In this mini-guide to direct-to-consumer (DtC) shipping, American Whiskey Magazine explores the unique challenges yet potentially promising future distilleries and consumers face
Written by Gabrielle Nicole Pharms
Over the last several years, the whiskey world has experienced incredible innovation through distilling and blending techniques. However, one industry component lacking inventiveness is the direct-to-consumer (DtC) shipping of spirits – which is no fault of the distilleries or thought leaders in whiskey. Instead, you can thank the antiquated laws in effect that date back to Prohibition.
Each state is sanctioned to establish its own laws for how alcohol may be produced, sold, and transported within its borders. Consequently, distillers may only ship in or into a state if that state’s laws allow for DtC shipping. Currently, only eight states and D.C. permit distillers for interstate shipment of spirits to their residents, which – as the below stats prove – is scarcer than craft spirits enthusiasts would prefer.
A 2022 study conducted through American Craft Spirits Association (ACSA) with Sovos ShipCompliant shows that consumers want to shop for craft spirits in the same fashion they shop for most other packaged goods. The surveys were conducted online by The Harris Poll on behalf of Sovos ShipCompliant in October 2022 among 1,958 adults aged 21 and up, among whom 618 are regular craft spirits drinkers, defined as those who drink craft spirits at least once per month, and among 1,942 adults aged 21 and up, among whom 588 drink craft spirits/liquor at least once per month.
Furthermore, the report found that 79 per cent of craft spirits drinkers would like to see laws change to expand DtC shipping, 73 per cent of regular craft spirits drinkers want to purchase craft spirits via DtC in the future, and 74 per cent are interested in trying new products not available locally. Meanwhile, 71 per cent of regular craft spirits drinkers say they’ve tried a craft spirit while traveling that they wish they could purchase, but which is unavailable near their home.
And here’s the kicker: nearly 50 per cent of regular craft spirits drinkers would spend more than $100 monthly on craft spirits via DtC shipping. Thus, the industry has plenty of room for growth, profit, and opportunity if shipping laws are amended as a top legislative priority.
New to the DtC dialogue or simply seeking to gain more perspective on the topic? American Whiskey Magazine enlisted four spirits e-commerce frontrunners to weigh in on the discussion in this mini-guide to DtC.
What exactly does direct-to-consumer (DtC) shipping mean?
Direct-to-consumer shipping is selling spirits directly to consumers and fulfilling orders through a third-party carrier, such as UPS or FedEx. There are also third-party logistics services, like fulfillment houses, that help producers store, pack, and ship their products to consumers. These sales can be in various avenues, such as online, through a subscription club, or by consumers visiting a distillery’s tasting room. Shipping the spirits makes these sales complex, with specific regulations.
The ACSA/Sovos ShipCompliant report mentioned above stated, “When it comes to products that regular craft spirits drinkers – defined as those who drink craft spirits/ liquor at least once per month – would like to be able to purchase and have shipped directly to their homes/someone else’s home via a third-party carrier, craft spirits (46 per cent) rank similar to beer (49 per cent).” Furthermore, spirits are just as popular as multiple other consumer products, such as cleaning products (50 per cent), paper products (51 per cent), and self-care products (53 per cent).
As a consumer, what should you know?
Before I gained experience in the whiskey industry, I thought shopping for and receiving a shipment of my favorite bottle was a simple, cut-and-dry process. It’s not.
And you could be forgiven for thinking this; 47 states and D.C. permit DtC wine shipments, so I assumed the same rules applied to spirits. However, one of the most challenging aspects of DtC with spirits is that the companies can’t compete with the flexibility and already modernized regulations that wine has for shipping across the country to consumers.
“Wine has been doing this for decades. But the average consumer has no idea what the complexity of the laws are that govern sales and marketing of alcohol generally; there are significant differences between beer, wine, and spirits,” says Mark Shilling, director and partner of Big Thirst, a leading e-commerce sales and marketing company. “If the consumers were more aware of the challenges of how to get a bottle or a can of something from A-to-B to them, then they would be much more active in calling for parity across the three categories.”
Thus, the DtC discussion impacts you as a consumer, too – especially when you can’t get your hands on a coveted bottle because of your state’s shipping laws.
That’s where companies such as Big Thirst come in. The Austin, Texas-based company has helped set the tone in making it possible for spirits brands to conveniently expand sales and ship products to consumers in up to 42 states.
The company started in 2014 as a full-service agency, Big Thirst Marketing, dedicated to helping to tell the stories of companies in the beverage industry. It added a compliance, distribution, and sales consultancy, Big Thirst Consulting, in 2020 and an e-commerce platform in 2021. Now, Big Thirst provides integrated e-commerce with shopping carts built into their distillery clients’ websites to maintain the brand’s style throughout a transaction so consumers feel directly connected with the brand. Its sales services are three-tier compliant, meaning it works with suppliers and distributors and manage order fulfillment through a network of retailer partners.
“We make it look like to a consumer that they’re buying directly from a distillery and get this ease of purchase the same way they would if they’re going to a winery website. Let’s say you go to Cedar Ridge to buy The QuintEssential single malt because it’s highly rated and getting great awards; you click on that ‘buy now’ button and you think it’s coming straight from Cedar Ridge, but because of the laws, it must go through a third party,” says Matt McGinnis, founder and CEO of Big Thirst. “So, we’re a three-tier compliant way of setting up the technology so that orders pass through our system to a warehouse – we have partner warehouses across the country – that then pack and ship that bottle to your house. So, it’s a seamless experience for the consumer and the distillery, too.”
How DtC helps shine a spotlight on distilleries
The lifeblood of a distillery is its consumers. We’re living in a time where the art of storytelling and intelligent branding, in addition to creating a quality product, is what drives a mere curious drinker to become a long-time fan.
Recently, many craft distilleries have started including links to different online liquor stores where their product is available, so they could at least capture the sale when they have their consumer’s attention. However, when driving traffic to the ReserveBar and Drizly-esque marketplaces, craft distilleries lose control over their customer’s journey since many other brands and distractions pop up as recommended buys, which could potentially inadvertently generate sales for a competitor.
One way the DtC shipping of spirits is innovating is with the arrival of platforms such as Speakeasy Co.
Founded by Josh Jacobs and Michael Bowen, Speakeasy Co. is a three-tier compliant white-label solution for the wine and spirits industry that ships alcohol products directly to consumers. Speakeasy has grown to nearly 300 partners on the platform, including prominent brands such as WhistlePig, Tesla Tequila, Stoli Group, and Jägermeister, while also working with start-ups such as Au Vodka.
“Our mission is to empower partners to take back control for the first time in the industry. They have control over their data and control of their customer relationships. What it all boils down to is control over their own destiny, where historically suppliers have had to rely on the second and third tiers for the longevity of the business,” Jacobs says. “Suddenly, brands can own the digital journey with a white-label integrated shopping cart on their website, and not just own the digital journey but can also own all the data and truly scale like an e-commerce company, unlike ever before in the alcohol industry.”
Speakeasy Co. is also committed to creating distinct consumer experiences – from the bottle to exclusive merchandise. The company works on creative projects that a consumer can’t find in a liquor store. For instance, Speakeasy Co. partner Villa One, owned by Stoli Group, has signed guitars from musician Nick Jonas and has launched gift bundles for Mike Rowe’s (of Discovery Channel’s Dirty Jobs) Knobel Spirits featuring glassware and a signed postcard from Rowe.
Jacobs adds, “At the end of the day, we’re trying to work with our brand partners on what can we create together that’s not available in the corner liquor store, because that’s really going to be what speaks to the consumer that’s shopping online.”
The power of DtC shipping and its future
Despite the red tape, e-commerce retailers such as Taste Select Repeat (TSR) are showing the country what forward-thinking technology in DtC looks like versus the reliance on liquor store foot traffic. In 2020, founders Pierre Auguste and OJ Lima launched TSR, focusing on single barrel whiskey selections and rare bottles while hosting virtual and in-person tastings.
“Everything that we do is intentional for our consumers so they have an intentional reason to purchase,” says Lima. “When we select our single barrels – which is what we’re known for – unless there’s some reason why we can’t do it, we always go to the distillery.” So, TSR has gone great distances across the country – from rural Nevada to the outskirts of Kentucky – to meet the producers behind the brands they feature online. In addition, Auguste does all the professional photography and video, which promotes TSR’s sale of the bottle and provides visibility to independent suppliers and distilleries, who primarily operate without social media or marketing teams. Lima mentions the added value of working with TSR is that they’re sharing the brand’s story – from telling consumers about the masterminds behind the companies to their first-hand experiences at the distilleries.
TSR stands out due to its highly curated list of products. This bottle list “doesn’t mean they’re expensive,” Lima mentions; it simply covers what whiskey the duo perceives as high quality. Additionally, the company’s approximately 2,000-member program caters to both whiskey nerds and novices. “When we decided to get into liquor retail, we started to think of all the things that would differentiate us from other boutique stores and big-ticket stores. That broadened the aperture of people who participate and use technology to meet people where they are with the spirits.”
“Roughly three in four regular craft spirits drinkers say the ability to purchase craft spirits via DtC shipping would make them more likely to try spirits from out-of-state distilleries (76 per cent), and they would purchase craft spirits from out-of-state distilleries via DtC shipping if they could do so (74 per cent),” the ACSA/Sovos ShipCompliant report said. “Looking specifically at the year ahead, our survey results show that a majority of regular craft spirits drinkers (64 per cent) say they plan to purchase craft spirits via DtC shipping in 2023.”
These stats further prove that trailblazers such as TSR offer a sample of ingenuity in DtC shipping that the country is compelled to sip – but the sign of approval from legislation remains to be written.
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