Dear Client: 

With shelter in place orders in effect across the country and tasting rooms shuttered, wineries have turned to virtual tastings to stay relevant and connected to consumers. But the requirements around shipping small containers of wine were unclear. The Wine Institute sought clarification.

The Alcohol Tobacco Tax and Trade Bureau (TTB) along with several state agencies— including New York, Florida, Oklahoma, South Carolina, Texas, West Virginia and Wyoming— confirmed they will permit small containers of wine to be sent to consumers for virtual tastings subject to current direct-to-consumer wine shipping regulations, according to the Wine Institute. 

Per TTB, distribution of wine for tasting samples “will be treated as a normal taxable removal from the winery premises” so long as the following requirements are followed:

• Samples must be provided in an approved standard of fill – 50ml or 100ml
• Wine tasting containers must be properly labeled
• Shipments of containers must be treated as other types of removals from bond 
• Wineries must ensure that any shipments are in compliance with the laws of their states and the state(s) of their customers 

The wine is also subject to the Federal Alcohol Administration Act, the Alcoholic Beverage Labeling Act, and the Internal Revenue Code. The trade group also notes that for out-of-state shipments, tasting samples are reportable DTC shipments applied to a customer’s quantity limitations. 

The WI “is working on getting approvals from other states that currently allow DTC shipping,” per a release. 

Currently, 45 states plus Washington D.C. allow DTC wine shipments. Kentucky recently joined that list, but the new law has yet to take effect [see WSD 04-08-2020]. 

WINE RETAILERS PUSH FOR INTERSTATE SHIPPING 

Speaking of wine shipping, the National Association of Wine Retailers (NAWR) is pushing to open up interstate retailer shipping. 

The trade group recently sent a letter to Attorneys General and alcohol regulatory chiefs in 18 states, calling the wine shipping bans in place “unconstitutional and unenforceable.” 

The letters were sent to AZ, CO, IL, IN, KY, ME, MA, MI, MN, MO, NM, NY, NJ, NC, OH, PA, RI and WA. 

“NAWR and its legal advisors have concluded that your state’s laws and regulations barring shipment of wine from out-of-state licensed retailers are both unconstitutional and unenforceable,” based on review of the 2019 US Supreme Court opinion in Total Wine v. Tennessee case and the 2005 Granholm decision, per letter. “This follows from the discriminatory nature of the legal ban on shipments into the state from licensed wine retailers.”  

A model retailer direct shipping bill for the states to consider was also attached to the letter. “Its details and provisions meet the regulatory and revenue needs of your state, provide for consumers’ well-regulated access to the wines they have regularly asked our members to ship them, and meets the needs of out-of-state retailers, who prefer to operate under a constitutional regulatory scheme that is neither discriminatory nor protectionist.” 

You may recall, NAWR executive director Tom Work issued a statement recently saying that if there was ever a time to open up interstate retailer shipping, it’s now [see WSD 03-24-2020].

TRADE GROUPS URGE AGAINST PLANNED SPIRITS PRICE INCREASES IN PENNSYLVANIA

The Distilled Spirits Council and the American Distilled Spirits Alliance sent a letter on Monday to the Pennsylvania Liquor Control Board (PLCB) chairman Tim Holden urging the agency to reconsider planned price hikes scheduled to take effect in August 2020. A notice of the price hikes was sent to suppliers last month. 

“In light of the severe disruption in spirits sales caused by the continued closure of all Pennsylvania state stores, we urge you to suspend all scheduled PLCB initiated price adjustments scheduled to go into effect in August 2020,” per letter. “In our view, there couldn’t be a worse time to raise prices on Pennsylvania consumers. Store closures during the COVID-19 outbreak resulted in a significant drop in state tax revenue from lost spirits sales, approximately $16 million per week. It would be incredibly misguided to increase prices on spirits products now to make up for that shortfall.”

You may recall, under the flexible pricing law the PLCB has the power to change the markup and/or offer different markups on different products, essentially leaving suppliers with no control over the price of their product in the state. In September, the Pennsylvania House Liquor Control Committee passed a bill, sponsored by state Rep. Jesse Topper, to repeal the state’s flexible pricing model [see WSD 09-23-2019]. 

“Flexible pricing gives the PLCB complete authority to increase prices on Pennsylvania consumers without any checks from the people’s representatives,” said Rep. Topper. “Now, the agency wants to increase prices on top of store closures and the negative impacts of COVID-19. The current crisis has only exacerbated the problems caused by flexible pricing, and the need for repeal is only more prevalent.” 

For more on the state of liquor sales in Pennsylvania, see WSD 04-15-2020. 

WINE AND SPIRIT WHOLESALERS WILL LOSE OVER $900 MILLION IN UNCOLLECTIBLE OR DIFFICULT-TO-COLLECT RECEIVABLES

US wine and spirit wholesalers can expect to lose up to $921.4 million in uncollectible or difficult-to-collect receivables due to the impact of COVID-19 on on-premise accounts based on an estimate of sales to on-premise, according to a recent study by economists at John Dunham & Associates.

31 states allow alcohol wholesale delivery on credit. About 60% of all sales within those 31 states are done on credit, meaning wholesalers aren’t paid immediately for delivered product, per Wine & Spirits Wholesalers of America. 

“The lack of cash flow for hospitality venues in these states put payments to wine and spirits wholesalers far down on the pecking order,” per John Dunham & Associates. “This could lead to further job losses as wholesalers become unable to collect for products that they have already distributed.” 

WSD BRIEFS:

PRESTIGE BEVERAGE GROUP’S YES WAY ROSE CANS MAKE ITS WAY TO RETAILERS NATIONWIDE. Prestige Beverage Group’s Yes Way Rose cans are now being introduced to retailers nationwide. The 250ml cans are available in 4 packs for approximately $17. 

EASTSIDE DISTILLING RECEIVES $1.4 MILLION PPP LOAN APPROVAL AND FUNDING. Eastside Distilling, Inc. and Craft Canning + Bottling, LLC have entered a loan agreement with Live Oak Banking Company under the Paycheck Protection Program (PPP) of the Coronavirus Aid, Relief, and Economic Security Act totaling approximately $1.4 million in aggregate, per a release. The funding will accrue interest at a rate of 1% per annum and, based on the company’s current operating plan, Eastside believes that the majority of the principal amount of the loans may be forgiven, provided that it uses the funding proceeds for eligible payroll costs, eligible utility expenses, eligible rent payments and interest on pre-existing mortgage debt. 

STE. MICHELLE WINE ESTATES DONATES TO COVID-19 RELIEF EFFORTS. Ste. Michelle Wine Estates has announced a series of actions to benefit communities affected by COVID-19. The company will contribute $50,000 to The Plate Fund as well as $50,000 to the WA Food Fund and $25,000 to the Seattle Foundation, per a release.

Until tomorrow,
Sarah

“Life is not easy for any of us. But what of that? We must have perseverance and above all confidence in ourselves. We must believe that we are gifted for something and that this thing must be attained.” – Marie Curie

——- Sell Day Calendar ———
Today’s Sell Day: 12
Sell days this month: 22
Sell days this month last year: 22
This month ends on a: Thurs.
This month last year ended on a: Tues.
YTD sell days Over/Under: +1