Direct Shipment & Compliance

New DtC Rules In Kentucky For Wineries and Distilleries

Ship Compliant Wine Blog - Fri, 04/20/2018 - 17:12

On April 13, Kentucky Governor Matt Bevin signed HB 400, a bill establishing new rules for wineries, distilleries, and package retailers to make direct-to-consumer (DtC) sales to Kentucky residents, and for the carriers fulfilling those orders. The bill has an emergency clause attached, which makes it immediately effective.

While the bill appears to be a big win for the Bluegrass State’s bourbon industry, it is as yet unclear what all effects the new rules will have on the DtC market. Indeed, there are a number of provisions whose application must still be worked out, nor is it certain whether industry members — particularly common carriers — will engage with the new system. Nevertheless, this does mark one of the biggest shifts regarding DtC rules in Kentucky in years.

 

What’s in the Bill?

HB 400 amends several sections of the Kentucky beverage alcohol code to provide greater ability for licensed wine and spirits manufacturers and package retail stores to sell and ship products directly to Kentucky residents.

For Distilleries:

The bill permits, for the first time, licensed spirit producers to initiate deliveries to Kentucky residents. Establishing DtC sales for distillers has become a major goal for the state’s Distillers Association. Visitors to distilleries along Kentucky’s famous Bourbon Trail have long complained about the prohibition preventing them from getting any spirits shipped back to their homes. (Of course, visitors could still personally carry away a limited amount of bottles from their visits).

Under HB 400, in-state and out-of-state distilleries will be permitted to ship spirits to Kentucky residents if:

  • They are properly licensed by the Kentucky Alcohol Beverage Control (ABC) department.
  • They ship no more than 4 ½ liters of spirits at a time, when the purchase was made by the Kentucky resident when on-site at the distiller’s location. (This volume limit will increase to 9 liters per purchase after January 1, 2021.)
  • They ship no more than 9 liters per month to a Kentucky resident who is a member of a subscription program or club set up by the distiller, as long as the enrollment in and payment for the club or subscription was arranged while the Kentucky resident was physically present at the distillery.
  • Only licensed common carriers or transporters fulfill the delivery, and the package is in a box clearly indicating that it contains alcohol, and an adult’s signature is collected at the time of delivery.
  • The shipment does not go a territory where such sales are not otherwise permitted.
For Wineries:

HB 400 provides similar permissions for wine producers as for distillers. These new provisions replace previous rules that permitted small farm wineries only (those producing fewer than 100,000 gallons of wine per year) to ship 2 cases of wine purchased on-site at a time.

Going forward, in-state and out-of-state wineries will be permitted to ship wine to Kentucky residents if:

  • They are properly licensed by the Kentucky ABC. Notably, HB 400 will apply to wineries of all sizes; the previous 100,000 gallon limit appears to be going away.
  • They ship no more than 4 cases of wine at a time, when the purchase was made by the Kentucky resident when on-site at the winery’s premises.
  • They ship no more than 1 case per month to a Kentucky resident who is a member of a subscription program or club set up by the winery, as long as the enrollment in and payment for the club or subscription was arranged while the Kentucky resident was physically present at the winery.
  • Only licensed common carriers or transporters fulfill the delivery, and the package is in a box clearly indicating that it contains alcohol, and an adult’s signature is collected at the time of delivery.
  • The shipment does not go a territory where such sales are not otherwise permitted.
For Quota Retail Package Licensees:

Interestingly, HB 400 also includes provisions that will permit package retail stores to make DtC shipments. Under the terms set out in HB 400, licensed package retailers may ship both wine and spirits to Kentucky residents if:

  • They are licensed by the Kentucky ABC, and at least 80% of their sales are made to Kentucky residents. This restriction appears to prohibit any out-of-state retailer from fulfilling DtC orders into Kentucky.
  • They ship no more than 4 ½ liters of spirits and 4 cases of wine at a time, when the purchase was made by the Kentucky resident when on-site at the distiller’s location. (This volume limit will increase to 9 liters of spirits per purchase after January 1, 2021.)
  • They ship no more than 9 liters per month of spirits and 1 case of wine per month to a Kentucky resident who is a member of a subscription program or club set up by the retailer, as long as the enrollment in and payment for the club or subscription was arranged while the Kentucky resident was physically present at the retailer.
  • Only licensed common carriers or transporters fulfill the delivery, and the package is in a box clearly indicating that it contains alcohol, and an adult’s signature is collected at the time of delivery.
  • The shipment does not go a territory where such sales are not otherwise permitted.

The issue of retailers entering the DtC market has been particularly contentious recently, so it is rather notable that Kentucky is entering the fray. Since only local, Kentucky-based retailers can get the necessary license to make DtC shipments, the state could be setting itself up for legal challenges, as such a restriction butts against the Interstate Commerce Clause doctrine as applied in the 2005 Granholm decision. (For a longer take on retailer DtC rules and how Granholm may apply read here.)

For Transporters:

One of the driving reasons that Kentucky has historically been effectively closed for DtC sales, despite the prior allowance for Small Farm Wineries, has been the risk of felony charges that carriers faced if they shipped any package containing alcohol to a region designated as “dry” (no alcohol sales permitted) or “moist” (alcohol sales restricted, but not entirely banned). A felony penalty can be a very serious consequence, which no carrier (such as FedEx or UPS) had ever been willing to risk.

HB 400 does still clearly state that deliveries of any alcoholic product to any territory in the state that prohibits such sales is absolutely prohibited. However, HB 400 also provides that properly licensed common carriers and transporters and their employees may not be held liable for a delivery to a prohibited territory when fulfilling a consigned order.

Further, HB 400 provides that wineries, retailers, and distilleries can use a written representation from the purchaser that the delivery address was in a territory that permitted the sale as an absolute defense to any charge of an impermissible shipment. That is, if the shipper can get the purchaser to state in writing that they can buy the product at the delivery address, the shipper can claim they were acting in good faith if it turns out that that was not the case. The form that this written statement needs to take, though, is unclear.

 

What does all this mean?

Whether these provisions will really change things for the Kentucky DtC market remains to be seen.

One of the biggest uncertainties is whether any tax obligations will attach to these new DtC permissions. It is currently unknown whether an out-of-state DtC seller would be required to collect and remit any excise, wholesale, or sales tax for their sales to Kentucky residents. We hope to receive clarification on this soon and will notify you on what we find.

Looking beyond the tax issue, we have yet to see whether any carrier will make a move to accept packages going to Kentucky. They have been dealing with a crackdown in a number of other states in recent years, so it is uncertain how they will approach the Kentucky market, especially when the state has historically been so restrictive.

Limiting all purchases, even subscribing to a club, to only on-site orders may also be a barrier, though there is an interesting history to such a rule in Kentucky. A similar rule applied originally to the rules permitting DtC sales for Small Farm Wineries. However, in a 2006 case (Church Hill Vineyards v. V. Lavoyed Hudgins), the U.S. District Court for the Western District of Kentucky ruled that an on-site-only restriction was unconstitutional, as it effectively prevented Kentucky residents from accessing approximately 99% of U.S. wineries. How the ABC will proceed with the on-site-only restrictions in HB 400 remains to be seen.

Further, HB 400 is not a panacea for Kentucky distillers. It is a fundamental rule for the DtC market that a shipper must follow the laws of the state into which they’re shipping. Currently, only a handful of states (North Dakota, New Hampshire, Nebraska, and the District of Columbia — and now Kentucky) permit shipping distilled spirits to residents in their borders.

So the vast majority of out-of-state visitors to the Bourbon Trail will still be disappointed when they ask to have a few bottles of Kentucky bourbon shipped home. Changing this will require a nationwide effort to change DtC rules regarding spirits; essentially something like the efforts that Free the Grapes! and Wine Institute have worked on over the last few decades.

Still, HB 400’s passage should be seen as a positive step for the beverage alcohol industry. Kentucky has taken steps to open itself up to the DtC market, removing a number of restrictions that had been a major barrier to Kentucky residents enjoying all the wine they wanted. If, going forward, carriers do accept orders to Kentucky and suppliers move to get licensed, we could expect the state to quickly jump up the ranks of DtC destination states.

As things develop, including how the ABC reacts to these new provisions, we at ShipCompliant by Sovos will make sure to keep you informed.

 

Want to learn more about trends in the direct-to-consumer shipping channel? Download the 2018 Direct-to-Consumer Wine Shipping Report.

The post New DtC Rules In Kentucky For Wineries and Distilleries appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

Canadian Supreme Court Upholds Restrictions on Interprovincial Transportation of Alcohol

Ship Compliant Wine Blog - Thu, 04/19/2018 - 16:18

The Supreme Court of Canada issued a ruling in a highly anticipated case affecting the movement of alcohol across provincial borders, which was forecast by some as a potential Granholm moment for the nation. Such hopes were dashed, though, by the Court’s ruling.

In an unanimous vote, the Court ruled that provinces were not constitutionally prohibited from imposing restrictions on importing certain goods from other provinces, as long as the intent of those restrictions was not to impede trade. The case, Her Majesty the Queen v. Gerard Comeau, arose after the defendant, a resident of New Brunswick, was stopped at the border with Quebec with an amount of alcohol in excess of New Brunswick’s personal importation limit. He was fined C$ 292.50, but decided to contest the charge in court arguing that the importation limit was in violation of Canada’s constitution.

Specifically, Comeau argued that section 121 of the Constitution Act, which reads that goods from one province “shall . . . be admitted free into each of the other Provinces,” meant that New Brunswick’s importation limit was improper. However, a decision from the Supreme Court in 1921 had said that section 121 only prevented tariff barriers to trade, but not other barriers like volume limits.

Ultimately, the Supreme Court upheld that previous ruling, determining that section 121 did not give free reign to interprovincial trade; provinces can impose certain barriers, as long as their main purpose is not to restrict trade.

The Court found that New Brunswick’s importation limit was permissible, as its main purpose was to prevent “excessive quantities of liquor from supplies not managed by the province” from entering its borders. The province did not impose an absolute barrier to importing alcohol, merely a lesser restriction designed to limit alcohol imports not controlled by the New Brunswick Liquor Corporation, a body establishing and operating under the auspices of the provincial government.

Most Canadian provinces also operate in a control system, where the governing body directs the distribution and/or retailing of alcoholic beverages (only Alberta has fully privatized). They also mostly all have importation limits like New Brunswick.

In effect, the Supreme Court’s decision means nothing has changed for alcohol suppliers or consumers in their ability to bring alcohol across provincial borders. Canada missed an opportunity like Granholm, and so nothing really will change.

This does not mean that the dream of a Canadian DtC market is dead, merely that relief won’t come judicially anytime soon. Instead, it now turns to the provinces themselves to open their borders legislatively and give their residents access to the greater world of beverage alcohol.

 

Want to learn more about trends in the direct-to-consumer shipping channel? Download the 2018 Direct-to-Consumer Wine Shipping Report.

The post Canadian Supreme Court Upholds Restrictions on Interprovincial Transportation of Alcohol appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

2018 ShipCompliant Wine Summit: Sponsors and Exhibitors

Ship Compliant Wine Blog - Wed, 04/18/2018 - 15:14

The 2018 ShipCompliant Wine Summit is approaching fast! If you haven’t already registered for the conference, which will take place May 31 at the Napa Valley Marriott in Napa, California, we encourage you to do so as soon as possible to ensure your spot. You won’t want to miss out on our premier user conference with keynotes from industry experts, exciting breakout sessions, our exhibition hall with our sponsors and partners from the industry, a big reception, and plenty of networking time.

This is the 13th edition of our annual summit, which will focus on industry trends like cutting-edge data utilization, consumer experience, expanding your footprint, and how to stay on top of increasingly challenging compliance issues and scrutiny.

We are also excited to bring back ShipCompliant University, our exclusive educational training for clients that enables them to make the most of our platform. Members of the ShipCompliant team will be on hand the day before the Wine Summit to walk you through the features and field any questions you may have. Make sure to join us from 3:00 to 5:00 p.m. on Wednesday, May 30. The first session is “How to Keep A Pulse on Your ShipCompliant Account,” followed by “Top Ways to Manage Your Data in ShipCompliant.” The training session will be followed by a happy hour. Register today – you won’t want to miss this exclusive opportunity!

As always, we’d like to thank our wonderful sponsors, partners, and exhibitors for their roles in making the ShipCompliant Wine Summit happen. These organizations are driving innovation in our industry and beyond, changing the landscape and dialogue. Here’s a list of the organizations you can expect to see in Napa:

 

Platinum Sponsors         

Fedex

Wines & Vines

 

Reception Sponsor

Wineshipping

 

Exhibitors

eCellar

PakSource

UPS

Copper Peak Logistics

TrueCommerce

 

Don’t miss out – register for the 2018 ShipCompliant Wine Summit today!

 

 

 

 

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BevAlc Roundup | U.S. craft beer is conquering the world, a look at three DtC sellers, and why alcohol should be green.

Ship Compliant Wine Blog - Mon, 04/16/2018 - 10:54

Flowers are starting to bloom, and the Roundup is one more bud for you to enjoy. This week we have a special section all about U.S. craft beer having an increasing impact in other countries, including how exports continue to grow as U.S. styles capture foreign taste buds. We also look at how a burgeoning trade war with China could affect the U.S. wine industry, a new label to showcase eco-friendly wines, and why it might be too soon to bring AI into alcohol sales.

Stay up to date with the latest trends in the DtC wine market with the ShipCompliant/Wines & Vines 2018 DtC Report. Make sure to download your copy here!

 

ShipCompliant Events

GCS: Wine Summit, our annual wine industry conference is coming up! This year, we’ll be hosting the event at the Napa Valley Marriott on May 31, with panels on the state of DtC wine sales and how to expand your three-tier distribution footprint. Sign up here!

 

Craft Beer Growing Around the World

American Craft Beer Exports Surpass $125 Million | Supported by the Brewers Association’s Export Development Program (EDP), craft beer export volume increased by 3.6 percent in 2017, now totaling 482,309 barrels and valued at $125.4 million. Brewers Association

Time Traveling: How Craft Beer Has Evolved Since 1990 | In the last nine years of craft beer development, we see years marked by tremendous prosperity sure, but also now marked by buyouts, closures, layoffs and wild new stylistic trend: brewing low ABV lagers. Brewbound

Has American Craft Beer Taken Over the World? | From Germany and the UK to Chile, American-style craft breweries are popping up around the world and claiming ever more market share. Daily Beast

LegislativeUpdate

TTB Newsletter | Top stories include a reminder for brewers on Formula rules, an expansion of allowable changes to approved labels, and new ABA boundaries. TTB

Wine Spectator: Will China’s Threatened Tariffs Hurt American Wine? | While it’s unclear if the Chinese government will actually follow through on its threat, wine industry leaders are asking how this may affect their bottom line. Shanken News Daily

Walmart Wins Over Texas Spirit Sales | A historic ruling widening the sales of spirits in conservative Texas raises concerns among local firms. Wine-searcher.com

As Brewery Taprooms Thrive, Industry Stakeholders Voice Concerns | As the number of taprooms has grown, so too have concerns about their impact on the three-tier system. Brewbound

Privately Owned “Agency” Liquor Stores Appear Unlikely To Begin Operating Anytime Soon IN Montgomery County | Although the county was given the authority to license private store owners to sell liquor, the Department of Liquor Control director said there’s no timeline to do so. Bethesda Magazine

IndustryUp

Case Studies on Growing DtC Wine Sales | Three wineries on California’s Central Coast on boosting direct-to-consumer sales. Wines & Vines

California’s New Wine Labels Make It Easier To Find Eco-friendly Wines | California’s Sustainable Wine-growing Alliance (CSWA) is trialling a new set of bottle labels to help drinkers make more environmental choices in supermarkets. Wine Business

This Female Brewer Suggests These 3 Actions To Get Ahead In the Beer Industry | Beverly Armstrong has three degrees from Harvard University — but her formal education is only a piece of her impressive resume. Forbes

Wines & Vines Promotes Adams to Editor | Wines & Vines magazine has promoted its senior editor, Andrew Adams, to the editor position to take over from Jim Gordon who has relinquished the editor post after 12 years. Wines & Vines

Wine Country Leaders Say Industry Largely Unscathed By October Fires | Wine Country is open for business, and an early look at tourism activity and impacts to vineyards since the destructive October fires show the regions’ signature industry may have gotten out mostly unscathed. Press Democrat

JustFun

For the Booze Business, Going Green Is A Matter of Survival | In an industry that’s dependent on healthy ecosystems for good ingredients, turning a blind eye to wasteful practices, unsustainable agriculture, and the effects of climate change on crops isn’t an option. Popular Science

Robert Mondavi Winery and the James Beard Foundation Announce 5-Year Scholarship For Wine Study | From 2018 to 2022, the James Beard Foundation Robert Mondavi Memorial Scholarship wil award $10,000 annually to an aspiring culinary or wine professional to further their wine education. Wine Industry Insight

Artificial Intelligence In the Wine Industry? Not Yet, Please! | The world is changing rapidly, and the wine industry needs to keep up. However, we should not rip over our own feet in a mad rush to do this. The Wine Gourd

Find out how ShipCompliant by Sovos can help your business stay on top of compliance by signing up for a free demo.

 

The post BevAlc Roundup | U.S. craft beer is conquering the world, a look at three DtC sellers, and why alcohol should be green. appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

State Spotlight Series: Direct to Consumer Wine Shipping and New Rules for Malt Beverage Manufacturers in South Dakota

Ship Compliant Wine Blog - Mon, 04/09/2018 - 18:25

The twin pillars of being a state regulator are implementation and enforcement: figuring how new rules will work, and then making sure that everyone follows the rules. For those operating in a highly regulated market — such as the beverage alcohol industry — it’s critical to always stay on top of what state regulators are up to, so you know what’s coming down the road and which of your activities are now in the spotlight.

South Dakota’s regulators are currently quite busy indeed, working to determine how to implement a bevy of new rules regarding in-state and craft manufacturers, while also ensuring that industry members — particularly wineries making direct-to-consumer (DtC) sales into the state — are following existing rules. As a trusted source of regulatory information for the industry, we wanted to highlight what’s going on in South Dakota.

 

What’s New In The Mount Rushmore State?

Governor Dennis Daugaard had a busy time this March, signing almost a dozen bills amending the state’s beverage alcohol statutes. Many of these rule changes will act to liberalize some of the state’s regulations, following similar efforts by other states to reduce the burdens on the industry.

For instance, going forward, manufacturers and wholesalers will be permitted to create sponsorship agreements with charitable organizations (HB 1157), certain retailers can get licensed to make local deliveries (SB 143), and South Dakota residents may bring their own wine to consume at a restaurant (HB 1185).

But the biggest changes revolve around in-state manufacturers. A series of bills establish new and amended rules for malt beverage manufacturers (SB 173), distillers (HB 1313), and wineries (HB 1067 and SB 187).

Notably, many of these bills permit sales by the licensees for both on-premises and off-premises consumption, and some limited ability to self-distribute to local retailers. (Manufacturers in South Dakota should make sure to read these bills carefully to understand their respective permissions.)

These bills are set to become effective on July 1, 2018, leaving only a few months for South Dakota’s regulators to prepare. Anyone interested should make sure to keep their ears open for news from the South Dakota Alcohol Tax Division on how the interpretation and implementation of these bills is going.

 

DtC Wine Shippers Enforcement Notices

South Dakota was a recent addition to the DtC landscape, opening up just in 2016. Like most new states, there was a period of growing pains as the state worked out kinks in the reporting process (this lead to a requirement for wineries to report their package tracking numbers last year).

Now with two full years of DtC sales under its belt, the state recently sent out a reminder email to wineries underscoring five key rules that it needs wineries to follow:

 

Reporting Accuracy

DtC sellers are required to report their shipments quarterly, including remittance of state and local sales tax, the Occupational Tax, and wine excise taxes.

As the notice indicates, state regulators have found some inaccuracies in recent reports, such as failing to include all relevant tracking numbers and listing the purchase date not the shipping date. DtC wineries are reminded that if a purchase is shipped in more than one package, the tracking numbers for each package must be reported; in addition, the shipped date of each purchase should be reported, not the purchase date, otherwise the winery risks reporting the order in the wrong quarter. Errors in reporting can result in the state denying a winery’s renewal of their DtC license.

 

Third Party Fulfillment Services

South Dakota does permit wineries to use third-party fulfillment warehouses to facilitate their DtC sales to the state. However, wineries are reminded that each order a fulfillment warehouse ships must have originated with a properly licensed party.

That is, in order to ship its wines DtC to South Dakota residents, a winery must have its own license and cannot rely on a third party for any licensing or registration requirements.

 

Brand Registrations

Before any wine brand may be sold in South Dakota, it must be registered with the state. This includes all wines being sold DtC as well. The notice indicates that state regulators are actively comparing their brand listings and DtC reports to ensure that registrations have been done.

South Dakota charges $25 for an initial registration, and $17.50 for any additional labels. Registrations may be done online through Product Registration Online.

 

Age Verifications

South Dakota is one of the roughly half-dozen states that explicitly requires all DtC licensees to verify the age of the purchaser before shipping any wine. Part of the recent notice is a reminder to DtC licensees that they must fulfill this requirement in order to stay in good standing with the state.

It should be noted that it is illegal everywhere to sell or provide anyone under 21 with alcohol; South Dakota, among other states, stands out because it establishes a specific process that DtC licensees must follow. In order to comply, a DtC licensee must either receive a facsimile of the purchaser’s state-issued ID, or use an approved online age verification service, like IDology or LexisNexis prior to shipping a DtC sale.

Age verifications can be a very complicated and costly process. For more information on what these requirements can entail, and how ShipCompliant by Sovos can help, please read this post.

 

Wine Prices

Finally, the state notice reminds wineries that they are not permitted to sell wine to South Dakota residents at below the cost of production. As such, any offer for “free” wine is not permitted.

 

Operating in a highly regulated market can get quite complicated. Implementing and enforcing those regulations is no easier. But by staying aware of what’s going on and what’s upcoming, everyone can end up in a happier place.

 

Want to know everything about direct-to-consumer wine shipping in every state? Download the 2018 Direct to Consumer Wine Shipping Report?

The post State Spotlight Series: Direct to Consumer Wine Shipping and New Rules for Malt Beverage Manufacturers in South Dakota appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

Global Compliance Series: ShipCompliant Beer Summit Recap

Ship Compliant Wine Blog - Thu, 04/05/2018 - 16:08

Late-season snow settled in over Denver on March 29, as a couple dozen people — mostly brewers, with some attorneys and consultants mixed in — gathered at Great Divide Brewing’s Barrel Bar for the inaugural GCS: ShipCompliant Beer Summit.

Hosted by ShipCompliant by Sovos, the Beer Summit provided a venue for regional brewers to connect and network, while also hearing from industry members, including Patrick Maroney, Director of the Colorado Liquor Enforcement Division, on how to grow their businesses and upcoming regulatory changes for brewers in the Centennial State. Here are some highlights from the panels:

 

“How to Grow Your Footprint in a Crowded Market”

Kicking off the presentation portion of the event, ShipCompliant’s own Mackenzie Latham emceed a panel on how breweries can succeed and expand in an increasingly crowded field. Joining her were Mark Boelman, Director of Accounting and Administration for Left Hand Brewing; Chad Yakobson, Owner and Brewmaster at Crooked Stave; and Brad Windecker, CEO of Orchestra Software. (The following questions and answers have been edited for clarity.)

 

How do you establish your brands in stores, and once there maintain that foothold?

Mark Boelman: Having a legacy product [such as Left Hand’s nearly ubiquitous Milk Stout] is a great entry point in stores, from which you can introduce a broader selection of brands. But always know that shelf space is limited; any room you give up will be filled by a competitor. So don’t get rid of a brand without having something ready to replace it.

Chad Yakobson: We started out with a hundred different brands, but had to pare that back so we could focus more on drawing an audience without also overwhelming them. But no beer was sacred in that process. What we’ve really seen is a need to keep up with our fickle customers — they’re always looking for the next great beer, and we need to keep up with that demand by having new varieties ready to replace labels that aren’t selling anymore.

Brad Windecker: In our experience, consumers aren’t so much “fickle” as “promiscuous.” Since about 2014, we’ve seen this strategy of constantly shifting brands become more ubiquitous. Now more breweries understand that you can’t keep an audience on brand loyalty alone. Today’s sophisticated beer drinkers are constantly looking for something new; in order to succeed, a brewery must be up to the challenge of keeping up with that promiscuous demand. A few legacy beers can get people in the door, but you then need a constantly rotating list to keep their attention.

 

How do you determine your distribution strategy, and work with distributors to make it succeed?

MB: It’s critical to work with distributors who are knowledgeable with selling craft beer, and are committed to selling your beer. There are more breweries and brands out there than ever before; distributors get overwhelmed by SKUmageddon as much as consumers do. So don’t think you can just give them your beer and walk away. You have to know that they have the resources and drive to get your products into stores.

BW: One word: data. You have to communicate your strategy clearly and directly with your distributors, so they can be a good partner in selling your beer. But if you don’t know which labels sell, or where your consumer base is, a distributor won’t take you seriously, and won’t put in the effort to sell your products. If, instead, you present yourself as professional, knowledgeable, and manageable, you’ll get their attention. Distributors can’t sell your product in a vacuum; the better the model you provide them with, the better they can help you succeed. It’s also important not to get too big for your britches. We’ve seen many breweries out there try to expand too quickly and end up flat on their face. Know your market, know your audience, and cultivate them thoroughly before you look for the next area to grow into.

CY: Working with a distributor has to be a whole separate business within your business. Unless you’re willing to put in the effort and commitment to selling your beer, by developing a strong brand and effective marketing (and first of all, making great beer), no distributor will pick up your brands. You also have to figure out how to get noticed in different markets; being “local” alone isn’t enough — after all, a brewer in Portland is no longer local when they’re selling in Tennessee. But getting more involved in new markets, including, say setting up remote tap rooms, can be a great way to build that national presence, and get your beer to more consumers.

 

How do you set yourself apart in stores, on increasingly crowded shelves?

MB: Super sexy packaging, seriously. If you’re in a store, walking through a crowded aisle, needing to make a quick decision, something that really catches the eye will stand out and be purchased. But, while that’s great for random or new customers, you also need to have good name recognition so that they become repeat consumers. Having a good brand, or certain legacy products, like Milk Stout, has really helped Left Hand.

CY: Absolutely. Getting good brand recognition is critical to getting a sold consumer base. And that can start with the label. As we say, beer has to be both “art in the bottle, art on the bottle.” That requires having solid marketing and design teams. It’s also important to not overwhelm your audience. Originally, each of our brands had unique designs; they would sell, but consumers wouldn’t come back for different styles — we didn’t have a unified look. Once we changed to highlighting the Crooked Stave name on our cans, we ended up getting a much stronger consumer base who know to keep coming back to our section in the store.

BW: It’s all about having a vision and story of who you are and what your beer is about. Beer drinkers are special in that they can really commit to a brewery that stands out and fills their needs. This is different from other product types — for instance, vodka drinkers focus on the brand but not the producer — how many Grey Goose drinkers ever think about Diageo? With a strong vision, that clearly shows up on your labels, you can turn the random consumer into a lifelong friend.

 

 

“The State of Colorado Beer”

Filling out the afternoon was a presentation by Patrick Maroney, Director of the Colorado Liquor Enforcement Division (LED), who discussed upcoming regulatory changes facing the beer industry in Colorado. And indeed, there are some major changes in the works.

Many of these rule changes follow the passing of SB 197, in 2016, (which we discussed in part here), which among other things, expanded the ability of convenience and grocery stores to sell  full strength beer. SB 197 accomplished this by removing a lot of statutory language concerning 3.2 beer. (Currently in Colorado, convenience and grocery stores can only get a license to sell beer with an ABV below 3.2%.)

However, as Patrick explained, the way SB 197 was constructed could complicate its implementation. This is because SB 197 did not excise 3.2 beer (called “Fermented Malt Beverage”) from the statutes, but instead merely remove the ABV cap. So, from January 2019 on, convenience and grocery stores with an off-premises Fermented Malt Beverage retailer license can sell full strength beer — but they can only make purchases from distributors and producers with their own Fermented Malt Beverage licenses.

When Patrick asked the audience — made up mostly of Colorado brewers — how many had a Fermented Malt Beverage producer’s license in addition to their Malt Liquor (i.e. beer over 3.2 % ABV) license, no one raised their hands. In the end then, for convenience and grocery stores to sell full strength beer after January 1, 2019 someone — either the retailers, or their providers — will need new licenses.

In addition to these kind of regulatory complications, Patrick noted that the LED is looking to expand their enforcement of trade practice rules in the state. This follows a pattern among other states, notably California and Florida, which are also cracking down on trade practice violations, though at this moment, Colorado is not actively working with the federal TTB on any enforcement actions.

Ultimately, Patrick explained, the LED’s primary drive is to provide the necessary education and support to help Colorado’s beverage alcohol industry thrive in a safe and fair manner. The state has long stood out for its flourishing craft beer market. While a friendly legal environment (such as more liberal self-distribution permissions) has helped, it’s been the active partnership between industry members and regulators that has really made the Colorado craft market succeed.

It is in this spirit that we at ShipCompliant at Sovos were honored to put on this inaugural Beer Summit. Providing a forum for education and cooperation is something we pride ourselves on. And to support that, we are again very grateful for the fantastic participation of the panelists and everyone who came out. We look forward to holding more such conferences in the future, in different locations across the country. Keep an eye on our events page for updates.

 

Find out how ShipCompliant by Sovos can help your business stay compliant and grow. Request a demo today.

The post Global Compliance Series: ShipCompliant Beer Summit Recap appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

BevAlc Roundup | Avoid trade practice violations, wine exports continue to grow, and the secrets in wine labelling.

Ship Compliant Wine Blog - Mon, 04/02/2018 - 15:32

Spring is here, and the BevAlc Roundup is in full bloom! This week we look at the TTB’s latest trade practice investigations along with how recent trade disputes with China could affect the industry. Then, which markets are growing (exports and craft beer) and which need a pick-me-up (cider and selling to Gen-X). Finally, if you’re already a wine snob, Tom Wark lets you know that’s perfectly fine; and if you’re not, a new podcast from E. & J. Gallo will tickle your funny bone, and hopefully also your palate. All that, plus beer…in SPACE?!

Stay up-to-date with the latest trends in the DtC wine market with the 2018 Direct to Consumer Wine Shipping Report. Make sure to download your copy here!

 

ShipCompliant Events

GCS: Wine Summit, our annual wine industry conference is coming up! This year, we’ll be hosting the event at the Napa Valley Marriott on May 31, with panels on the state of DtC wine sales and how to expand your three-tier distribution footprint. Sign up here!

LegislativeUpdate

TTB Newsletter | Top stories include further guidance on the Craft Beverage and Modernization Act for distilled spirits and and new guidance on formula approvals. TTB

How To Avoid Pay-To-Play Violations | The TTB has increased its enforcement budget — here’s what you need to know to stay in the clear. SevenFifty Daily

China’s Tariffs Are Sobering News For California’s Wine Country | China just announced plans to add a 15 percent tariff on a range of U.S. products from pipes, to fruit, to — yes, wine. Bloomberg

The Rise of Canned Wine, Beer, And Cocktails Is Bigger Than Any Tariff |  A post-World-War-II-era convenience, aluminum cans are now being used to hold everything from cocktails to craft beer and even wine. VinePair

ABI/SAB Miller Deal: DOJ Clarifies Best Efforts Clause In Proposed Final Judgment | DOJ’s clarifications to the Proposed Final Judgment give beer wholesalers more authority to promote third-party brands than many had feared. Alcohol Law Advisor

The EU Has Painted A Bright, 20-Million-Euro Bulls-Eye On Your Web Site, If . . .  | Wine Industry Insight provides a look into upcoming General Data Protection Regulation (GDPR) requirements that could mean big problems for non-compliant wineries with visitors from the European Union. Wine Industry Insight

Texas Alcohol Agency Reverses Judge, Preserving State Booze Industry | Two weeks ago, the agency that regulates alcohol beverages decided that shuttering the state’s booze business was probably not what legislators intended. Statesman

IndustryUp

U.S. Wine Exports Total $1.53 Billion in 2017 | California wine exports have grown nearly 70% by value in the past decade. Wine Business

Small and Independent Brewers See Sustained Growth in 2017 | Brewers Association releases new data figures for craft brewers. Brewers Association

What’s Holding Cider Back? | For some reason, craft cider just can’t get a foothold in the market the same way craft beer has over the last few decades. VinePair

New Reasons Why Wine Marketers Should Pay Attention To Generation X | Generally an ignored generation due to its small size and early preference for cocktails, Gen X has now begun to spend much more money on wine. Wine Business

Why Is It Becoming Harder To Buy Wine Online? | Over time, the way we shop has changed, and wine lovers demand more freedom to buy wines that don’t reach local shelves through the traditional system. Washington Post

Total Wine & More Sharpens Focus on Winery Direct | Wholesalers clearing wine for reduce margins enables retailer to sell wines from smaller producers more profitably. Wine Business

JustFun

In the Future, There Will Be A Distillery On Every Corner | Americans are finding job fulfillment in the craft-booze industry, which continues its upward growth trajectory unabated. Bloomberg

Craft Wine: Is It The Next Big Thing? | Craft beer and craft cocktails have captured the imagination of a thirsty nation. Is craft wine ready to step into the spotlight? Vino-Sphere

How Do You Make Beer In Space? | Strap on your beer goggles and join us on a hops-fueled rocket ride. Smithsonian

Let Your Wine Snobbery Run Free | In almost every single case, a person who is labeled a “wine snob” ends up being a person with discerning and educated tastes. Fermentation

Don’t Be A Wine Novice, Let Comedian Ben Schwartz Be One For You In New Podcast | E. & J. Gallo Winery launches “The Wine Down” podcast to teach you everything you’ve always wanted to know about wine. PR Newswire

Wine Labels Are Little White Lies With Enormous Implications | If you think that wine labels don’t matter, that they don’t affect the way a wine tastes, think again. VinePair

 

Find out how ShipCompliant by Sovos can help your business stay on top of compliance by signing up for a free demo.

The post BevAlc Roundup | Avoid trade practice violations, wine exports continue to grow, and the secrets in wine labelling. appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

Direct-to-Consumer Wine Shipping: Small Wineries Lead the Way Once Again

Ship Compliant Wine Blog - Thu, 03/29/2018 - 17:19

In January, we released the 2018 Direct-to-Consumer Wine Shipping Report, which offers an exclusive deep dive into the direct-to-consumer (DtC) wine shipping channel with our partners Wines & Vines. The report is produced using Wines & Vines’ algorithm, which extrapolates data from the extensive ShipCompliant by Sovos transaction library.

This article will focus on a few key trends we found in analyzing DtC wine shipping data by the size of the wineries using the channel. The report broke wineries into four categories based on the volume of wine they produce:

  • Limited Production (fewer than 1,000 cases)
  • Very Small (1,000 to 4,999 cases)
  • Small (5,00 to 49,999 cases)
  • Medium (50,000 to 499,999 cases)
  • Large (more than 500,000 cases)
Limited Production wineries went for quality over quantity.

The smallest category of wineries saw a decrease in volume of shipments by 11 percent last year. On the surface, that sounds troubling for these smaller operations. But they made up for any lost volume with a remarkable 26 percent increase in the average price per bottle shipped to $64.37 each, the largest average price of any category. This is the first time Limited Production wineries have claimed that title since 2010. Overall, these wineries increased their value of shipments by 13 percent.

Very small wineries slightly underperformed their lofty standards last year.

Since 2012, this category has outperformed the overall DtC channel, but this was not quite the case in 2017. Very small wineries still saw increases in both value and volume, at 11 percent and 13 percent, respectively. However, the category has increased its value over 200 percent since 2010, compared to 127 percent for the overall channel. So, while these increases are still positive, they are actually a bit of a step back relatively.

Small wineries maintained their dominance of the channel.

While it may come as a surprise to some, wineries that produce more than 5,000 but fewer than 50,000 cases per year have been the driving force behind the DtC shipping channel for years. This trend continued in 2017, with 70 percent of the channel’s value generated by wineries in this category. Small wineries accounted for 43 percent of all DtC shipments and 46 percent of all DtC sales. This category appears to have a stranglehold on the top spot in DtC channel value.

Medium-sized wineries rebounded from an underwhelming 2016 to drive growth.

While smaller wineries may have held steady in 2017, the medium-sized category took massive steps forward, experiencing an incredible rebound from a poor 2016 performance. This category was responsible for 37 percent of the DtC shipping channel’s total dollar growth, with a 22 percent increase in volume of shipments. While medium-sized wineries contributed greatly to growth, they were only accountable for a more modest 23 percent of the overall channel.

Large wineries followed up a wildly successful 2016 with a meek 2017.

In 2016, large wineries looked to be en route to taking control of the DtC shipping channel, delivering some of the largest year-over-year volume growth in any category ever. But these wineries did not continue their explosive growth from last year, with underwhelming 3.4 percent and 4 percent increased in volume and value, respectively. With an average price per bottle of just $16.14, this category relies heavily on volume increases, and it fell somewhat short in 2017.

 

Want to learn more about trends in the direct-to-consumer shipping channel? Download the 2018 Direct-to-Consumer Wine Shipping Report.

The post Direct-to-Consumer Wine Shipping: Small Wineries Lead the Way Once Again appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

Webinar Recap: 2018 Direct to Consumer Wine Shipping Report

Ship Compliant Wine Blog - Tue, 03/27/2018 - 10:47

On March 22, ShipCompliant hosted a webinar on sales trends in the Direct to Consumer (DtC) wine market from 2017. The webinar had Alex Koral of ShipCompliant by Sovos, and Jim Gordon from Wines & Vines, reviewing key data points from the 2018 Direct to Consumer Wine Shipping Report along with some responses from a recent Wines & Vines DtC seller’s survey.

This all served as the backdrop for a robust discussion between Alex and Jim on how the DtC market is developing, where wineries should put their current DtC sales efforts, and where the market may go in the future.

The DtC Wine Shipping Report is an annual collaboration between ShipCompliant by Sovos and Wines & Vines, which, by aggregating sales data into an industry model, provides detailed insights into the DtC market. The 2018 report is free to download here.

For those who were unable to attend the live broadcast of the webinar, it will soon be posted for you to stream.

 

2017 Key Trends

As discussed in the webinar, 2017 was another banner year for the DtC wine market. While this market has been growing unabated for years, both the total volume and value of wine shipped DtC in 2017 grew at a remarkable 15% rate.

In absolute numbers, the 2017 DtC market saw 5.78 million cases shipped for a value of $2.69 billion. This represents a doubling of the market since 2010.

Notably, DtC sales now represents 10% of the total U.S. market of off-premises consumption wine sales. (DtC sales are those where the wine purchased is shipped to the consumer’s home through a common carrier, include remote/online sales, wine club sales, and sales made in tasting rooms where the consumer does not take immediate possession of their wine.)

 

Digging a Little Deeper

2017 was fairly stable in terms of which states saw the most deliveries, with California still far ahead of any other state. Though other usual suspects like Texas, New York, Illinois, and Florida remained near the top. The biggest shift was Pennsylvania, which leapt all the way to the 10th largest destination for DtC sales, growing by well over 150%. Big growth was expected, as 2017 was the first full year for DtC sales in Pennsylvania; getting all the way into the top ten, though, was a pleasant surprise.

When it comes to where DtC wine is coming from, again there weren’t any big shockers, with California (and in particular Sonoma and Napa counties) shipping a majority of DtC sales. However, both Oregon and Washington saw notable growth of 30% and 25% more bottles shipped, respectively. This reflects both greater awareness among consumers of new sources of wine, and greater efforts by these wineries to market their products.

2017 also continued a trend in which wineries are engaging in the DtC market. Historically, DtC sales have been dominated by smaller scale wineries (those producing fewer than 50,000 cases annually), which captured roughly 75% of the total value of DtC sales in 2017. But medium sized wineries (producing between 50,000 and 500,000 cases annually) grew their DtC sales by nearly 30% in terms of total value shipped.

While smaller scale wineries also grew in value of DtC sales by a nothing-to-sneeze-at 10-13%, this does show that larger wineries, once largely focused on traditional sales through local wholesalers and retailers, are noticing the benefits of DtC sales and making efforts to get in on the market.

 

Predictions for the Future

Data from Wines & Vines from January and February show a big bump in year on year sales. If these trends keep up for the rest of 2018, we could be in line for another exceptional year for DtC sales. As the central coast recovers from last year’s fires, and as regions like Oregon and Washington continue to grow, 2018 could be very exceptional, indeed.

One of the more interesting takeaways from the webinar came when Alex and Jim examined the generational divides. As could be expected, the Boomer generation still dominates, buying nearly half of all DtC wine; and while there is an enormous amount of attention paid to Millennials’ potential as a customer base, they’re still an undeveloped market, making up less than 10% of the total DtC market.

Instead the big news is the rise of Generation X as wine buyers. While less numerous than both the Boomer and Millennial generations, Gen-Xers are now moving into their peak purchasing years. They have both the interest and the money to go after more luxury items, like wine. And they have the know-how and drive to seek it out through alternative market lines, like online sales.

This all tends to indicate that wineries should be looking more at Gen X in the coming years as a key customer base. Boomers and Millennials, of course, should not be ignored. But as one group ages out of, and the other malingers into the wine market, it is critical to make sure that the middle ground is captured.

In all, when developing your DtC strategies, you should use as much data as you can get. It is this kind of insight that we seek to bring to the industry through webinars and reports. Make sure to download a copy of the 2018 DtC Wine Shipping Report, and check regularly with Wines & Vines, who provides monthly updates on the market so you can stay ahead of any trends as they develop.

 

Watch the webinar replay to learn more about trends in the direct-to-consumer wine shipping channel.

The post Webinar Recap: 2018 Direct to Consumer Wine Shipping Report appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

BevAlc Roundup | Women in the industry, Canada mulls interprovincial sales of wine, grow your DtC business with data, and the TTB gets its first Master of Wine.

Ship Compliant Wine Blog - Mon, 03/19/2018 - 09:10

To help celebrate Women’s History Month, and International Women’s Day on March 8, the Roundup this week has a special selection of articles showcasing the past, present, and future of women in the beverage alcohol industry. Additional coverage includes hot takes on ongoing problems with the recent tax bill and potential shakeups at the TTB, plus SVB’s Rob McMillan predicts the next ten years for the wine industry, and an indictment of American beer tastes.

Stay up to date with the latest trends in the DtC wine market with the ShipCompliant/Wines & Vines 2018 DtC Report. Make sure to download your copy here!

 

ShipCompliant Events

GCS: Wine Summit, our annual wine industry conference is coming up! This year, we’ll be hosting the event at the Napa Valley Marriott on May 31, with panels on the state of DtC wine sales and how to expand your three-tier distribution footprint. Sign up here!

GCS: Beer, is an inaugural event we’re putting on in partnership with the Colorado Brewer’s Guild. If you’re in the region come on by for an informative afternoon for networking and enjoying beer. Sign up here!

 

Celebrating Women of Beverage Alcohol

Women of the Wine & Spirits Celebrates Women’s History Month | Women of the Vine & Spirits is changing the face of the alcohol industry, creating a movement to empower and advance women. Women of the Vine & Spirits

4 Women Who Shaped The History Of Whisky | The influence and legacy of women who managed to succeed in what has traditionally been a man’s world has left a lasting impression in the whisky we get to drink. Forbes

Meet The Next Generation Of Women In Wine | Consider that in 2017, for the first time, more women than men were enrolled in the viticulture and enology program at University of California, Davis — both the undergraduate and graduate levels. Food and Wine

How Can We Create More Diverse And Inclusive Workplaces? | Leaders from across the beverage alcohol industry –and beyond — share strategic frameworks, fresh ideas, and actionable tips for effecting change. SevenFifty Daily

LegislativeUpdate

TTB Newsletter | Top stories include further guidance on the Craft Beverage and Modernization Act and sign up for a webinar on submitting wine formulas. TTB

Troubling Implications Of The New Wine Tax Law |  While the Act created new tax credits that were meant to benefit all wineries large and small, it’s now clear that it falls short of its promise due to its poor drafting and hasty implementation. ShipCompliant Guest Post

ATF And TTB: Is Another Divorce On The Horizon? What’s Going On With The Agency? | The Fiscal year 2019 proposed budget foreshadows a possible second divorce for ATF and TTB that could alter the culture of TTB. Hinman & Carmichael — Booze Rules

The Four Pillars of Modern Alcohol Regulatory Reform | The current alcohol regulatory system is in need of new foundational ideas and philosophies that account for nearly a century of change in the alcohol marketplace, the economy, technology and consumer expectations. Fermentation

Canadian Supreme Court Deliberating Wine Case | Nation’s top court deliberating on case that centers on interprovincial wine shipments. Wines & Vines

Napa County To Vote On New Vineyard Curbs | Napa County voters will go to the polls on June 5 to decide whether to curtail new vineyard development by providing greater protection to watersheds and oak woodlands. Press Democrat

Regulators Investigate Napa, Sonoma Wineries and Distributors For Illegal Trade Practices | Federal and state agents visited more than 30 wine-related businesses in Napa and Sonoma counties last week as part of a probe into consignment sales. Press Democrat

IndustryUp

What Will The Wine Business Look Like in 2028? | In 10 years, the wine business won’t look anything like it does today, so clubs and direct sales will also evolve. SVB on Wine

Data Consortium Demonstrates Power of Big Data For Unlocking DTC Potential, Boosting Sales | A startup is showing how winery customer lists can be combined with large data sets that can then be analyzed computationally to reveal patterns, trends, and associations about human behavior. Wine Business

NJ Brewer’s Association Breaks Its Silence Ten Days After Founding Members Secretly Form A New Group | For only the second time in memory, craft brewers within one state would have two statewide associations to represent their interests. Forbes

Wine And Spirits, It’s Time To Catch Up To E-Commerce | To make real strides, leaders must understand the challenges that have impeded a flourishing e-commerce marketplace for wine and spirits providers, where the market stands now and how to get ahead of the curve. Food Dive

JustFun

Can Wine Transform China’s Countryside? | Ningzia’s wineries have been winning awards, but they are also part of Beijing’s new vision for rural life. New Yorker

Why Bland American Beer Is Here To Stay | Although craft beer has experienced explosive market growth over the past 25 years, the vast majority of American still don’t drink it. The Conversation

The TTB Gets A Master Of Wine | Caroline Hermann, the bureau’s import-export program manager for wine, beer, and spirits, recently earned the prestigious Master of Wine title. SevenFifty Daily

 

Find out how ShipCompliant by Sovos can help your business stay on top of compliance by signing up for a free demo.

The post BevAlc Roundup | Women in the industry, Canada mulls interprovincial sales of wine, grow your DtC business with data, and the TTB gets its first Master of Wine. appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

Guest Post: Troubling Implications of the New Wine Tax Law

Ship Compliant Wine Blog - Fri, 03/09/2018 - 17:30

The following is a guest post written by Sara Schorske, founder of Compliance Service of America (CSA). Sara is one of the original compliance specialists in the alcoholic beverage industry. She has advised and assisted clients with compliance matters, trained many winery personnel and compliance professionals, and written numerous articles on compliance for industry publications since she founded CSA in 1983. She is known in the industry for her clear, down-to-earth explanations of complex regulatory matters. CSA is a leading provider of regulatory consulting and licensing services for the alcoholic beverage industry, nationwide.

Late last Friday afternoon (March 2) TTB released further guidance on the recently enacted Craft Beverage Modernization and Tax Reform Act. The new guidance finally answered some large and pressing questions about how the law will be implemented, and revealed some very troubling consequences. While the Act created new tax credits that were meant to benefit all wineries large and small, it’s now clear that it falls short of its promise due to its poor drafting and hasty implementation.

Not all of your wine is eligible

In three FAQs added last week to TTB’s website the agency confirmed that, because of the way the law was written, only wine produced by the taxpayer who removes the wine is eligible for the new credits. This means that any wine received in bond is not eligible for the new credits — unless the removing winery has performed an operation on it that increases its volume, such as sweetening, the addition of wine spirits, amelioration (where legal), or the production of formula wines which was “undertaken in the ordinary course of production and not solely for the purpose of qualifying for the credit” (emphasis added). (This means that wineries are not allowed to add concentrate or perform other production activities on wine only for the purpose of qualifying for lost tax credits.) In effect, wineries were told that their common industry practice of custom crushing, which allows wineries to use their excess production capacity to help other wineries who are short on fermentation space, and the thriving business of buying and selling wine in the bulk market, so central to the health of the industry, have suddenly inherited heavy, unexpected tax consequences, putting wineries that rely on them at a competitive disadvantage.   

Transfer of credits has been suspended

TTB’s guidance also announced that the provision allowing wineries to use their tax credits on wine stored in bond at independent bonded wine cellars (BWCs) is now suspended, because it was allowed in connection with the currently suspended Small Producer Credit. Under the transfer-of-credit provision, small producers were formerly allowed to transfer their tax credits on wine they produced to other taxpayers – an important privilege since most smaller wineries (and many larger ones) simply do not have the warehouse space to store all of their own case goods. Therefore, it is common for wineries to ship their case goods in bond to BWC warehouses that offer storage, consolidation, and shipping services. The BWCs have been removing the wine and paying tax on their winery clients’ behalf, at each winery’s tax rate.

When the new Act suspended the Small Producer Credit, it neglected to extend the transfer provisions. Wineries that could have shipped credit-eligible wine to a BWC in bond without losing their tax credits last year must pay their taxes at the winery before shipment in order to take their tax credit this year – or, if the wine is already stored at a third-party BWC as hundreds of thousands of cases are, the winery must return it to the winery for removal from bond.

Recognizing the cost and impracticality of returning wine physically to the winery from the BWC, TTB created an alternate procedure of operation that will partly make up for the problems, but only for several months. And TTB has not addressed how they will treat wine that has already been removed from BWCs during the first two months of 2018, and whether the alternate procedure can be used retroactively.

The newly announced alternate procedure allows wineries to return wine to the winery, remove and taxpay the wine at their own premises, and send it back to third-party storage through a series of paperwork transfers without physically moving the wine. This solution will be available only until June 30, 2018. I will describe in detail how to use the alternate procedure later in this article.

Other implications to consider

What does this mean to your winery? There are many operational implications to these changes. I will describe four of them below. Please read the following discussion carefully to see what parts of it apply to you.

First, part or all of the products sold by your winery may be ineligible for the new tax credits, because they were not produced at the winery. The new Act changed what wines would be eligible for the new credits in a very significant way. In the past a small producer could purchase and bottle bulk wine made by another winery, and as long as it removed the purchased wine from its winery, it could claim the credit on that wine. The new credits can only be taken on wine the winery both produced and removed. Wine received from another winery in bond and merely bottled by the winery that removes it does not qualify for the new credits.

The guidance published last week did not address whether the new credits would apply to any of your products that are blends of wines produced by your winery with wines from another winery. After querying TTB directly about the issue we’ve been told that when a winery removes from its bonded premises wine of its own production that has been blended with wine produced by another winery, the winery may claim the credit only for the portion of the wine that it produced. It may not take the credit for the portion of the wine that it did not produce. TTB intends to post official guidance on this question to its website very soon.

 

Beyond the reductions in tax credit eligibility for blending with purchased wine, you may also inadvertently sacrifice some of the tax credits you could otherwise take on wine produced at your winery if ineligible wines are removed from bond earlier in the year. Because the tax credit is allowed on wine in chronological order of removal (the first 30,000 gallons, next 100,000 gallons, and next 620,000 gallons removed) any non-qualifying wine removed before all the credit is used up reduces the total gallonage eligible for tax credits in the calendar year. For example, if half of the first 30,000 gallons of wine removed happens to be ineligible for the tax credit, the winery will only be entitled to take the highest rate of credit on the remaining 15,000 gallons of wine.

Since it is March, your winery may have already removed wine from bond in 2018, so it may be too late to avoid the loss of some or all of your eligibility for the highest rate(s) of tax.

Second, many wineries have significant quantities of wine in bond stored off-site at third-party commercial warehouses. If this wine was not produced by your winery, just leave it there: you face no loss of tax credits when the BWC removes that wine at the full tax rate. However, if the wine was totally or partly produced by your winery and therefore is eligible for tax credits, you will be able to take the tax credit only if you return the wine to your winery and taxably remove it at your own bonded premises. In recognition of the logistical difficulties and expense of this requirement to both the wineries and the BWC’s, and the fact that wineries and BWCs had no advance notice of this change giving them the opportunity to taxably remove the wine at the BWC before the law went into effect, TTB has instituted for a limited time an easier alternate procedure for wineries to tax determine and taxpay wine stored in bond at bonded wine cellars, described in detail in TTB Industry Circular 2018-1. This procedure may be used any time through June 30, 2018.

Under the alternate procedure, wineries may return wine to their own bonded premises for removal and tax payment through paper documentation and reporting, without any physical movement of the wine — in other words, using a paper-only transfer — under the following conditions:

  1. The transfer documents used must clearly refer to the alternate procedure in Industry Circular 2018-1.
  2. All of the documented transfers must be completed so that the removals from bond occur on or before June 30, 2018.
  3. All “movements” must be reported on the winery’s and BWC’s Forms 5120.17, Report of Wine Premises Operations. The wine must be reported as transferred in bond from the BWC, received in bond at the winery, and taxpaid at the winery. Bills of ladings or invoices showing taxpaid wine returned to the BWC and received by it for taxpaid storage should also be prepared.
  4. The taxes due must be paid by the due date for the wine producer’s next tax return following the removal. For annual reporters, the bills of lading and/or invoices showing taxpaid wine returned to the BWC must be dated on or before June 30, 2018, but the wineries may report the transfers and pay the taxes on the annual 5120.17 and annual Federal Excise Tax Return due next January.
  5. No TTB approval is needed before using the alternate procedure.
  6. BWCs need not establish enlarged taxpaid areas to accommodate the additional taxpaid storage created by use of the alternate procedure. Any taxpaid wine stored outside of the BWC’s already established taxpaid area(s) must simply have markings on the outermost packaging of the taxpaid wine so that its taxpaid status is readily identifiable.

It is good that TTB devised the alternate procedure to permit wineries to take the tax credit, but having to do so will certainly create financial hardships. In order to take advantage of the tax credits on wine stored at third-party BWCs, many wineries will now be compelled to make large tax payments months or even years in advance of sale, due to limitations of storage space at the winery’s own premises. In addition to the expense of generating the needed paperwork, the unplanned cost of having to pay all those taxes will obviously put a financial burden on those wineries.

Third, wineries eligible for tax credits that remove more than 30,000 gallons of wine a year will need to implement additional recordkeeping procedures in order to remove wine at the proper tax rate throughout the year, and be aware of the point at which the tax rate changes. Wineries that sell and remove some wine that qualifies for the credit and other wine that does not qualify will have the additional burden of making sure each case is taxpaid at the correct rate, depending on how much wine has previously been removed this year, and how much of the removed wine was not produced by your winery. But remember, when you remove wine that doesn’t qualify for the tax credit, you must still include it in your cumulative total of gallons removed to date, in order to know what tax rate the winery currently qualifies for.  

Because the law requires wineries to use the credits chronologically on the first gallons removed each year, wineries that have both eligible and ineligible wine will want to avoid if possible removing ineligible wine from bond in the first 30,000 gallons removed, and potentially also within the first 130,000 gallons removed, if they have enough eligible wine to take full advantage of both of those tax rates. That is, a winery that will remove over 30,000 gallons of wine of its own production during the year will want to make sure that the first 30,000 gallons removed will all qualify for the tax credit. The same is true for a winery that will remove over 130,000 gallons of wine of its own production during the year: it will want to make sure that the first 130,000 gallons removed will all qualify for the tax credit. A simple way to accomplish this would be to send your non-qualifying wine in bond for storage at a BWC who will later remove it at the time of sale and pay the taxes on behalf of the winery.

Fourth, small wineries that previously qualified for the Small Producer Credit but do not produce 100% of their wine will now owe tax at the full $1.07/gallon rate — a huge tax increase they had no way to anticipate. As I said earlier, wine received in bond and bottled by the small producer under its own label formerly qualified for the Small Producer Credit if removed at the small producer’s winery. The 2018 tax law has made such wine ineligible for any credit, requiring the small producers to pay taxes at the highest rate. This was certainly not the intention of the legislature or the administration in enacting this law and accelerating its effective date.

Hopefully, wine industry lobbyists will be able to prevail on Congress to enact emergency corrective legislation before the end of the year to reverse or mitigate some or all of these impacts. However, until corrective legislation is actually passed and confirmed to correct the problems, it is prudent for wineries to consider how the various implications of the new law impact their operations, and protect their interests as best they can.

Latest guidance is published on TTB’s website.

Any additional guidance TTB publishes here can be found by checking this page regularly. Updates to this page will be announced in TTB’s newsletter, available to all persons who sign up on TTB’s website for email notifications.

 

Want to learn about trends in the direct-to-consumer wine shipping channel? Download the 2018 Direct-to-Consumer Wine Shipping Report.

The post Guest Post: Troubling Implications of the New Wine Tax Law appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

BevAlc Roundup | The TTB announces dates for Trade Practice Seminars, Indiana expands Sunday sales, Maryland second guesses its craft beer permissions, and could your toothpaste be made from wine in the future?

Ship Compliant Wine Blog - Mon, 03/05/2018 - 15:23

It’s March already, and the BevAlc Roundup is coming in like a lion! But don’t worry, we still as gentle as a lamb. This week, new tariffs on aluminum could raise the packaging costs for brewers, Washington and Oregon wine markets release their 2017 production data, and does the NBA have a secret love affair with wine?

The ShipCompliant/Wines & Vines 2018 DtC Report is now available! Make sure to download your copy here.

Sign up for the GCS: Wine Summit, our annual wine-focussed industry event. This year, we’ll be hosting the event at the Napa Valley Marriott on May 31. Sign up here!

LegislativeUpdate

TTB Newsletter | Top stories include additional guidance on the Craft Beverage and Modernization Act and registration is open for TTB Trade Practice Seminars. TTB

Trump’s Newest Trade Idea Could Make Your Beer More Expensive | Trade associations representing beer companies and brewers warn that proposed restrictions on the imports of aluminum could increase the cost of brewing and packaging beer. Business Insider

Oklahoma Losing Out On Millions Through Uncollected Taxes | The money is from alcohol sales and economists say while there are proposals to change how alcohol is taxed, the real money maker might just be enforcing the current tax laws. FOX 25 News

Maryland Small Brewers Squaring Off In Annapolis With Alcohol Industry | Delegates are scheduled to hear more than a dozen alcohol-related bills, including what Comptroller Peter Franchot has dubbed his “Reform on Tap” effort. Baltimore Sun

It’s Official: You Can Now Buy Alcohol At Stores On Sunday In Indiana | Gov. Eric Holcomb signed into law a repeal of Indiana’s unpopular ban on Sunday carryout alcohol sales, allowing Hoosiers to buy beer, wine and liquor at stores on Sunday for the first time in Indiana history. Indy Star

IndustryUp

Beyond Wine Boom & Bust: Taking A Closer Look At The SVB Report | Silicon Valley Bank recently released their 2018 State of the Industry report on the U.S. wine market and if you haven’t read it you should. The Wine Economist

White Men Are The Future Of Beer — And That’s Terrible News For the Struggling Industry | White men are the only subgroup of the next generation — Gen Z — to prefer beer over other types of alcohol. Business Insider

Washington Reports Lighter Wine Grape Harvest, Excellent Quality | Washington’s wine industry reported a lighter harvest but with near-ideal conditions for grapes in 2017, according to the latest information from Washington State Wine. Walla Walla Union-Business

Oregon’s “Rocking” Wine Industry Advised To Avoid Complacency | With their wine sales growth outperforming other regions, Oregon producers should avoid resting on their laurels, experts say. Capital Press

Epic Crop Fail Made It A Bad Year For Bulk Wine | Last year was unkind to wine producers across the globe. Financial Times

JustFun

The NBA’s Secret Wine Society | The inside-the-bottle story of the intest love affair between NBA stars and the gilded grape. ESPN

Wine Could Cure Bad Breath | Drink destroys bacteria that causes cavities and gum disease, paving the way for new toothpastes and mouthwashes containing the key antioxidant. Daily Mail

9 Themed Beer Festivals Worthy of a Beercation | Check out these creative beer festivals with themes from oddball to athletic. They’re well worth a beercation. Craftbeer.com

The Financial Realities Behind High-End Wine Pricing | For all of the attention that the most sought-after wines get — their scores are parsed; their SRPs and performance at auction are analyzed — the economics of producing and distributing them are often overlooked. Forbes

Wild Fermentation Is the Sexiest, Least Understood Technique in Winemaking | Fermentation, by either wild or industrial yeasts, has become synonymous with the battle between all that is natural, and the convenience and consistency of man-made machination. VinePair

 

Find out how ShipCompliant by Sovos can help your business stay on top of compliance by signing up for a free demo.

The post BevAlc Roundup | The TTB announces dates for Trade Practice Seminars, Indiana expands Sunday sales, Maryland second guesses its craft beer permissions, and could your toothpaste be made from wine in the future? appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

Webinar Recap: eCommerce Trends to Watch in 2018

Ship Compliant Wine Blog - Thu, 03/01/2018 - 20:51

On Tuesday, February 20, ShipCompliant hosted a webinar, “eCommerce Trends to Watch in 2018.” In the webinar, we were joined by Jim Agger, VP of Marketing and Business Development for WineDirect, who gave an overview of the complicated eCommerce arena, providing tips and solutions that wineries can use to maximize their direct-to-consumer (DtC) sales. Customers are increasingly deciding to make purchases based on their at-sale experience. To help wineries with this, Jim discusses many ways they can improve both the online and tasting room experiences.

The webinar also featured ShipCompliant’s own Alex Koral, who discussed compliance issues affecting the eCommerce arena, and for DtC wineries in particular. This included an overview of the current state of online sales tax regulation, and a look at Alternative Delivery Solutions (ADS), which some carriers are offering to ensure a safe, compliant, and timely delivery experience for their customers. These ADS include storefronts and warehouses, where the carrier can hold packages until the customer is ready to them pick up.

The webinar has been posted online, and is available for your viewing here. Below we have compiled answers to some of the more common questions that came from the webinar’s audience, plus some that we weren’t able to get to in the webinar — the responses were provided by both WineDirect and ShipCompliant.

How can we best manage our customer expectations when it comes to delivery costs? Are there any tips you can suggest we can use to explain why something like “free shipping” is not something we can offer?

We see the best success with clients who offer shipping included or flat rate shipping. Consumers just aren’t used to paying over $10 for shipping anymore, and we see conversion drop sharply at that price point. Many wineries set minimum quantity thresholds to qualify for reduced or lower rate shipping – e.g., $5 shipping if you order 12 bottles. No matter what, we recommend being very transparent and up front about the shipping costs. Add language to your store, product pages, your shopping cart page (before checkout) to reduce confusion and sticker shock at checkout.

From a compliance perspective, you should also be aware of any limits on what you can offer your customers. Some states, California in particular, may see something like “free shipping” as an improper inducement, and would prohibit you from offering that outright. While it may be complicated to explain this to your customers, it is something to consider.

Do you have any best tips or tricks on collecting customer data? What are the most important data points we should collect, and what are the best methods for getting that data in a useful format?

The best place to collect data is in the tasting room, and the email address is the single most important data point to collect. Without the email, you can’t get in touch with them again.

Ideally you should be using a POS system that integrates with your Customer Relationship Management software (like WineDirect), that way all transactions will be reflected in the customer profile, and you can easily capture and associate data in one step. If you’re looking to survey customers or club members, tools like SurveyMonkey are free (or very low cost).

Do you have any thoughts on how non-winery subscription services, like the NPR or WSJ wine clubs, are affecting winery-based DtC sales?

Certainly clubs like this compete for consumer wine dollars. As modern clubs proliferate and offer more choice, flexibility and (of course) free or heavily discounted shipping, consumers begin to expect those things as the norm. This is why we say rising consumer expectations are the biggest challenge facing wineries today. 

Can you share any specific data on what strategies and activities succeed for wineries setting up online markets (such as how often getting an email leads to further sales)?

In general, emails on the WineDirect platform convert at 2.75%. That means for every 10,000 emails you send you will get 275 sales. Our “Thank You for Visiting” email converts at 7.5%, almost triple the average rate. This is the single most effective email you can set up to send to every new person who visits your tasting room. Implementing a loyalty program is also a great way to encourage customer loyalty and keep them coming back for repeat purchases. WineDirect recently launched a Loyalty Points program that enables wineries to easily do this, and we’ll have case studies soon that illustrate how it’s working for wineries.

How can I begin using Alternative Delivery Solutions? What options are out there, and where are they available? How about using the postal service (USPS)?

The first step in using Alternative Delivery Solutions (ADS) is talking to your common carrier, who can detail when and where they offer such a service. Even if your carrier offers an ADS, it may not be available everywhere you ship to. For instance, If the carrier works with an independent storefront for their ADS service (for instance, with FedEx and Walgreens), you’ll need to confirm that those stores are set up to handle your packages. Carriers working with the DtC market are well aware of your compliance needs, but it’s always best to talk it out with them before you begin using any new service. As for USPS, it is currently illegal for them to accept any packages containing alcohol — there is a bill before Congress to change this rule; however, it is uncertain that that bill will go anywhere soon.

How should I report orders that involved an Alternative Delivery Solution? How should I set up my order management tools to capture all the information I need?

When using an ADS, it is important to note that the delivery is not complete until the package makes it to the customer’s home. The ADS is there as an expedient, allowing the customer to affect the last leg of the delivery on their own. Therefore, for compliance needs, the customer’s home address should be used as the address of record. This applies to such issues as what is the proper tax rate, whether any purchase limits are triggered, and what address to report. It is vital, then, to always capture your customer’s address with every order you make. This could be made part of setting up an account, or could come from other data you collect (perhaps the bill-to address). At worst, it should just require asking your customers to provide a little more information at checkout. This may be a bit of a pain point for them, but it is critical for your compliance needs.

 

We’re very excited for the 2018 ShipCompliant Wine Summit at the end of May! Join us in Napa to learn from industry experts, network with peers, and stay up-to-date with the latest trends.

The post Webinar Recap: eCommerce Trends to Watch in 2018 appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

Direct-to-Consumer Wine Shipping: 5 Key Monthly and Seasonal Trends

Ship Compliant Wine Blog - Tue, 02/27/2018 - 12:02

In January, we released the 2018 Direct-to-Consumer Wine Shipping Report, which offers an exclusive deep dive into the direct-to-consumer (DtC) wine shipping channel with our partners Wines & Vines. The report is produced using Wines & Vines’ algorithm, which extrapolates data from the extensive ShipCompliant by Sovos transaction library.

This article will focus on a few key trends we found in analyzing monthly DtC wine shipping data. Here are five takeaways:

 

1. Seasonally Appropriate

The holidays are always a busy time of year for wineries and distributors, and 2017 was no different. Close to 40 percent of the total value of DtC wine shipments last year occurred in the months leading up to and encompassing the holiday season: October, November and December. Similarly, 35 percent of the total volume of shipments took place in those months.

Wine country visitation patterns and weather once again played big roles in the overall performance of the industry, as the largest value and volume of shipments took place in March, October and November.

2. Value of Wine Shipments

In March, over $310 million of wine was shipped in the DtC channel, making up 11.5 percent of the total figure for the year. October saw nearly $395 million of wine shipped, accounting for 14.7 percent of the yearly sum. In November, a whopping $417 million of wine was shipped DtC, checking in at 15.5 percent of the yearly total.

3. Volume of Wine Shipments

March saw 575,661 cases of wine shipped DtC, good for 9.9 percent of the yearly total. In October, 709,693 cases of wine were shipped, accounting for 12.3 percent of the annual sum. And November saw the strongest performance in volume, just as in value, with 803,063 cases shipped totalling 13.9 percent of the year’s shipments.

The numbers for both value and volume of shipments are noteworthy on their own, but they become even more impressive when taking into account the destructive wildfires that raged through California Wine Country this past fall. Despite the entire region facing a tragic natural catastrophe, wineries managed to persevere and put up impressive numbers. Without that complication, it is likely the amount of wine shipped last fall would be even more substantial.

4. Dog Days of Summer

Summer has become a period of relative inactivity in the DtC channel. Between June and August, only about 15 percent of shipments were made. And the total value generated during this period is even less significant, at just over 12 percent. For perspective, twice as much wine is shipped in the fall than shipped in summer.

However, this is not a cause for concern – winery visitations pick up in the fall as the temperature cools, as is demonstrated in the large spikes in both volume and value of shipments in those months. In addition, wine is often held during the summer and shipped later due to temperature spikes, and wineries design their club shipments to go out in the spring and fall so they can take advantage of the least extreme weather, which is favorable for shipments. 

5. Spring Shipments Blossom

While the fall season held a decided advantage over any other time of year, the value and volume of shipments were steady throughout the spring. As mentioned above, March performed third-best of any month, but April and May were not far behind. In April, 8.5 percent of the total volume of shipments took place, while May was remarkably similar at 8.6 percent. These two months also reflected each other in terms of value, as 8.4 percent of the annual value of DtC shipments took place in April and 7.9 percent occurred in May.

More comprehensive month-to-month data can be found in the full DtC report. Be on the lookout for more deep dives into data from this year’s report!

 

Want to learn more about trends in the direct-to-consumer shipping channel? Download the 2018 Direct-to-Consumer Wine Shipping Report.

 

 

The post Direct-to-Consumer Wine Shipping: 5 Key Monthly and Seasonal Trends appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

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