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One of the few salutary effects of the pandemic has been an unprecedented liberalization of American alcohol regulations. Consumer-friendly changes have occurred in the past two years that one might have expected to take decades under normal circumstances. States have allowed bars and restaurants to sell cocktails to-go, relaxed restrictions on outdoor drinking, and permitted direct shipping from producers to consumers. These changes have been instrumental for helping businesses survive and have made pandemic life more enjoyable for consumers; the catch is that many of them are temporary measures that won't remain in place without legislative action
That's the challenge looming over California craft distillers who are at risk of losing business when the state's emergency order allowing direct shipping of spirits expires on January 1. Direct-to-consumer (DTC) shipping has helped replace revenues lost in other channels due to the pandemic and related restrictions.
"About 20% of my sales are shipped direct to consumer," says Aaron Bergh, president and distiller of Calwise Spirits in Paso Robles, California. "One of the biggest things for me has been my ability to grow my subscription club. Before, it had to be pick-up only, which turned a lot of people off because they don't come to my area often enough to pick up. When I was able to offer shipping, I was able to grow my club to people that live outside of my area. If I'm not able to ship anymore, I know I'm going to lose a chunk of club members."
A common perception is that the pandemic led to booming alcohol sales. While there is some truth to this, especially in the early days of comprehensive shutdowns when consumers scrambled to stock their home bars, the gains have been unevenly distributed. Retail sales generally favored bigger, established brands while small distillers lost avenues to reach consumers. Tourism, tasting room visits, in-store tastings, and specialty cocktail bars are how small distillers tend to pursue new sales; with all of these closed off to various degrees, sales of craft spirits suffered.
A survey of craft distillers conducted in early 2021 found that more than a third of them reported revenue losses of more than a quarter. It also found that in states that allowed direct-to-consumer shipping, the channel accounted for more than a third of sales for participating distilleries. Writing in the Orange County Register in May, Ryan Friesen of Blinking Owl Distillery noted that "the measure allowed my distillery to keep the lights on, barely, but we have lived with the ever-present knowledge that DTC has not been made permanent and will no longer be allowed without legislative action, which has now stalled."
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