Shipping bill brewing for distilleries

Should liquor from distilleries in Iowa be available for Iowans to order online and have shipped directly to their homes? Iowa native distillers sure think so. Owners of Revelton Distilling Company in Osceola Rob and Christi Taylor met with Iowa legislators and lobbyists last Tuesday to discuss two bills that seek to do just that.

Currently, there are several states plus Washington, D.C., that allow a form of direct-to-consumer shipping, where a customer can order a product from a distillery that is shipped directly to the customer’s door. Lobbyist for Distilled Spirits Council of the United States Madison Grady explained that there are two bills currently in the Iowa Senate - House File 993 and Senate File 245 both introduced this past legislative season - that address the direct-to-consumer issue.

“We have regulations set in the bill that’s very similar to how the wine industry operates today, where the shipper has to be a licensed shipper of alcohol, the distillery doing the shipping has to be licensed in the state, the products have to licensed in the state and then when the package gets delivered, you have to sign for it and have to show proof that you’re 21 years or older,” Grady said.

With nearly all of the states allowing wine to ship directly to consumers, Grady pointed out that many can also get liquor delivered to them through delivery services such as DoorDash.

“We have all the parameters in there, it doesn’t go out of the three-tier system,” she said, referencing the system that separates manufacturers, distributors and retails of alcohol. Distillery products would still be registered through the state’s alcohol distribution warehouse in Ankeny, they just would not physically go there. The same amount of taxes would still be paid.

“The only difference is that it just gets shipped from [distiller] to whoever ordered it online,” Grady said.

Christi explained that Revelton currently handles online orders using a legal workaround, selling products to a gentleman in Washington, D.C., who is then licensed to sell alcohol in 42 states. While this allows consumers to have access to Revelton’s products, the downside is the increase in cost as Revelton pays for shipping, then the dealer also pays for shipping to the consumer, all of which gets tacked onto the product’s final cost. This, she said, removes the even playing field for them not just within the state of Iowa, but with anyone who makes alcohol.

“We would just like to have the same opportunity to sell our stuff that other people - if you’re in other states - you’re allowed to ship it,” Christi said.

“The reason this direct-to-consumer bill is so, so darned important… we can’t ship to anybody in the state of Iowa,” Rob added.

The only way for a person to purchase a product from Revelton in Iowa outside of the Washington, D.C. dealer is to either visit their physical location or purchase from a Hy-Vee or Fareway store.

Needed

Saying they’d really like to see the bill make it to the finish line this coming legislative year, the Taylors spoke about what they said legislators were likely to hear from those opposed to the bill. One involved monitoring products that are sold outside of the distillery.

“Everything we do is tracked,” Christi said.

As a control state, the sale of all alcoholic beverages must go through the Iowa Alcoholic Beverages Division in Ankeny. Where at one point every product sold in the Revelton retail shop had to be taken to Ankeny, picked up and brought back, that reporting is now done electronically each week. The state still gets its 50% mark-up, but doesn’t have to worry about touching or transporting the product. The proposed direct-to-consumer bills state the products would still be listed with the ABD warehouse, just not stored there. This, Rob said, would be a good thing for both distillers and ABD.

“The consistent complaint that they have is they’re running out of room. And they can’t store everything so they’re having to pick winners and losers,” Rob said, reiterating the electronic transfer for direct-to-consumer sales would be used in the same way. “We’ll track it, you still get your markup but you don’t have to store it, you don’t have to touch it, let us do that, that’s what we’re good at. And I think they’re amicable to it.”

The Taylors noted the effectiveness of the ABD in distributing Revelton products around the state that they themselves would not feasibly be able to do, with their products in 653 touchpoints - such as restaurants, bars, grocery stores - around Iowa. With infrastructure already in place to ship alcohol, Rob said the direct-to-consumer bill would just add to that ability for native distilleries.

“I don’t see that as an excuse of why direct-to-consumer shipping shouldn’t be embraced in the state of Iowa,” he said.

Direct-to-consumer shipping would also give distilleries the ability to make small batches of a product and sell it without relying on the ABD to do so. If certain products don’t move within the state, they are delisted with the ABD.

Start and stops

Bills dealing with the shipping issue have been in the works before but have not made it into law. When asked what seemed to be some of the bigger reasons for that, lobbyist John Cacciatore answered “beer wholesalers,” even though they are not in the bills.

“We’ve written the bill in a fashion that honors the three-tier system… their concern is that someday it’s gonna apply to beer,” Cacciatore said. “My suggestion for all the policymakers in the room, when that comes at you that way, you all decide if it applies to beer… this is about spirits.”

Sen. Amy Sinclair (R-Dist. 12) asked the Taylors if the bill passed, would they still use their dealer in D.C. The response was yes, as in order to sell in other states, they would have to be licensed in those states.

“As a craft distillery, breaking into new markets is exceedingly expensive. So we have to not only get the licensure to sell in the state of like Oklahoma, but nobody there knows us,” Christi said.

Social media, however, allows their products to reach people in Oklahoma who might then be interested in purchasing from Revelton. Rob added that using their dealer in D.C. has opened up their products to people who have visited Revelton, but live out of state and want more. Several at the discussion said this likewise was good for tourism and agri-tourism.

“At the end of day… whether Iowa wants to admit it or not, and the rest of these states, it’s a matter of time before Amazon or an Amazon-like company says hey, we’re gonna start distributing alcohol like we do everything else and they do it on a national scale,” Rob said. “We need to be prepared.”

He cautioned that the bill needs to stay as “clean” as it can and not get worried about trying to add other wants into it, such as adding protectionis against distilleries from other states. The bill will focus primarily on Iowa residents, and give Iowa distilleries the chance to enter the online direct-to-consumer market.

“If there’s states already doing this, this is catching on… let’s be part of that trend,” said Rep. Megan Jones (R-Dist. 6).

House File 993 was introduced and placed on the Ways and Means calendar April 7. It is managed by Jones and Sen. Scott Webster (R-Dist. 47). It was referred to State Government committee May 15. Senate File 245 was introduced Feb. 10 and referred to Commerce. As of March 11, it is in the Ways and Means subcommittee. The bill is managed by Jones and Webster.

Other members of the Iowa legislator at Revelton were Rep. Sam Wengryn (R-Dist. 24), Sen. Mike Bousselot (R-Dist. 21) and Sen. Mike Klemish (R-Dist. 32).