Distilleries Push For Direct

BUFFALO, N.Y. -- New York's modern distillery industry has been around for roughly 15 years.

Distillers Guild President Brian Facquet was one of the first to make craft spirits.

"New York state is a wonderful place to do business as far as getting licensed but then the real world scenario kicks in is how do you compete in a market place that is run by giants?" Facquet said.

The COVID-19 pandemic was difficult for the industry. Since 2020, Facquet said a net of about 50 distilleries, 25% of the industry, has shuttered.

"New York was second in a country three years ago in number of licensees. Today we fall behind Pennsylvania. No offense to Pennsylvania, but we're fifth."

A lifeline however, for distillers, was an executive order allowing them to temporarily directly ship their products to consumers. Now the guild is pushing for DTC shipping, which has already been available to wineries, to become permanent law.

Facquet said distillers do most of their business when people visit their facilities and if they can't sign them up for future shipments before they walk out the door they likely lose sales. They also don't have the means for widespread distribution so getting data about where their customer base is located allows them to be more efficient.

"What we found is that anyone that bought our products, they really want to buy it from a retailer but we need to build the audience from the retailer to make it viable," Facquet said.

New York state Liquor Store Association President Stefan Kalogridis argued the practices will lead to public safety issues like underage drinking and allow for the growth of an alcohol "dark market."

"We want to underscore that beverage alcohol retailers understand the need for competition and compete every day with fellow retailers," Kalogridis said.

He continued that the liquor stores compete on a level playing field with similarly-licensed businesses. Kalogridis said DTC would throw competition without the same licensing standards into that pool.

"This gives the Amazons of the world the upper hand to either sell products at a lower price because those products have not gone through the otherwise required alcohol regulatory system or to sell them for the going retail price and take a significantly larger profit margin than traditional retailers," Kalogridis said.

Opponents in the liquor store and distribution sectors have voiced concerns about larger companies undercutting their sales. Facquet believes those concerns are addressed in the most current iteration of the bill but doesn't believe direct to consumer shipment of widely sold products makes sense either.

"How are they going to undercut when they've got to pay $20 in shipping or $30 in shipping for a $15 bottle to sell a bottle. There's no logic to it," he said.

The guild president also pushed back on underage drinking arguments claiming it was not an issue when DTC was allowed during the pandemic. On top of that, he said an expanded craft spirits industry is also good for New York farmers who sell corn, grain, dairy and other produce to distillers.

"Everybody worrying about the future businesses going out of businesses but they're not paying attention to the farmers and they're not paying attention to the manufacturers," Facquet said.

He said he believes the state Legislature is failing the industry but can take a major step toward keeping it alive by passing this legislation this year.