Direct-to-consumer (DTC) spirits sales represents a $2.5-$3 billion opportunity for the industry, David Ozgo, chief economist for the Distilled Spirits Council of the United States (DISCUS), said during the latest episode of Rabobank’s Liquid Assets podcast.
Ozgo and DISCUS CEO Chris Swonger shared their reasons why DTC spirits sales, cocktails to-go privileges and tax tax equivalency for spirits-based canned beverages are necessary changes during the 42-minute conversation with RaboResearch food and agribusiness team.
“We’re advocating for DTC shipping because one, the consumers want it, but then secondly, the craft distillers really need it,” Ozgo said. “We completely support the three-tier system, however what we see DTC is doing is really augmenting the three-tier system.”
Ozgo emphasized the importance of DTC for smaller or newer producers, who can use direct sales to get into the marketplace and build their brands to appeal to wholesalers, who can’t always take on every producer. DTC and other e-commerce avenues are “the way of the world,” he said, adding that the industry must modify and modernize — but not replace — the three-tier system.
“DTC shipping of spirits — just like wine — can be an on-ramp in support of the three-tier system, will meet consumer demand, and will be a great help to these craft distilleries,” Swonger said.
Along with DTC sales, to-go cocktail sales have helped the industry battle COVID-19-related economic headwinds. Swonger expressed his gratitude to governors who have adopted resolutions to add the to-go sales privileges for bars and restaurants, and said DISCUS was fully in support of making related measures permanent. Thus far, 16 states and Washington, D.C., have made cocktails to-go permanent, 14 states have extended temporary allowances, and three states have extensions underconsideration, according to Swonger.
Additionally, Swonger and Ozgo discussed efforts to adjust tax rates for spirits-based, ready-to-drink (RTD) beverages in line with beer — a move that Swonger said would allow the segment to grow from 30 million cases to 250 million cases. He pointed to the market in Canada — which made excise tax changes on spirits and wine in April — and stated that more cases of spirit-based RTDs are sold in the country than regular spirits, noting similar changes in the U.S. would be a win for wholesalers and states.
Efforts to bring spirits-based, RTD tax rates in line with beer offerings has met opposition from leaders within the beer industry.
Listen to the full discussion — which also covers the impact of tariffs on the industry, as well as off-premise performance — above.