Mother Earth Brew Co- Beer-Shipping Buzzkill: This is how Direct-to-Consumer Sales Died a Horrible Death, Overnight.

From Mother Earth Brew Co:

IT'S 1935 - Just two years removed from the prohibition era that dried the lips of Americans for 13 years and set in motion a whole new set of systemic regulations to govern the manufacturing, distribution, and consumption of alcohol. In the wake of the most infamous ban on a controlled substance in American history, there was a need to restore order to an industry that had previously operated relatively unregulated, and in many cases, unscrupulously.

Enter Tied-House laws. It's a term you may have heard before in reference to some of the restrictions breweries face. You know...the often silly and downright absurd set of guidelines that dictate how alcoholic beverages can be marketed to consumers, and how entities involved in the supply chain are allowed to interact with one another. So what the hell does all that mean? Well, it means there is a stone tablet in Washington D.C. and (in our case) Sacramento that has rules and regulations scribed in it that lay out exactly what we, as the manufacturer, are allowed to do and say. When we say scribed, we are talking about a 658 page document known as the ABC act, which also cross-references Division 9 of the CA Business and Professions Code and good luck deciphering it to save your life. To make matters even more convoluted, ABC laws (Alcohol Beverage Control) are 'permissive', meaning we can only engage in a practice if it is expressly stated, as opposed to the 'restrictive' laws that govern the rest of our daily lives - which is to say that unless something is outlawed, you CAN do it.

This labyrinth of regulation is at the center of what we do every day. It dictates where and to whom we sell as well as what tactics are allowable for marketing, and it's enforced by sworn peace officers.

The penalty for an offense? Well that depends on a number of factors, which include the severity of the offense and whether or not you are a first time offender. At worst though, you can be held criminally liable. A hefty fine and possible license revocation are possible as well. The long and short of it is that it isn't a joke, which is why most alcohol manufacturers cringe at the very mention of the ABC.

All that changed when the Covid-19 pandemic broke, though. In addition to many other facets of the public and private sector that relaxed restrictions as shutdowns ravaged our economy, the ABC began turning a blind eye to many of the activities that were formerly heavily regulated and grounds for serious punishment. Was it a function of economic stimulation? A pity-related relaxation that even government agencies themselves recognized would be necessary to curb the depressive effects of the Coronavirus? Or was it simply that the employees in charge of enforcement got furloughed and there was no one to do the work? One can only speculate. What we do know is that the rumors started spreading like wildfire. Whispers could be heard on every corner: Psst...Did you know you can drink on the streets? Psst...Did you hear you can get a beer in a cup like a daiquiri drive-thru?

Trust me, we were elated too. We, like many others, needed every dollar we could get in the midst of uncertainty. Boy were we shocked when all of a sudden things turned into the wild west virtually overnight. All the strictly enforced practices that we had followed for 10 years were suddenly obsolete. There was just a collective sense that we had to do whatever it took to survive, even that meant making ignoring the laws that protect us.

That's what the laws are there to do by the way. In its purest form, the ABC act was written to protect the industry from practices that were either unfair from a business standpoint and weren't part of a fair market trade practice, or to protect consumers from the harmful effects alcohol had/has on society, real or perceived. So in spirit it has to be applauded, even though at times - scratch that - most of the time, it feels dated and trivial.

One form of distribution that has been historically unavailable and recently exploited is direct-to-consumer shipping via a carrier like DHL, Fedex, UPS, and the likes. USPS strictly forbids it, but the private companies allow it with some caveats. Strangely, it's a number of old school alcohol laws that allow the shipping of wine but NOT beer. Are there folks that do it anyway? Sure. Check out any credible beer influencer's Instagram page and you'll see a whole slew of beers that clearly weren't picked up on a road trip. Breweries shipping to consumers on the other hand has been touchy to put it mildly. Not only is it technically illegal (short a few exceptions that don't apply to a large majority of US residents), but it undermines and directly competes with their own distribution partnerships, who contractually own the exclusive rights to distribute our beer within the territory stated in the Wholesaler Distribution Agreement. During the Covid-19 pandemic, it wasn't just the ABC and shipping companies looking the other way, it was the beer distributors across the country that silently tolerated the D2C self-distribution of the brands they owned the rights to. For weeks, craft beer fans all over the nation could purchase the beer they loved from thousands of miles away, albeit for the cost of a left kidney, but it was available nonetheless (shipping a heavy, controlled substance ain't cheap!).

You may even remember a previous post of ours enthusiastically announcing the availability of shipping. At the time there was no end in sight. We even allocated resources to the endeavour, keeping staff members on payroll and setting up a portion of the warehouse to increase our shipment preparation speed and consistency. That was a Thursday. The future of beer shipping in America looked bright. Then it was Friday.

The ABC must have sent folks back to work for phase 2 of reopening California, because waiting for us in our inbox was a note from the CA ABC notifying us that "the incidence of delivery of alcoholic beverages to minors was alarmingly high." They go on to say, "With the increase in volume of deliveries, the Department has received numerous complaints of deliveries of alcoholic beverages to minors. In response, the Department has conducted investigations to determine if alcohol deliveries were being done in compliance with existing law and the temporary notices of regulatory relief issued by the Department in response to the crisis."

Well, there goes the neighborhood. How could this happen? How could a seemingly harmless service collapse so quickly? After all we are just champions of the craft movement! We are getting beer to the people in times of crisis! Well as it turns out, and unbeknownst to us at the time we set up the shipping option, UPS and Fedex had instituted a contactless delivery system in response to the social distancing recommendations of the CDC and state governments to protect the community and their employees, which means, yup, you guessed it...THEY WERE NOT COLLECTING SIGNATURES! You can't very well perform a contactless ID check, now can you?!

We knew immediately this was the death nail.

Everyone in this industry knows (or should know) that the ABC has a blanket policy when it comes to strict liability - "As discussed in the prior Industry Advisory, ABC licensees are responsible for the delivery of alcoholic beverages away from their licensed premises, whether that delivery is undertaken by their own employees or using a third-party delivery service...License discipline may involve a suspension or revocation of the license." What this means for us, and you as the consumer, is that we were forced to cut off shipments as fast as we could, and it's likely you will see this option disappear for many more of your favorite brands. Liability generally falls, unduly, on the supplier even after the product has changed hands (another absurdly unfair imposition) and we aren't about to lose our license so that Suzie can get her Cali Creamin' fix in Philly.

The cliff notes - What IS the future of direct-to-consumer beer shipments? Well here is where it stands to the best of our knowledge based on conversations with Wholesalers, Shipping Carriers, and Industry professionals alike:

Wholesalers - Look, beer distributors have no interest in supporting this. It makes them no money unless they set up a program to fulfill on behalf of their suppliers and take their cut, but that cuts out their retailers, who are much more valuable to them. The numbers aren't huge, however, and shipping comes at a significant premium so let it work itself out, I say.
Carriers - I suppose they will do whatever is logistically possible and legal as long as they are making their money. They do carry a certain liability with alcohol deliveries but it's no different than what they do within wine, so get with the program.
Regulatory Agencies - This is part of a larger discussion. There is a general need to update the ancient laws of yesteryear with something more pragmatic and relevant in today's market, especially given the economic climate, but we are talking systemic and sweeping changes. I can't imagine this will happen soon.
Suppliers - Breweries and the like should be able to set themselves up fairly easily to accommodate this but there are a few issues consumers should be aware of that affect the beer they are paying a pretty penny for:

1) It's expensive - Sending a 10-60# box across the country is not economical.

2) It's not eco-friendly - cardboard, plastic, styrofoam, etc. All types of material are used to pack your beer to safely make the trek, and a lot of it at that. Not to mention the fuel used to transport all those boxes. If you are trying to stay green, you should be looking locally.

3) It's not great for the beer - Depending on the time of year and transport time/distance, your beer could undergo temperature fluctuations or become lightstruck, and refrigerated shipping would be far too cost prohibitive. If top quality fresh beer is the only way you roll then go to the source.

In summary, it's a flawed system and its going to take multiple agencies along with the lobbying and cooperation of everyone involved to fix it. There are some things that need to be ironed out and at the end of the day if the public is at risk because of an industry practice then that should be our top priority to address. Having said that, we also should be evaluating what's good for the consumer. Clearly there is a demand for this service, but as we all know, what FEELS good may not actually BE good, so we must proceed with caution until we fully understand the implications and impacts to the industry and public safety. Admittedly, it's hard not to see it as yet another obstacle standing in the way of a free market though.

At the end of the day we are just out here trying to sell some beer, man.

-The Dude, probably.

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