ACSA RESPONDS: U.S. CRAFT DISTILLERIES ARE IN CRISIS

The American Craft Spirits Association (ACSA) applauds Jake Emen’s Food & Wine article, “U.S. Craft Distilleries Are in Crisis,” which candidly depicts the harsh realities of the state of craft distilling in 2024 and the economic and legislative headwinds these independent small businesses face.

ACSA and Jake Emen are not alone in sounding this alarm bell. The federal government has put considerable effort in recent years into investigating and addressing the issues raised in this article. TheWhite House ordered the Treasury Department, Department of Justice, and the Federal Trade Commission in 2021 to assess “threats to competition and barriers to new entrants” in the beverage alcohol industry, with a focus on illegal and anticompetitive distribution practices as well as distributor consolidation. The resulting report by the Treasury Department, which is the alcohol industry’s federal regulator, validated all of the White House’s concerns about anticompetitive practices and added many more. The U.S. Alcohol & Tobacco Tax & Trade Bureau initiated a sweeping trade practices rule making process to address rampant anticompetitive behavior by large industry members. And, the Federal Trade Commission is also actively engaged in investigating unfair methods of competition within the wholesale tier. ACSA applauds the press and regulators for their attention to these issues.

As WSWA contends, it is true that market conditions today are challenging, and we welcome an open dialogue on these matters. But respectfully, with inflation, rising costs of living and market uncertainty plaguing the entire economic landscape, we cannot afford to overlook the need for new tools for craft distillers—particularly those that allow them to sell in the way today’s consumer demands.

Consolidation Is a Major Factor That Has Turned the 3-Tier System Upside DownWe believe the three-tier system works for many brands at scale, but as consolidation continues within all tiers (with the top 10 wholesalers holding 80% market share and the top two more than 50%), consumers are increasingly unable to locally access independent craft spirits products on shelves or behind the bar. This lack of access to craft coupled with the lack of a lifeline for craft producers through DtC or self-distribution is stifling our industry. Since January 2023, at least 49 craft distilleries have closed, and the rate of closures has accelerated in 2024. According to a recent ACSA survey on distribution:

• A majority of craft distillers (72%) have been seeking distribution in one or more states, but most of them (51%) have been turned down and 22% have entirely given up looking.
•79% of distilleries with distribution relationships report that there are not viable alternatives to their current partners.

ACSA Is Calling for Market Access Modernization, And DtC is Just One ToolWe agree with WSWA that DtC is not a silver bullet, but it is imperative that craft distillers have additional tools to access the current marketplace. In order to thrive and offer consumers greater choice, the spirits industry must have multiple routes to market for distillers and their brands. This would benefit every stakeholder—distillers, distributors, retailers and, above all, consumers. Here are three key ways to offer a new routes to market for craft distillers:

1. Expand the number of states that allow interstate DtC shipping for spirits. Currently there are 8 states and the District of Columbia that allow craft distillers to ship products to consumers in some form compared with 47 states for wine. Enacting DtC laws will help distillers introduce and grow brands and provide an ‘on-ramp’ to distribution that satisfies consumers as well as helps wholesalers and retailers. What’s more, consumers broadly support the notion. 87% of craft spirits drinkers want to legally purchase craft spirits via DtC, and 82% of craft spirits drinkers would like to see laws change in order to expand DtC.

2. Increase self-distribution privileges for craft distillers. There has been an increase in the number of states that allow limited self-distribution of spirits which allow craft distillers to deliver directly to retail partners. ACSA believes this tool will take pressure off of the three-tier system.

3. Improve trade practices that allow craft distillers to market their products. In many states craft distillers are limited in what they can sell in their tasting rooms or where they can sell their products, such as not allowing spirits to be sampled or sold at farmers markets. ACSA supports improved trade practices for craft distillers.

We welcome your support. To join ACSA in our efforts to modernize the craft spirits marketplace, please add your contact information here, or e-mail legislation@americancraftspirits.org or ACSA CEO Margie A.S. Lehrman at margie@americancraftspirits.org.

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