By John Wilson/Winestyr.com
One element of Michigan’s regulatory framework surrounding alcohol that gets a lot of attention is the recent movement to allow direct-to-consumer (DTC) wine shipments. Such sales take place when a winery sells and ships their wine directly to a Michigan consumer, without going through traditional distribution channels. Until the last decade or so, such sales were prohibited by law in Michigan. They are now allowed -- with some restrictions.
Once such restriction that routinely causes commotion within the industry limits the amount of wine a winery holding a Michigan direct shipper’s permit may ship to Michigan consumers to 1,500 cases annually. The rule causes a lot of frustration both because it is often misunderstood, and because of a lack of clear reason for its existence.
One example of its being misunderstood recently occurred at Winestyr, when a recent effort to feature a Michigan winery did not materialize because the winery did not sell wine on their website.
Their stated reason for not doing so was that they did not feel that an investment to develop a direct-to-consumer (DTC) business was warranted given that they were limited 1,500 cases for DTC shipments. At some point this winery had come to the mistaken conclusion, as have many others, that this is a limit on Michigan wineries specifically.
However, the restriction does not depend on the winery’s location, but rather on the consumer’s location.
A winery located in Michigan may ship well in excess of 1,500 cases nationally -- so long as they do not ship more than 1,500 of those cases to Michigan consumers. This contrasts with the mistaken belief by some that Michigan wineries may only ship 1,500 cases directly to consumers, regardless of the consumers’ locations.
The second major reason the rule causes commotion, a lack of clear reasoning for its existence, is a harder one to answer.
I have yet to see a clear explanation for its existence and would venture to guess that, at some point, the limit will be removed either by legislative repeal or in the courts as being discriminatory with no public benefit.
However, that probably will not occur until a larger producer decides to fight it. Most small and mid-size producers are likely not approaching the limit; even if they are, they likely do not have much of a voice with Michigan’s Legislature. Larger producers, who often have full distribution, are less likely to challenge this restriction anytime soon due to their being content with the status quo. It is only a matter of time, however, until the large producers get into the DTC game; when they do, this limit will probably disappear.