THE GIST
Online retail giant Amazon has applied for permits to deliver alcohol directly to consumers in Cincinnati and Columbus, Ohio through its Prime Now service. Pending state approval, the corporation would be able to bring beer, wine, and other low-proof alcohol—but not higher proof alcohol sold in liquor stores—straight to the doors of Amazon Prime members. Prime Now has been available in Cincinnati and Columbus since April and May of last year respectively.
WHY IT MATTERS
The move isn’t overly surprising, as Amazon has been establishing a foothold in the alcohol delivery business for some time now. From a broader perspective, too, the emergence of alcohol delivery as a smartphone transaction is becoming less and less unfathomable. As we reported in November, the online alcohol sales industry ballooned to $614 million in 2016, indicative of an 11.7% annual growth rate over a five-year period.
That’s not to suggest the next frontier of alcohol sales—if we allow online delivery to be considered as such—is poised to blossom without hiccup, of course. Even by alcohol industry standards, booze delivery is extremely heavily regulated, and those rules vary wildly state by state. Amazon itself has reportedly struggled to navigate this landscape bordered by red tape. Most notably, Amazon Fresh suspended its popular alcohol delivery service in Seattle, Washington in 2015. The company itself offered little in the way of explanation, but tech publication Pando suggested it “quietly shut down” the service because it “likely” “ran afoul” of three-tier regulations in the state.
Ohio has a three-tier system of its own, so the company will have to contend with the rules there if it wants the service to last. But beyond anything Amazon itself has to do to stay afloat, there are other issues the rest of the state’s beer industry will be paying attention to.
For instance, Ohio imposes minimum pricing on beer sales to, among other things, “preserve orderly competition” and “ensure fair prices over the long term.” Given how these services have really only emerged in the last few years, compliance is easier said than done. (Need proof? Consider that Drizly, a growing startup and leader in the game, has continued its delivery operation in Seattle, Amazon’s own home turf, without being stonewalled by the law, while Amazon ceased business.)
Andy Tveekrem, brewmaster at Market Garden Brewery in Cleveland, suggests Amazon’s respect for minimum pricing, equal to other retailers, could well determine whether the service works or not. “As long as state minimum pricing is in place, I see no real problem with the delivery service,” he tells GBH. “Some retail stores may object, just like taxi companies may object to Uber or Lyft. But let the marketplace determine what the proper fit is.”
Matt Cole, brewmaster at Fat Head’s Brewery in Cleveland elaborates further, adding he hopes Amazon doesn’t threaten smaller, traditional retail operations. “I would hate to see discounting and discounting and discounting that hurts retailers in the process,” he says. “You’ve got this corporate goliath that could crush some small businesses.”
Apart from the retail tier, there could be issues for producers, too. Treatment of beer is obviously a widespread concern that producers deal with in doing business with wholesalers and retailers. But many wholesalers and retailers are also dedicated to treating beer to a producer’s demands and indeed boast that commitment as a selling point. As such, Cole also worries that a company like Amazon might view the beer he toils over as just another product to make money off of rather than a perishable item.
“I have a little bit of a concern that they sell it through in a timely fashion, making sure the beer is rotated well, and taking care of it the way we anticipate,” Cole says. “We hope our retailers rotate stock, keep it fresh, keep it turning, keep it cold, and treat it like a delicate thing and not just a commodity. That’s a concern, especially for hop forward beers. Hoppy beers are really intended to be [drunk] fresh.”
—Dave Eisenberg
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Amazon working to deliver alcohol in Ohio [WLWT]