Direct-To-Consumer Opportunities for Spirits

Ryan Malkin (00:09)

My name is Ryan Malkin, and I’m an attorney in the alcohol beverage industry. Today, we’re going to talk a little bit about direct-to-consumer alternatives. On the spirits side, I’m sure everybody knows that selling direct-to-consumer is quite limited. Certainly, distilleries in some states can sell directly to consumers from their souvenir gift shop, but direct-to-consumer online—which is largely what we’re talking about today—is restricted. However, there are a lot of opportunities and options that distilleries take advantage of when selling “online directly to consumers.”

Ryan Malkin (00:43)

What happens is you go to a distillery or brand website, and it looks like you’re buying directly from them. You click “Buy Now,” and without knowing it, you might be taken to a different URL or a pop-up window with a shopping cart. When you ultimately check out, that order is actually sent to a licensed retailer who can fulfill the order directly to the consumer.

Ryan Malkin (01:09)

There are a number of services that offer these modified or direct-to-consumer-feeling solutions. Companies like Passion Spirits, BarCart, Speakeasy, Thirsty, and ReserveBar are all offering this type of service. At its core, this arrangement is largely a software contract between you (the brand) and the third-party provider.

Ryan Malkin (01:32)

When you agree to add this technology to your website so they can fulfill the shopping cart, you as a brand want to make sure that the third party is held responsible for ensuring the retailers they work with are fully compliant. The primary compliance challenge is that most retailers can only legally ship within their own state.

Ryan Malkin (01:53)

There are limited opportunities in certain states where retailers can ship across state lines, but those options are quite restricted. If an out-of-state retailer ships into another state—for example, shipping from Florida to Michigan—the destination state (Michigan) can issue a cease-and-desist letter to both the retailer and the brand, telling them not to ship into their state from out of state.

Ryan Malkin (02:14)

Because of those regulatory risks, you as a brand want to make sure you are working with a provider who assumes responsibility for compliance and ensures that participating retailers only ship where they are legally permitted to ship. If you have any questions, feel free to reach out. Thank you very much!