Where to Look when Developing Direct-to-Consumer Sales

Although it is not legal in every state at this time, breweries that have the luxury of connecting with new consumers in other states without off-premise sales can

Currently, only 12 states allow DtC sales — and all have different rules for compliance — along with the District of Columbia, and those include Alaska, Kentucky, Nebraska, Nevada, New Hampshire, North Carolina, North Dakota, Ohio, Oregon, Vermont, Virginia, and Pennsylvania.

Sovos ShipCompliant’s Senior Regulatory Counsel, Alex Koral, discussed compliance tactics at the 2020 Sell More Beer Virtual Summit presented by NBWA in a discussion on Direct-to-Consumer shipping.

“There’s a lot of opportunity and growth and value in this market,” he said, noting that about 10% of wine sales are DtC with more than $3 billion in sales annually. “There’s clearly a lot of value and a lot of opportunity in there for beer shippers to get involved as well.”

But it’s not about money alone, there’s also that direct connection you get with consumers, he added.

“They want that experience and through these direct consumer shipments,” he said. “You’re able to create that connection to build your own market, your brand, and to create successful sales.

“This also then leads into you being able to develop a national presence.”

Although direct-to-consumer sales can avoid some of the troubles and problems that may be involved in a standard three-tier distribution, the onus is more on your brewery to make it successful.

But Koral pointed out that DtC can build your three-tier sales as well.

“One reason why distributors may not want to pick up a small craft brewer is because it’s hard for them to sell it into a foreign state,” he said. “You may have a great presence in Ohio or Michigan, but then if you’re starting to sell in Texas or California, it can be a little bit harder for those distributors to believe you will sell there.

“But if you have a direct consumer shipping presence already if you have that established local base of consumers, you can really prove to them that you are a valuable brand, you can sell there and thereby build and develop your three-tier system.”

Alabama, Delaware, Mississippi, and Utah don’t allow DtC at all.

Some states, like Kentucky, just passed laws in April to allow direct to consumer shipping. However, they have not taken effect yet. Alaska also does not technically permit the direct to consumer shipping.

“It’s more that they are operating under an Attorney General decision to not prosecute people,” Koral explained. He also added that there are communities in Alaska that prohibit the local sale of alcohol.

Oregon is a reciprocal state, which means that it will only allow licensed brewers located in other states that themselves allow direct consumer shipping of beer.

“So a brewer in Ohio could ship to Oregon residents, but a brewer in California currently cannot,” Koral said.

Pennsylvania is another outlier state as it does not license beer manufacturers to do direct consumer shipping. Only licensed parties who hold a wholesale or a beer wholesale or beer off-premise retail license in their home state to do direct-to-consumer shipping.

“It’s kind of unfortunate,” Koral said about the availability of DtC for breweries, “because you look at the rest of the country and it’s so open to direct-to-consumer shipping of wine. It’s very common, almost national at this point.”

Koral advised making absolutely sure your brewery can do DtC sales. That means making sure your state can ship to a certain state. Asking your local guild and contacting state guilds you plan to ship to for legalities as good first steps along with talking with your own counsel.

“States are absolutely cracking down on this, they are looking at these types of sales,” Koral said. “They are concerned with the possibility of illegal shipments and the possibility of people under 21 getting beer through the mail.”

Photo courtesy Divine Barrel

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