COVID-19-related changes left beverage alcohol industry shaken and stirred The COVID-19 pandemic ignited an explosion in ecommerce across most industry sectors. Beverage alcohol was no exception.
By one estimate, online sales of beer, wine, and spirits grew by 80% in 2020, experiencing three to five years of normal sales growth in just six months. More than 35 states allowed for sales of cocktails to go during the pandemic, with 16 of them (plus the District of Columbia) deciding to make the change permanent. The United States ended 2021 as the global leader in online alcohol sales, with a total market of $19 billion.
This growth has triggered changes in three broad categories: direct-to-consumer shipments by producers, third-party apps that deliver alcohol from retailers and restaurants to your door, and “cocktails to go” laws that allow take-out sales by restaurants and other retailers.
The wine industry has long dominated direct-to-consumer sales. Currently, 45 states (plus the District of Columbia) allow wineries to ship directly to customers. (See our directory of direct-to-consumer wine-shipping rules for a state-by-state breakdown.)
On the other hand, breweries, distilleries, and retailers lag far behind wineries when it comes to direct shipments. Retailers can ship directly in 13 states, breweries in nine, and distilleries in six. (District of Columbia allows direct-to-consumer shipments of all three.)
All three groups are pushing regulators for changes to allow more direct sales, with the spirits industry, in particular, seeming “especially prepared to make substantive rogress in 2022,” according to Jeff Carroll, general manager of Beverage Alcohol at Avalara, the tax compliance software company.
Colorado, Connecticut, Kentucky, Maryland, and Virginia all have authorized distilleries to sell directly to consumers. The California Legislature is debating a bill that would do the same.
Third-party delivery apps
DoorDash, as of last year, offered more than 30,000 alcoholic beverage products for home delivery. Grocery delivery services can bring beverages to your door from neighborhood grocery, convenience, or liquor stores within the hour.
But regulators are struggling with how to address the many issues that arise from the growth in delivery services, particularly when it comes to taxes. When a store sells a product through a delivery service, which then delivers it, who is responsible for collecting and remitting the sales tax? Who is responsible for the excise tax? Many states haven’t specified how the flow of funds should be handled, and those that have don’t all have the same requirements.
Cocktails to go
Thanks to COVID-19-related restrictions on dining, food delivery is now a $150 billion industry worldwide, having tripled since the end of 2017. Part of that was generated by allowing single-serving alcohol sales with delivered meals. Many states have made to-go sales permanent, some are allowing them on a “temporary” basis, and others are still banning them.
Outlook for the beverage alcohol industry in 2022
There will be a lot of debate about if these COVID-19-inspired measures should be rolled back. Our crystal ball is smudged, but it seems that states that recently expanded options for bars, brewers, distilleries, restaurants, and wineries are unlikely to walk them back. Once granted, it’s difficult to revoke expanded rights.
To learn more about the tax challenges facing the beverage alcohol industry, read this report from our partners at Avalara. Avalara offers a complete compliance solution for these businesses. You can learn more here, or contact your account executive for more information.