Beer, Wine, & Spirits Producers Are Stepping Up During The Pandemic, Aided By Government Standing Down

Spirits, beer, and wine producers – among the oldest participants in the American economy – are playing a helpful role in the coronavirus pandemic response. Many politicians across the U.S., to their credit, have taken action to remove regulatory impediments in a way that helps these companies transition operations to meet new crisis-driven demands, such as the increased need for face masks and hand sanitizer. 

The recent wave of federal and state deregulatory action is also helping businesses get their traditional products to consumers. At the end of March in Kentucky, for example, state lawmakers passed House Bill 415, legislation that permits spirits, beer, and wine producers to ship directly to consumers. 

“We need to do all we can to support our signature industries during this economic crisis,” Representative Adam Koenig (R) said. “The bourbon industry has stepped up to start producing hand sanitizer for business and health care providers in this state. Kentucky needs to step up and give them the tools they need to rebound, and this bill will help.”

The District of Columbia and five states—Arizona, Florida, Hawaii, Nebraska and New Hampshire— permit the direct shipment of spirits as of the start of 2020, according to the National Conference of State Legislatures. Eight states allow the direct shipment of beer and wine: Delaware, Massachusetts, Montana, North Dakota, Ohio, Oregon, Vermont and Virginia. The rest of the states only permit direct shipments of wine. 

Governors and lawmakers in others states have taken similar deregulatory action in recent days and weeks. Texas Governor Greg Abbott (R), for example, issued an executive order that lifts the regulation that prevented groceries and alcohol from being delivered on the same truck. 

“This is yet another example of the private sector stepping up and Texans helping Texans as we all work to mitigate the impact of COVID-19 in our state,” Governor Abbott said. “By waiving these regulations, we are streamlining the process to replenish the shelves in grocery stores across the state.” 

In Texas people can now add margaritas and other adult beverages to Uber Eats and other meal deliver orders. That’s because Governor Abbott also issued a March 18 executive order that permits restaurants to deliver beverages containing alcohol.

“The State of Texas is committed to supporting retailers, restaurants, and their employees,” Governor Abbott said. “These waivers will allow restaurants to provide enhanced delivery options to consumers during this temporary period of social distancing.”

Blue states are also liberalizing alcoholic sales regulations. New York Governor Andrew Cuomo (D) issued an executive order in March allowing bars and restaurants to sell alcohol for off-premises consumption. 

“We hope that goes a long way toward alleviating any economic hardship,” Cuomo said.

Virginia Governor Ralph Northam (D) issued an executive order on April 8 permitting the Virginia Alcoholic Beverage Control Authority to allow restaurants and distillers to sell cocktails and spirits to-go and for delivery.

A 2018 report by American Beverage Licensees found the “direct economic impact of America’s beer, wine and spirits retail industry is more than $122.63 billion annually; the total economic impact of the industry is $363.33 billion annually; and the industry is responsible for 1.65% of the U.S. economy based on total GDP.”

That’s the economic impact of the retail side. The spirits industry, according to the Distilled Spirits Council of the United States, generates $190 billion annually in economic activity, creates 1.64 million jobs, and generates nearly $32 billion in federal, state, and local tax collections. Switching to beer, that industry “employs nearly 2.1 million Americans, providing more than $101 billion in wages and benefits,” according to the Beer Institute, which also notes that the industry “pays more than $59 billion in business, personal and consumption taxes.”

The deregulatory actions taken by federal and state officials pertaining to distillers, brewers, and vintners – in addition to helping meet critical needs during the pandemic – will also help keep an important sector of the economy humming as much as possible during the pandemic-driven downturn.

There is more that officials at both the federal and state levels can do to get out of spirits, wine, and beer producers’ way as they step up to help fight the spread of coronavirus. The Cares Act pandemic relief package passed with bipartisan approval and signed into law by President Donald Trump in March exempts hand sanitizer made by distillers from federal alcohol excise taxes. 

The Food and Drug Administration, however, still needs to act in order for that intention of President Trump and Congress to be realized. That’s because current FDA guidelines, which distillers must meet to receive the excise tax break in the CARES Act, require distillers to add a denaturant to hand sanitizer to make it inconsumable. The problem with that is distillery operations are not set up to add FDA-mandated denaturants, as that would prevent production of their normal inventory. 

“We make consumable alcohol products,” says Matt Dogali, the President and CEO of the American Distilled Spirits Alliance. “And if we introduce a denaturant into our lines, it renders them useless for future alcohol production barring extreme cleaning measures, because we cannot have any remnant of the denaturant in our lines, and then sell a consumable product.” 

Members of Congress are now calling on the FDA to modify its guidelines that are preventing needed hand sanitizer from being produced. 

“Through the current guidance, the FDA is standing in the way of hundreds of thousands of gallons of hand sanitizer from being produced and given to those on the front lines battling this pandemic,” Kentucky Reps. John Yarmuth and Andy Barr, the co-chairs of the Congressional Bourbon Caucus, wrote a letter sent to FDA Commissioner Stephen Hahn on March 27. 

While Many States Ease Restrictions On Alcohol Sales, Pennsylvania Takes Opposite Approach By Shutting Down Sales

A March 19 executive order issued by Governor Tom Wolf (D-Pa.) closed down all state-run liquor stores in Pennsylvania. Pennsylvania is one of 17 “control states” where spirits can only be purchased in state government-owned and operated stores. However Pennsylvania is the only one of those control states where spirits retailers have been shut down during the pandemic.

“Alabama, for example, closed its liquor stores but is allowing curbside pickup—albeit with strict limits on purchase quantities,” Reason Magazine’s Peter Suderman writes. “Virginia, on the other hand, recently announced a plan to bypass state-run stores and let distilleries ship directly to consumers, a practice that’s normally prohibited in the state.” 

The Keystone State’s pandemic response, notes Suderman, “provides both an unfortunate reminder of the folly of giving the state government a near-monopoly over liquor sales—and an object lesson in how the closure of businesses in the name of public health can backfire.”

“By closing all the stores, what they are doing is forcing a lot of people to simply go out of state,” David Ozgo, Senior Vice President of Economic & Strategic Analysis for the Distilled Spirits Council of the United States, told Suderman. 

Though Governor Wolf has closed state-run liquor stores, the Pennsylvania Liquor Control Board (PLCB) offered a way last week for Pennsylvanians to purchase spirits online. The PLCB’s website for online purchases quickly went the way of the initial Obamacare website, crashing with the following notice subsequently appearing: 

“You have to keep trying throughout the day and random chance you’ll get on,” PLCB spokesman Shawn Kelly said. “Eventually, you will get through,” adds Kelly, who asks that “people be patient” as the bureaucracy is “randomizing access to the (online) store.”

Even though other control states have not closed down stores like Pennsylvania has, long term reform of government regulation of alcohol sales is likely to be a hot topic of debate in many state capitals after the current crisis has passed. Among many structural reforms that will be considered when the pandemic is in the rear view mirror, expect to see an increased interest in having state government be less meddlesome with the booze business.