US wine market growth hindered by wholesale and regulatory barriers
We all agree on what is required - the challenge lies in regulatory interpretation and implementation.
Ever since the founding of Vinoshipper in 2006, we followed the most stringent regulatory rules for the direct sales of wine and beverage alcohol products, even for the states that did not mandate such scrutiny. This includes the following principles:
The seller is always licensed
All online transactions include pre-purchase electronic age verification
State quantity limits are enforced and cannot be overridden (some compliance systems allow overriding)
State sales tax is charged, reported and remitted
State excise taxes or alcohol taxes are reported and paid
Packages are shipped via a national licensed carrier with adult signature requirements and appropriate alcohol beverage labeling (paying the extra cost to the carriers).
In short, Vinoshipper transactions are 100% compliant, safe, and the most effective way to collect tax money and sell to the end buyer, whether that be a consumer or retailer.
Why do I bring this up?
I was revisiting a 2018 video from the WSWA with an interview of Barkley Stuart, who was the incoming Chairman of the WSWA at the time along with a senior executive with Southern Glazers and a Board member of Drizly. The interviewer asks an excellent question around the 5:20 mark, in which they asked Barkely, “What are the main challenges to the three-tier system?” Stuart responds with, “There are direct to consumer and direct to retail systems that, in principle, are really good ideas that meet consumer needs, but they need to ensure the same level of safety that the other modes of delivery within the three tier system provide” and then mentions these levels of safety include:
Age verification at point of delivery
Tax collection
Reporting requirements
The wholesale channel has established three core requirements—age verification, tax collection, and reporting—which they claim only they can properly implement. However, this stance reveals a fundamental contradiction: while DTC and DTT platforms already successfully fulfill these requirements, the wholesale channel continues to argue to regulators that these platforms are insufficient. Barkley does state that they (WSWA) are “principally, protecting the three-tier system” (04:40) and so exposes their true motivation. Rather than acknowledging the demonstrated capabilities of DTC and DTT platforms, they maintain this position solely to preserve their role as intermediaries in the three-tier system.
The DTC and DTT markets have already achieved the core requirements of preventing sales to minors and ensuring proper tax collection. Yet the wholesale channel continues to push for additional regulations “speed bumps”—like quantity limits (not required for retailer sales), shipping restrictions, and unnecessary label registrations—that create administrative barriers to both the sellers and the regulators who have to manage these unwieldy rules without serving any genuine regulatory purpose. These requirements appear designed solely to impede what would otherwise be a flourishing segment of the beverage alcohol industry.
The wholesale channel's selective innovation
Interestingly, the wholesale channel recognizes the growing demand for home delivery, as evidenced by WSWA's investment in Drizly. However, their support of Drizly reveals their strategic thinking—they favored this platform precisely because it operates through existing retailers, effectively maintaining the status quo by offering consumers the same in-store selection through a different delivery mechanism.
Barkley went on to emphasize the effectiveness of Drizly’s targeted marketing of the products on the platform. We would all agree that targeted marketing is a great reason to allow for the growth of the DTC and DTT opportunities. We have seen DTC and DTT be an onramp for new brands, that then take their sales data to distributors to show success and move a large portion of their business from DTC into distribution via the wholesale channel.
The safety argument
I disagree with Barkley on his safety argument. The wholesale channel doesn't add any unique safety elements to the process. Look at the facts: alcohol products move to consumers in two ways - either direct from the source or through retail. If retailers are buying through the wholesale channel, great. If products are shipping direct from the source, even better. There's nothing magical about putting products through a distributor warehouse that makes them safer. In fact, direct shipping creates a cleaner, more traceable path that we can verify end-to-end.
Moving forward: The case for industry evolution
As we have reviewed above and proven that DTC and DTT sales meet the criteria set by the wholesalers to be a properly functioning system, there is only one true real reason left why the wholesale channels continue to fight DTC and DTT, and that is purely to protect the interest and profit margins of the three tier system.
I understand this method of thinking from the wholesalers as I have seen it time and time again with industries that are disrupted - taxis, hotels, payments, car sales. The irony of the situation is while the wholesale channel continues its fight against direct sales, their resistance only shrinks the overall beverage alcohol market while compelling more producers to turn to DTC and DTT as their sole path to profitability.
The influence the wholesalers currently have over liquor control boards in many states is saddening and threatening to the entire industry.
It is time for the wholesale channel to come to the table and work with the domestic industry to help sustain and grow it. Unfortunately, the status quo today is that they are replacing domestic products with cheaper imports and small family US companies are going out of business because they are impeding the very sales channels these producers are required to be successful prior to entering the three tier system. Let’s be clear, wholesalers are no better than modern technology at preventing minors from buying, collecting the vast majority of taxes due, and do nothing to provide for health and safety. It is time we joined together to help the state of the overall industry.
It's a challenge for producers and orgs that support us at their core like vinoshipper. We would not be where we are as a brand with out our wholesale partners as they bring sales and exposure to new markets which then builds DTC for us in those markets. Our partners however, are not the big boys but smaller ma/pa shops across the country who are truly partners as we are like minded and aligned in our approach. We must "Unite the Indys!"