Self-Distribution is the Next Step for Alcohol Producers
DTC saved the small producer during the pandemic and now the future of growth is in direct to trade sales.
Direct to consumer (DTC) sales has been a life saver for many producers, and as I witnessed firsthand during the pandemic, it saved many businesses and the jobs associated with those businesses.
The next logical step to ensure the success of producers’ future is self-distribution. This means allowing producers to sell directly to trade accounts such as retailers, restaurants, and bars. If a restaurant wants the product and a distributor cannot provide it, then the retailer should be able to purchase the product direct, no matter where that producer is located in the country.
Some states have done a fabulous job in supporting their producers and allowing self-distribution. California is a shining example of this. Many of the large retailers still utilize the wholesale tier because it helps streamline logistics for them, proof the world for wholesale does not end with self-distribution as a channel. However, when demand volumes are not sufficient, or producers do not produce enough for wholesale, then allowing the direct sales to trade accounts is a brilliant solution. Before anyone suggests this, wholesalers should NOT have first right of refusal, and production limits should not be set – the US is or should continue to be a free market economy after all.
The failing of California, and other states that do allow self-distribution, is that California allows for self-distribution for California producers but does not allow out of state producers to self-distribute in the state, a clear supreme court violation (Granholm). I would hope that California and other states level up and allow all producers to self-distribute and prevent the need for litigation.
The wholesalers will argue against self-distribution and bring their financial influence on the legislators. I urge legislators to ask a simple question, “why do we discriminate”. The rules do not threaten jobs (it creates jobs), it does not reduce taxes (it increases them) and self-distribution creates no questions around the sale to minors – the sales are to licensed sellers (you just avoid a tier).
By allowing licensed resellers to have free access to a nation of products, you allow them to individualize their offerings and react to customer wants. Today, much of the individualization is found by the wholesalers having products made for them via secondary brands that only they distribute and are not available via other channels. We see this all the time.
Regional associations should support these changes but face the threat of retribution from the wholesalers. This intimidation is worrying, but impactful enough that associations will not speak publicly about this.
It is time for producers and associations to come together and seek the right to be able to self-distribute and we need legislators to provide real reasons why this is not already happening.