WSWA: DTC spirits report ‘misleading’

The Wine & Spirits Wholesalers of America (WSWA) has slammed a report in support of direct-to-consumer (DTC) spirits shipping for providing a ‘misleading conclusion’.

Last month, Sovos Shipcompliant and the American Craft Spirits Association (ACSA) published their 2023 Direct to Consumer Spirits Shipping report, which found that 82% of regular craft spirits drinkers believe that US laws should be updated to allow for DTC shipping.

Furthermore, 87% of regular craft spirits drinkers want to be able to purchase products via DTC shipping, up from 80% in 2022.

The WSWA, which represents represents 80% of all wines and spirits sold at wholesale in the US, has been vocal in opposing DTC shipping for alcohol nationwide.

The organisation said the Sovos report fails to ‘point out that the findings only apply to a tiny subset of US alcohol consumers – mainly craft spirits drinkers, fewer than 30% of respondents to their own survey’.

The trade body also said this ‘narrow group’ is made up of mostly ‘college-educated men under the age of 34 with a household annual income above US$100,000 – not the broad base of support the headline implies’.

Furthermore, the WSWA said the report’s claim that 81% of regular craft drinkers would be more likely to try new craft spirits brands if they could buy them through DTC shipping is ‘dubious at best’.

Instead, the WSWA believes that drinkers are ‘much more likely’ to find craft brands through retailers and the on-trade.

The WSWA said craft spirits are ‘booming’ under the three-tier system. Citing the ACSA’s 2022 Craft Spirits Data Project, the number of craft spirits producers in the US has grown by approximately 14% over the past five years.

The WSWA also said Sovos ‘disregards risks associated with multinational producers dominating the online landscape if DTC shipping were to take over’.

“Rather than DTC legislation passing in states, as Sovos claims is poised to happen if only craft spirits drinkers raised their voice, legislators have responded to the concerns consumers have that DTC shipping would increase underage alcohol access, undermine the integrity of the existing regulatory framework, and compromise local public health and safety,” the WSWA said.

The WSWA said the number of states considering the legislation has ‘dwindled year after year’, with only seven introducing new DTC spirits privileges in 2023. The states were: Delaware, Hawaii, Iowa, Massachusetts, New York, Texas, and Vermont.

Sovos response

In response to the WSWA’s declarations, Sovos said it had commissioned The Harris Poll to conduct polls for its report, calling it a ‘statistically valid survey of regular craft spirits drinkers, which are clearly defined as US adults aged 21-plus who drink craft spirits once a month or more often’.

Alex Koral, regulatory general counsel, Sovos ShipCompliant, said in the 15-plus years since the Granholm v Heald court case resulted in DTC wine shipping, states have “set forth a bevy of regulations, establishing a well-regulated channel”.

“It’s the states that determine which entities – producers, retailers, importers, etc – may or may not ship into their state and under what conditions, Koral said. “Wineries and other shippers have readily complied with these rules around licencing, age verification, volume limits, and of course taxes – to the tune of hundreds of millions of dollars added to state coffers since the market was established.

“At the same time the DTC wine shipping market has emerged, wholesalers have continued to prosper and thrive. The two channels are complementary, with a presence in one strengthening producers’ success in the other.

“We recognise the current restrictions on spirits DTC shipping and outline them in our report.”

Koral noted that the value of distributors is clear and simultaneously the survey “clearly shows there is more room for the craft spirits industry to grow” and follow the wine industry in creating a “successful and compliant DTC shipping channel”.

ACSA: ‘everyone wins’ with DTC

The ACSA said the report ‘underscores the wish of craft spirits consumers who clearly would like additional channels to purchase premium spirits’.

The statement continued: “We are not trying to mislead anyone. The fact is that there are well over 125,000 spirits products approved by the TTB [Alcohol and Tobacco Tax and Trade Bureau]. Distributors and retailers cannot conceivably carry all of these products. This fact, along with continued consolidation of the wholesaler tier, where according to Shanken’s Impact Newsletter, indicates the top 10 wholesalers account for over 75% of all wine and spirit brands distributed across the country.”

The ACSA noted that the top two wholesalers in the US distribute more than 50% of all wine and spirits brands, which makes it ‘increasingly more difficult for craft spirits suppliers to access markets for new products’.

“This is one reason why ACSA’s 2022 Craft Spirits Data Project indicates that up to 90% of all craft spirits products are sold within the home state of a distillery,” the statement said.

“As WSWA should know by reading the report, coupled with their own experience with DTC for wine, DTC is an important step in the evolution of the spirits marketplace: distilled spirits consumers want it, distillers of all sizes need it, and everyone wins with it, including WSWA’s own members.”