put oversight authority in the state’s hands.

The Model Bill was adopted by the National Conference of State Legislatures’ Task Force on the Wine Industry. (You can read the bill here.) The NCSL is an annual summit of state legislators hashing out key issues. This was a big deal. Free the Grapes! took a booth at the NCSL and I remember sitting in the huge ballroom, stunned, that the group just voted to endorse direct shipping legislation.

Why is this important? It allowed states to consider legislative provisions that already included concessions from the wine industry. It established a common framework that satisfied consumer frustration and regulatory concerns. For the most part, in-state wineries weren’t afraid of a little competition from their out of state peers.

Local Retailer Opposition. While individual states negotiated their own version of the Model DTC Bill, in-state retailer associations came out in opposition in most states. They wanted retailers out of the shipping bill! The thinking can only be described as protectionist; unlike local wineries, local retailers feared out of state competition from their retailer peers. So the in-state retailer lobby claimed jobs would be lost, taxes would be siphoned off, and all hell would break loose.

The National Specialty Retailers Association –now called the National Association of Wine Retailers — had good intentions (and shared a common goal with Free the Grapes!, to expand consumer choice). But the NAWR could not overcome local retailer lobbying muscle, and could not rally retailers around a common national approach, as had the wineries.

In numerous states, the Model Bill was introduced—including winery and retailer shipping. But the retailer licensees were mostly negotiated out by the local package store lobby. While the Wine Institute retained retailer DTC in a few states (e.g., Nebraska, Oregon and West Virginia), Wine Institute’s members are wineries, not retailers. Without a counter-vailing national lobbying effort from retailers supporting DTC shipping, the local retailer lobby arguments took the day and lawmakers stripped retailer DTC out of numerous bills.

So where are we now?

The reason why retailer DTC restrictions are getting some air time is that, well, most states don’t allow it! Other states like Illinois, Missouri and Michigan have cracked down and/or removed retailer’s shipping privileges, leading to pending litigation in each of these states. While the common carriers often get the blame, they need to follow state law; they have large, complex business interests to protect. One can hardly blame them for following the law.

What is needed? It’s easy to say, hard to do: a strong, national voice for retailers who embrace legal, regulated DTC shipping. And at Free the Grapes! we’ll continue our mission of improving consumer choice in this increasingly complex marketplace.

Jeremy Benson – Executive Director

NOTES

*Wine Institute, Family Winemakers of California, WineAmerica (then called American Vintners Association) and the Coalition for Free Trade.

*States that allow licensed retailers to ship DTC to their adult citizens: Alaska, California, Idaho, Louisiana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oregon, Virginia, West Virginia, Wyoming, and Washington., D.C.