Last year’s COVID-19 outbreak largely moved beer festivals and events to a virtual format. Some have returned to in-person events this year, while others, including the Great American Beer Festival, remain all-digital. But the experience has taught the beer industry something significant about virtual events: the benefit of delivering a box of beer directly to attendees for sampling.
That’s the model behind popular events put on by Next Glass, the company behind Hop Culture’s Juicy Brews Saturday Morning festival, Hop Culture x YETI’s Beers With(out) Beards Womxn in Craft Beer Festival, BeerAdvocate’s Extreme Beer Fest: Cyberspace, and others. Attendees at those events receive a box of beers from participating breweries delivered to their door, courtesy of New York-based retailer and distributor Half Time Beverage.
Other event producers have also pursued this format. Pittsburgh’s Barrel & Flow Fest and its virtual companion, Digi Flow, focus on celebrating and paying Black brewers, artists, and musicians. Digi Flow attendees can optionally buy a box of collaboration beers from participating breweries via craft beer delivery company Tavour.
These festivals include performances, discussions, music, and more, but for most, the box of beer is central to the events’ appeal.
“They’re probably the most important part [of the festival] because they are the most tangible aspect of this,” says Day Bracey, founder of Barrel & Flow and Digi Flow. “It’s huge for people to be able to hold a physical piece of art in their hand, not just art on the label but art as the liquid in the can.”
But if beer boxes are the most critical aspect of these events, they’re also the most opaque. Direct-to-consumer (DTC) beer shipping laws are notoriously complicated, and vary from state to state. Only 13 states fully allow DTC beer shipments, yet these festivals promise beer delivered to at least half the states in the U.S. Some services, such as Tavour, offer beer box delivery year-round. The model is popular with devoted craft beer fans who are excited to try beers that aren’t available to them locally. It’s also popular with breweries, which use it to get their beers into the hands of ardent fans.
However, the legality of these practices is uncertain, and it’s not clear how the model works. The companies that provide logistics and shipping of the beer boxes maintain that they are legal, but won’t disclose their compliance methods. The beer industry has for years sought updated regulations that would allow breweries or retailers to ship beer to consumers through more straightforward channels, such as those allowed for wine. Mostly, shipping laws haven’t kept pace with 21st-century consumer behaviors and business models.
So for now, the public can’t see the behind-the-scenes logistics, and what is visible exists in a potential gray area of the law. Meanwhile, virtual events—and their accompanying beer boxes—are becoming increasingly important for businesses that want to find a way to interact with drinkers during a pandemic.
Half Time says it uses a “regional carrier network” that operates on a case-by-case basis within a single zip code or entire state to deliver beer boxes. The company would not explain what such networks are, how they’re created, or how such a network could exist in only one zip code.
Instead, leadership stated that “because of both NDAs [non-disclosure agreements] and proprietary information, we cannot share specific/additional details with respect to shipping.”
Tavour is equally cagey. It did not answer questions about its terms and conditions, which state, in part, that all sales transactions take place in Washington State, and that consumers assume liability when buying beer through the platform. Tavour is, in essence, stating in its terms that a consumer has bought beer from Tavour in Washington State, and that Tavour then contracts with a shipping service—it didn’t specify which service—on the customer’s behalf to ship that beer to the customer.
“Tavour makes no representation as to the right of any person to import any product in to [sic] any state,” the terms state. “For each transaction, you represent that you may purchase and receive the products ordered in compliance with all applicable laws, including, without limitation, the alcoholic beverage control laws of the jurisdiction in which you reside, and that.such products will be used only in a lawful manner. … You may be required to submit detailed reports of the products in your cellar to your residing state’s legal authorities using the forms they supply. You agree to be responsible to meet all such reporting requirements imposed by the alcoholic beverage control authorities in the jurisdiction you reside [sic].”
When asked to elaborate on its shipping logistics, Megan Birch, Tavour’s director of marketing and communication, wrote in an email to Good Beer Hunting: “As a startup and a private company I am not sure how much of your questions I am able to answer.”
Art DeCelle, senior counsel at Washington, D.C.’s Lehrman Beverage Law, has worked extensively on alcohol policy legislation. He’s blunt in his assessment of alcohol shipping terms of service that seem to shift the legal burdens onto consumers.
“Those terms are grossly unfair, and unenforceable,” DeCelle says. “No AG [state attorney general] is going to go after someone who ordered a case of beer or wine.”
This makes it unlikely an individual customer would be prosecuted for ordering beer through such a service; more likely, he believes, is that an attorney general would go after the service itself.
When asked about how Tavour complies with state DTC shipping laws and the three-tier system of alcohol sales, Birch wrote in total: “We are an online retailer based in Washington and are able to ship to other states where out-of-state retailers are allowed.”
Tavour did not answer a request to explain further.
No expert contacted for this story—including state regulators, alcohol lawyers, and shipping compliance experts—could provide an explanation for how such companies would be able to send beer beyond the 13 states that expressly permit some form of DTC beer shipping.
“I have to imagine that if state regulators were to investigate these services closely, they would find grounds under current law to restrict or prevent them,” Alex Koral, senior regulatory counsel at Sovos, a shipping compliance company, told GBH in an email. “Of course, much of the uncertainty behind these types of shipments could be resolved if states would create clear, manageable, legal processes for shipping alcohol to consumers by more members of the existing beverage alcohol industry, including breweries and retailers.”
For now, though, Koral says such services operate in the “grayer, even black, areas of the law.”
Yet these DTC models are popular, and have proliferated in recent years. Guarding their compliance methods, companies say, is motivated by a desire not to skirt the law but to keep their competitive edge.
“There’s a barrier of entry into this business, so we have to be protective over what we do,” says Jason Daniels, chief operating officer at Half Time. Half Time’s competitive advantage, he says, is that the company knows how to navigate shipping laws in a way that others don’t.
What’s needed, according to beer industry trade groups and lawyers, are updated regulations that would ensure such businesses can operate legally, safely, and out in the open.
“States should recognize the enthusiasts’ niche market for beer and spirits like they do for wine,” says Ashley Brandt, a Chicago-based alcohol regulatory attorney at Tucker Ellis. “A simple amendment to wine direct-to-consumer statutes that allowed for breweries and distilleries to ship their beer and spirits would be an easy amendment and well within the spirit of those laws.”
In advocating for legalized DTC beer shipping, the Brewers Association, a trade group that represents small breweries, cites Sovos’ estimate that DTC wine shipping is a $3.7 billion business annually. Beer likely wouldn’t reach that level any time soon, even if regulations changed. That’s primarily because of margins. A supplier needs to ship a case of a typical beer to make its gross margins cover the shipping; shipping a six-pack of an average beer is generally so expensive (to cover margins) that the cost becomes prohibitive to customers. This means that the beers consumers are willing to pay to have shipped are often small-batch, specialty releases—a very small slice of the overall U.S. market.
Yet there’s certainly money to be made on beer boxes, especially those in conjunction with virtual festivals. Half Time says it ships 500-1,000 beer boxes for a smaller-scale festival, and 2,500-3,500 for a larger-scale festival. With each box priced at roughly $110, that’s potentially $385,000 in revenue per festival. Half Time says it’s devoted an entire area of one of its warehouses in Poughkeepsie, New York to a “virtual festival packaging and production facility” just to service these events, and has hired additional customer service staff to support them. This shows it’s an area of business worthy of their investment, especially as more events explore virtual-only options and need to contract with partners. There’s money to be made.
Digi Flow is selling boxes through Tavour for about $95 this year, and each will contain 15 beers made collaboratively by 18 Black-owned breweries. Organizers expect to sell approximately 2,000 such boxes, for a total of $190,000.
Plus, for Tavour and Half Time (which also sells beer-of-the-month boxes for delivery), shipping beer is a year-round business. Half Time has even begun working with breweries as their e-commerce partner as a result of these festivals, forging longer-term business partnerships after the event ends.
“[Breweries are] like, ‘Hey this is great, we’re not signing up with a distributor any time soon, but we want to continue working with you, Half Time, beyond just the virtual events. Yes, we’re comfortable with you making our beer available in your stores and online, etc.,’” says Tim Langley, beer buyer for Half Time.
Breweries clearly want to be able to sell beer this way. Especially during the pandemic, services like Half Time and Tavour have been a lifeline for small breweries whose taprooms were closed or operating at reduced capacity.
“They very quickly move a lot of beer without much additional work required by us,” Natalie Roberts, co-founder of 903 Brewers in Sherman, Texas, told Forbes last June. “Without Tavour we would have had to take a loan to make up lost sales of already produced beers.”
According to Forbes, pandemic-related closures were a boon to Tavour. The company’s revenue in March and April of last year doubled compared to last February, and in May 2020, Tavour took in 2.5 times its February 2020 revenue. (Actual dollar amounts were not disclosed in that article.)
This wouldn’t be possible without eager customers, too. Craft beer aficionados are willing to pay a premium for roughly 15 beers that aren’t normally available to them, and for the added convenience of having them shipped directly to their door. (For $100, that consumer could potentially purchase 20-30 craft beers at a bottle shop.) A Sovos ShipCompliant/Harris Poll consumer survey released in March found 84% of regular craft beer drinkers—defined as those who drink craft beer at least once per month—say they want to be able to legally purchase beer via direct-to-consumer shipping to their homes.
Proponents believe DTC shipments like this should be entirely legal everywhere—but they’re not, yet. Operating within a tangle of state laws and regulations is complicated, and it’s the basis for some of these companies’ entire business models. How to navigate such complexities is what these companies profit from, and it’s also the secret they hold closest to the vest.
DTC beer shipping companies may be evasive about their methods, but they’re not operating in the shadows. They advertise online, partner with media companies, and give media interviews.
So, are they catching the eye of regulators? Generally, they’re not. This may be because they’re in compliance, or because regulators haven’t yet figured out how to investigate them. State regulatory agencies are limited in what they can do to punish shipments coming from companies outside their state.
John Cordrey, commissioner of Delaware’s Office of Alcoholic Beverage Control, explains that his authority only extends to regulating licensees within his state; he says he has no power to revoke licenses or otherwise punish entities from out of state. In cases where out-of-state entities are committing illegal actions related to alcohol within the state of Delaware, Cordrey says those are criminal matters that would be investigated by the Delaware Alcohol and Tobacco Enforcement division.
DeCelle says it’s unusual, though not unheard of, for a state attorney general to file a lawsuit against an out-of-state alcohol shipper. But state attorneys general are often too busy to investigate and file charges against illegal alcohol shippers, or they may simply be unfamiliar with how to apply alcohol laws created in the early 20th century to situations involving online ordering and courier services.
All these factors keep this area of business murky. With so many variables that impact interest or understanding among officials, actions are left unchecked in lieu of more pressing or easily understood issues. In cases when an out-of-state shipper does catch the eye of an attorney general, the attorney general’s office will most often send a cease and desist letter ordering a company to stop shipping into a certain state.
“Many of the questions concerning these types of arrangements are uncertain as there has been limited scrutiny by state regulators as to their legality,” Sovos’ Koral says. “However, my suspicion is that many states would cast a dim eye on them if and when they were to become subject to a review.”
Some states have become more forceful in recent years: Last year, Tavour suspended shipments to Ohio after the state’s attorney general issued injunctions against several out-of-state wine retailers that had been shipping alcohol into the state. A Hop Culture guide to online beer retailers notes “Tavour is always updating where it can ship to.”
In a recent job listing for a bookkeeping/compliance position, Tavour states that this bookkeeper will be asked to “produce accurate results in a highly ambiguous environment.” It also mentions that this employee will be responsible for maintaining compliance around taxes and license renewals, and for building “a loop with state regulatory agencies to ensure compliance every six months.”
It’s not clear whether that relationship with state regulatory agencies already exists or is intended to be developed.
As the Delta variant of COVID leads to higher infection rates, virtual beer festivals continue to be a critical offering for event organizers. And whenever a post-pandemic future arrives, they’re likely to stick around.
“Even without pandemic situations, we’d like to have a virtual component to the festival,” says Bracey of Barrel & Flow and Digi Flow, which will be taking place in September. “Because there’s an education and entertainment component to our festival, we’re about lowering the barriers of access.”
Jennifer Breckner, a San Francisco resident who attended a virtual beer event last October organized by the Smithsonian’s National Museum of American History, agrees that there will likely always be a place for those types of digital events. And for her, paying $35 for a box of six beers that accompanied the event helped add an experiential layer.
“Especially in a year where we had all been watching and doing so many things virtually, the beers brought that to life,” Breckner says.
Until legislatures update the laws, companies offering beer shipping services beyond where they are expressly allowed will continue operating in this limbo-like state. But what’s not likely to abate is consumers’ interest in virtual beer events, online festivals, and beers from outside their area. That’s especially true as the pandemic continues, cooler weather looms, and some customers feel less confident visiting taprooms given rising coronavirus infection rates.
Thus far, laws passed decades ago have proven themselves insufficient to address the growing appeal of alcohol e-commerce, a commercial reality that would be better governed by clear, explicit permissions for certain types of beer sales to legal-drinking-age adults.
“Much of the uncertainty behind these types of shipments could be resolved if states would create clear, manageable, legal processes for shipping alcohol to consumers by more members of the existing beverage alcohol industry, including breweries and retailers,” Koral says. “This would enable consumers to get the products they want in a manner that meets their expectations for a 21st-century market.”
In the absence of clear-cut guidelines, opacity and secrecy reign.
Words by Kate Bernot