Supreme Court Ruling to Have Little Impact on Brewers
May 26, 2005 - It seemed like reason to celebrate for small boutique wineries. Encountering the same distribution issues as small brewers, the Supreme Court ruling last week appeared to open the door for small wineries, and brewers, to ship direct to consumers.
Even the mainstream press was splashing headlines that vintners were "popping corks in celebration" of the courts ruling.
But wait; not so fast. As is the case with most Supreme Court decisions, the ruling was complex and rife with interpretations.
Prior to the ruling, many pundits espoused this case as one that would pit the 21st Amendment against the Commerce Clause. Would the court rule in favor of interstate commerce, and therefore by default imply that states no longer have the right to regulate alcoholic beverages as was granted at the repeal of Prohibition? Or would they grant unquestionable rights to the sates, further empowering the three-tier system?
In this case, it seemed the court was able to do both.
Ultimately, the court was able to skirt ruling on either states rights or interstate commerce. The court's opinion took a narrow view, and simply declared that the two states named in the case, Michigan and New York, must not act in a discriminatory manner. Both New York and Michigan allowed in-state wineries to ship direct to consumers but disallowed out-of-state wineries to do the same.
By default, the court has allowed direct shipping and individual states to decide for themselves, as long as the regulations do not discriminate.
And therein lies the twist; the ruling may actually limit the number of states that currently do allow direct shipping.
For the 15 states that currently do not allow any direct shipping, the case has no bearing and those states will likely remain unchanged. The impact will be felt in those states that allow direct shipping for in-state wineries, but nor out-of-state winiers. It is in these states that alcohol beverage wholesaler associations have already begun lobbying to ban direct shipping altogether, alleging that it bypasses tax collection and contributes to underage access to alcohol; two powerful arguments. In most states, the state wholesale associations are many times more influential than small wineries.
The courts ruling therefore did not open up direct shipping to all states as was anticipated, and it may now mean that fewer states will allow direct shipping than before.
What does this mean for small brewers? Not much. It means that it is still a state by state situation. It means that brewers can not direct ship to consumers unless they are certain that the receiving state allows it. And it means that shipping company's will still be hesitant to ship beer.
What it means is that not much has changed, and likely won't in the near future.
Shipping beer has never been a potentially big business for brewers as much as it has been for wineries. Shipping a case of beer (or wine) costs about $20.00 to $30.00, nearly doubling the retail cost of beer. It could add some business for brewers who market sought after specialty beers, limited edition high-end beers or seasonal, but it's not likely to add a significant percentage of revenue. Small boutique wineries on the other hand, especially in high travel areas such as the Napa Valley, sell as much as 30-50% of their total sales by shipping direct.
In the end, this much ballyhooed decision by the Supreme Court means little to small brewers. The powerful wholesalers may be able to swing it in their favor, and in fact dodged a potential bullet. Had the justices ruled that states must open up direct shipping to consumers, it would have been a serious dent in the three-tier system of alcohol distribution.
For wineries, and brewers, any grand vision of being able to ship direct to consumers on a national level have been permanently eroded