California craft distillers push lawmakers to make direct-to-consumer shipping permanent

For California's craft distilleries, the ability to ship directly to customers has become an important way to reach consumers beyond their tasting rooms and local restaurants.

But that could change if lawmakers choose not to pass legislation safeguarding distillery deliveries before the legislative session ends on August 31.

The issue dates back to the COVID-19 pandemic, when tasting rooms and other businesses were forced to close. For many craft distillers, those closures eliminated one of their primary ways of selling their products.

"It really became critical. There was no way for us to sell our product, and we're kind of going back to that if we don't get a bill passed by the end of the year," said Cris Steller, owner of Dry Diggings Distillery in El Dorado Hills.

The American Distilling Institute reported that more than 4,600 employees in the craft distilling industry were furloughed during the pandemic. The organization also projected the industry could lose nearly $700 million in annual sales because of tasting room closures.

In response to the emergency, Gov. Gavin Newsom issued an executive order allowing craft distillers to ship their products directly to consumers.

The California Legislature has since extended the policy several times. The most recent extension is scheduled to expire on Dec. 31. Now, lawmakers are considering whether to make the policy permanent.

Republican Assemblymember Josh Hoover is working to add an amendment to legislation he introduced that would give craft distillers more flexibility to sell spirits and tastings at locations outside their distilleries.

The proposed amendment would make direct-to-consumer shipping permanent for qualifying craft distillers. The bill is currently before the Senate Governmental Organization Committee, which is expected to consider the amendment this week.

Craft distillers traveled to the state Capitol Monday to urge lawmakers to support the measure.

The proposal has drawn opposition from the wine industry, which says it supports direct shipping for craft distillers but opposes restrictions based on the size of a producer.    

Steve Gross, president and CEO of the Wine Institute, said the organization has fought for equal access to consumers for wineries of all sizes and has challenged size-based restrictions in other states.

"Wine Institute supports direct shipping for craft distillers. What we don't support is discriminating against producers based on their size," Gross said.

Gross said the organization would support extending direct shipping if the size restriction were removed.

"We've fought for decades to ensure wineries of all sizes have equal access to consumers, including successfully challenging size-based restrictions in other states that were found to violate the Constitution's Commerce Clause," he said. "California should follow that same principle for spirits. If the size restriction were removed, Wine Institute would support extending direct shipping."

Steller said his family-owned business in El Dorado Hills has relied on changes to state alcohol laws over the past 15 years to grow its operation.

"We're a small family operation up here in El Dorado Hills and have been doing it for quite a while and have relied on all of the legislative changes that they have given us over the last 15 years," Steller said. "It's been critical to us being able to grow and stay in business."

Steller said direct shipping has been critical because craft distillers face significant restrictions on how they can get their products to consumers.  

"It's just every year gotten harder and harder to get the other sides of these issues to come and meet us somewhere so that we can get this done permanently," he said.  

With the current authorization set to expire, he said he has already stopped advertising shipping as an option at his distillery. Instead, Steller is focusing his marketing on his restaurant and bar in case lawmakers fail to extend the policy.