Let's Make it Easier for Distillers To Ship Alcohol Directly to Adult Consumers

Congress can start by letting the U.S. Postal Service deliver booze to adults.

Advocates for distilled spirits producers and consumers are pushing Congress and states to reform antiquated, biased, and heavy-handed rules that make it difficult or impossible to ship liquor directly to consumers (DTC). The charge to modernize DTC legislation in Congress and the states comes as the Covid-19 pandemic has changed the way many consumers buy—and states regulate—alcohol, with online orders and direct shipments gaining considerably in popularity over the past 18 months.

"The pandemic has dramatically changed the way we shop for everyday goods, including beverage alcohol, and the expectation that we can purchase what we need with a click and have it delivered to our door with proper identification will not soon go away," wrote Chris Swonger, who leads the Distilled Spirits Council of the United States (DISCUS), in a USA Today op-ed published this summer.

Two key DTC issues are in play right now. The first is that Congress effectively prohibits the U.S. Postal Service from transporting beer, wine, or spirits directly to consumers. Such shipments must be made through FedEx, UPS, and other private shippers, which are often more expensive than USPS. A bipartisan bill introduced this summer, the USPS Shipping Equity Act, would end that ban and allow the USPS to ship alcohol from licensed producers to consumers of legal drinking age.

The second issue is that even though nearly every state allows DTC shipments of wine, and many allow DTC shipments of beer—directly from brewers and vintners, respectively, to consumers—only nine states currently permit direct shipments of liquor from distillers to consumers. While some states have temporarily relaxed DTC liquor shipment rules during the pandemic, in most cases there's no promise those measures will remain in place going forward.

Though the USPS shipping ban in Congress is a wholly federal matter, state shipping bans stem largely from states' authority to regulate alcohol under the 21st Amendment. While that amendment ushered in the end of federal alcohol Prohibition, it also, I explained in 2017, "basically transferred the language from federal prohibition and made it essentially state prohibition, so it gives the states this incredible power to do terrible things, and not surprisingly, the states have exercised that power with great vigor and glee."

They've done so, I explained in a column, through what's known as the three-tier system, a Prohibition relic under which states generally prohibit direct alcohol sales from a brewer, vintner, or distiller to a consumer. The three-tier system mandates these alcohol producers first sell to a distributor or retailer—a mandatory middleman—who can then sell to actual drinkers.

That mandatory middleman exists in the form of powerful alcohol wholesalers. Not surprisingly, some of those same alcohol distributors—the middle of the three tiers, sandwiched between producers and retailers—are opposed to allowing direct shipments from producers, since that would eat into their profits.

While I've written many times that I'd love to see the mandatory three-tier system scrapped entirely, neither allowing USPS to transport DTC liquor shipments nor changing state laws to allow DTC liquor shipments would overturn that system. Rather, allowing small distillers to ship their products directly to consumers will likely help many of them to grow their businesses and, subsequently, to rely on wholesalers for their distribution needs.

Indeed, more permissive federal and state DTC reforms would be particularly welcomed by smaller craft producers and their customers. That's largely the case because while shelf space in everything from large chain liquor stores to more mom-and-pop operations around the country is chock full of spirits from larger producers—from Jameson whiskey to Bacardi rum—smaller producers, who don't yet need or can't yet afford national distribution, could use DTC shipments to be competitive and grow.

I spoke this week with Dan Farber, founder of Osocalis, a small craft brandy distillery in Soquel, California, near Santa Cruz. Farber, busy overseeing Osocalis's grape harvest, is adamant about the benefits of Congress allowing USPS to ship his products directly to consumers.

"There need to be policies and procedures in place to ensure the safety and legality of every sale," Farber says. "And there are. UPS and FedEx do this every day, really effectively. I don't see any reasons why USPS shouldn't be able to do that as well."

The vast majority of consumers agree with Farber. There's widespread public support for allowing DTC liquor sales. A nationwide DISCUS survey, released in July, found that around four of every five consumers believe that distillers and wine producers should be subject to the same shipping rules, and that "distillers should be allowed to directly ship their products to legal-age consumers in any state."

It makes no sense for Congress to (rightly) allow FedEx and UPS to deliver alcohol but not permit USPS to do the same. It's equally bizarre for states to treat liquor shipments differently than shipments of wine, beer, or cider. In order to protect and create jobs, level the playing field for alcohol producers, and ensure consumers have more choices, Congress and state lawmakers must get to work.