A Step Ahead: Creating Focus for Your DTC Strategy Steve Gross, Wine Institute VP of State Relations
Goals for Today What happened in 2017? What do we anticipate for 2018? What can you be doing to help?
What s happened in 2017?
What were the 2017 Themes? Importance of Compliance State Enforcement Actions: Michigan, Arizona, Illinois and New York Common Carrier and Fulfillment House reporting legislation Major focus on retailer shipping emerging Ongoing efforts to open new states those remaining are multi-year efforts Protecting and improving existing statutes
Working with FedEx and UPS to address WSWA Carrier Bills WSWA and their local affiliates have targeted states to add common carrier reporting requirements We are working with FedEx and UPS to insure that what is passed is workable for the carriers and the wineries 5
Common Carrier DTC Legislation in 2017 Negotiated Language Introduced and Passed Contested Language Introduced
Direct-to-Consumer Shipping (as of 1/18/18) DTC allowed DTC prohibited
Alabama, Delaware, Kentucky & Mississippi 2017 Bills to create new DTC shipping permits in these four states failed to pass.
Alaska & Minnesota 2017 A bill to create a DTC shipping permit for Alaska failed to pass in 2017 it would replace the current allowance of a reasonable amount with a license, payment of taxes and a 12 case annual limit. A bill to create a DTC shipping permit to replace Minnesota s 2-case current non-licensed shipment failed to pass. Both carry over into 2018
Illinois Change in 2017 Retailer lawsuit has been filed: Lebamoff Enterprises v. Rauner Highly negative carrier reporting requirements were defeated. S 941 containing a provision regarding fulfillment house reporting requirements was signed on June 30, 2017.
Maryland - Change in 2017 H 987, signed on July 11, 2017, prevents a DTC licensee from acting as a retailer and selling wine produced by other vintners. Effective July 1, 2017, wineries must at the time of licensure or renewal identify wine produced by the winery that they intend to ship to MD consumers.
Michigan - Change in 2017 S 1088 was passed and signed in January 2017, sponsored by MBWW. It will let Michigan retailers ship to MI residents via common carrier, but prohibit out-of-state retailers. The bill removed the DTC case labeling requirement (license and invoice #s on outside of box) and inclusion of MI specific registration numbers on invoices effective 3/29/17 Litigation challenging retailer shipping was filed: Lebamoff Enterprises v. Snyder
Missouri Change in 2017 Retailer shipping litigation was filed: Sarasota Wine Market v. Nixon H 115, signed in June, removed reciprocal DTC shipping privilege for retailers starting Aug. 28, 2017. Onerous common carrier language was removed from the final bill.
Connecticut, Massachusetts & New York 2017 Bills to allow for out-of-state retailers to ship into the state failed to pass in these states. MA and NY carry over to 2018.
Oklahoma Change in 2017 Legislation to fix the law passed in Question # 792 passed. H 1540 & S 297 (signed May 19, 2017) solves some problems: Removes consumer permit requirement Removes prohibition on DTC sales of wines in wholesale distribution Improves some common carrier reporting requirements
Rhode Island 2017 A bill to create a new DTC permit to replace the on-site only law was held for an interim study.
South Dakota Change in 2017 A bill requiring tracking numbers on all reports was signed by the Governor and is now in effect.
Texas 2017 A bill to allow out-of-state retailers to ship wine and beer failed to pass no session until 2019.
What s On Tap for 2018?
Alabama, Delaware, Kentucky & Mississippi 2018 We re running bills again in 2018 to open up these states:
Alaska 2018 A bill to create a DTC shipping permit for Alaska carried over from 2017 it would replace the current allowance of a reasonable amount with a license and a 12 case annual limit. There are now several versions.
Illinois 2018 Fulfillment Houses must report their 2017 shipments to the ILCC by 2/1/18. Name and address of the winery shipper on whose behalf shipment was made Quantity of products delivered Date and address of the shipment 837 cease and desist letters sent two weeks ago (290 to wineries) Any further shipments will result in Class IV Felony violations. Retailer lawsuit is on-going: Lebamoff Enterprises v. Rauner
Indiana - 2018 Looking for an opportunity to remove the exclusion of wineries who have a wholesaler in the state.
Minnesota 2018 Bill to replace the current 2 case law with a permit system that allows up to 12 cases has carried over from 2017. We are hoping it will be included in the budget and passed.
New Jersey 2018 Working on a bill to address 250,000 gallon capacity cap and potentially the corporate tax for LLC s and corporations Watch for requests from FreeTheGrapes!
New York 2018 A bill to allow out-of-state retailers to ship into the state failed to pass. The bill carries over into 2018.
Oklahoma 2018 The state will open to DTC shipping on October 1, 2018. We may see additional Common Carrier legislation prior to that time.
Retailer Shipping is in the Spotlight Again in 2018 An Indiana retailer suing in response to state law changes. (Tanford and Epstein same attorneys as involved in Granholm suits) Illinois: Lebamoff v. Rauner (felony provisions) Michigan: Lebamoff v. Snyder (allow use of common carriers by in-state retailers) Missouri: Sarasota Wine Market v. Nixon (removal of retailers DTC privilege)
New Hampshire 2018 A bill to remove retailers from the existing DTC shipping law died in committee.
Connecticut, Massachusetts & New York 2018 Bills to allow for retailers to ship into these states are once again under consideration.
DTC Shipping by Out-of-State Wine Retailers (American Wine Consumers Coalition) WA OR CA NV ID UT MT WY CO ND SD NE KS MN IA MO WI IL MI OH IN KY WV NY PA VA VT NH DE MD ME NJ CTRI MA AZ NM OK AR TN SC NC MS AL GA AK HI TX LA FL Out-of-State Wine Retailer Shipments Allowed in 14 States and DC: AK, CA, DC, ID, LA, MO, NE, NV, NH, NM, ND, OR, VA, WV, WY (with restrictions)
How Wineries See Themselves.
How Regulators & Legislators Often See Us $2.69 Billion!
Why do perceptions matter? Opponents of DTC shipping are using confusion about thirdparty providers to undermine confidence in our DTC systems. 34
What is a Third-Party Provider? Typically, a Third-Party Provider is a non-licensed entity providing a service to a licensee (winery) to facilitate their shipments to a consumer.
Third-Party Providers Most Third-Party Providers are following the rules and can help you to reach new markets if you have the correct licensing. Remember No one else can hold the licenses to allow you to ship into another state unless you sell the wine to them and they hold a retail license.
What can YOU be doing? Make sure your shipments are ALL legal! Increase use of Age Verification at point of sale (even when not explicitly required by statute) Work with compliance companies to encourage system integrations for both wineries and states Work with third-party providers to ensure their programs meet state requirements Engage your customers (and potential customers) when asked to do so by FreeTheGrapes
Direct-to-Consumer Shipping (as of 1/18/18) DTC allowed DTC prohibited
State Relations Regions Sally Jefferson Tim Schmelzer Tyler Blackney Carol Martel Terri Beirne Hunter Limbaugh Katie Jacoy Tyler Rudd Annie Bones State Compliance Specialist
New DTC Shipping Website Has Launched
QUESTIONS? Steve Gross Vice President, State Relations Wine Institute 425 Market St., Suite 1000 San Francisco, CA 94105 sgross@wineinstitute.org