Direct beer shipping a non-starter

It’s a shame that West Virginia takes three steps forward, but then takes one step back. The three steps forward is the passage of the many, extremely positive provisions for beverage alcohol sales that are contained in HB 2025. The one step back is the unworkable system for the direct shipping of beer that is also written into HB 2025.

West Virginia beer consumers had hopes that the legislature would give us a good, simple, workable method for ordering and having beer direct shipped to our homes from breweries using the the same method that WV wine drinkers have had available to them for years. Direct-shipping of beer to the consumer’s home is allowed by a growing number other states, including our neighbors Ohio, Virginia, Pennsylvania, and Kentucky. We wanted it in West Virginia.

When HB 2025 first passed the House, it included a good and fairly simple direct shipping system that in-state and out-of-state brewers could use to ship beer directly to WV consumers. It was very similar to WV’s wine direct shipping law. But somewhere along the way a poison pill was injected into the bill. Unfortunately, that poison pill stayed in the final version that passed the legislature.

The poison pill is language that requires a brewer to ship beer to WV consumers only through its franchised beer distributor. WV consumers may not receive beer shipped directly to their homes.

Here’s how the system would work

An in-state or out-of-state brewer may obtain a beer direct shipper license for $250 annually. The brewer can then take remote orders from West Virginians, make sales, remit the WV beer taxes to the state monthly, and ship the beer to WV. They can ship up to a maximum of two standard 12-oz. bottle/can cases of beer or its equivalent (maximum 576 fluid ounces) per order. All that’s good so far. But now comes the poison. According to HB 2025, an in-state or out-of-state brewer may not ship any beer directly to a WV consumer. It must instead ship the beer to its beer distributor who has the franchise for the geographic territory in which the customer who ordered the beer resides. The customer would then have to travel to the beer distributor’s warehouse and pick up the beer. Huh? Really.

So instead of having FedEx delivering the six-pack to your house like other states allow and WV already allows for wine, the customer would have to travel to the distributor’s warehouse—a warehouse that might be 50 miles or more away—in order to get their six-pack. For crying out loud.

Of course we are talking about a universe of small out-of-state brewers who will not already have distributors in WV because they have never sold beer here before. If the brewery does not have a franchised distributor covering the territory where the customer lives, it must either appoint one or refuse the sale. Holy cow.

Too complex and unworkable

Think about this. To comply with this law, little out-of-state breweries who want to sell beer to West Virginians would have to go though the complex process of appointing distributors all across the state. Appointing distributors for lifetime franchise rights is not a little decision to be taken lightly by a brewer. It usually includes some serious planning and review by the brewer’s legal counsel. From the distributor’s side, it is doubtful that distributors would even want to fool with this set up. You could see many distributors choosing to not participate since there is going to be no money in it for them. Most would probably see it as a pain in the rear.

For a small brewery, having to go through the complicated process and expense of appointing lifetime franchised distributors just for the right to sell a few cases of beer in WV—in addition to paying a $250 annual license fee—will probably eliminate 99.9% of all brewers out there. Having to use beer distributors totally over-complicates the process of direct sales and makes the system unworkable. If Pennsylvania, Ohio, Virginia, and Kentucky have no problem with brewers direct-shipping beer to the consumer’s home, what is West Virginia thinking?

And what happens to West Virginia brewers who currently self-distribute all their own beer to retailers and do not have any franchised distributors (Stumptown, Weathered Ground, Short Story, Brew Keepers, High Ground, Abolitionist, to name a few)? These are brewers who are growing fast and doing very well. These brewers would be excluded from doing any direct shipping within WV unless they appointed distributors—but then they could no longer self-distribute to retailers. For crying out loud. That is a slap in the face of some of the very best brewers in West Virginia.

If you make the process unattractive enough, there surely won’t be much beer sold through the direct shipper process. Maybe that’s what this poison pill was all about. It’s doubtful that legislators on their own came up with these ideas. Whoever got their ear, it was folks who did not have the beer consumer’s interest or the brewer’s interest at heart. Whatever the case, it needs to be fixed, made workable, and made consumer friendly.

Winery direct shipping works well

West Virginia’s winery direct shipper law works just fine as is evidenced by the fact that there are currently over 360 wine suppliers from across the country with WV direct shipper licenses for wine. With the system enacted in HB 2025, there will not be 360 small breweries getting WV direct shipper licenses. Why can’t we get the beer direct shipper process set up just like the winery one? Let’s not complicate things West Virginia.

Aaron Rote of the WV Craft Brewers Guild did remind me of one good thing about the direct shipper section of HB 2025. That one thing is that it does permit WV brewers to ship beer directly to consumers in other states that allow it and in which the WV brewery would obtain a permit for from that state.

In this way Rote feels it “extends the footprint of smaller WV craft breweries and gives us something to build on in the future.” So maybe there was a little nugget in the direct shipping provisions for WV brewers. That’s good. But for West Virginia beer consumers, the direct shipping provisions are a total nonstarter.