SB 620, a game-changing California bill

Photo by Rogelio Gonzalez / Unsplash

We keep a close eye on liquor laws in California and nationwide. As small producers in a HIGHLY regulated industry, the rules can make or break us. And there are a lot of rules.

We want to talk about a bill that’s up for vote in California that could be a HUGE GAME CHANGER. SB 620 proposes to allow spirit producers to sell and ship a certain quantity of spirits directly to consumers (DTC) here in California.

But, as always, there are a few sticking points.

Firstly, the California Senate has to pass the bill (our sources say it seems likely). Second, the folks in charge of amending the bill on its way to a final vote need to understand what SB 620 ACTUALLY means for the industry and for the really small producers (like us).

Here's why: in California, small spirits producers operate under the Type 74 craft distiller's license or, like us, the Type 7 rectifier's license. While both bottle and sell distilled spirits, a distiller ferments and distills, while a rectifier buys bulk products produced elsewhere.

Setting up a distillery easily takes more than a million-dollar investment.

A rectifier really only needs a warehouse space, so there's the rub: if you want to get in the game but you don't have a million bucks to blow, the Type 7 rectifier's license is a great way to build your brand before you find investors to start building a distillery.

And that's the message that is getting muddled up in Sacramento. Craft distillers have good industry representation, so they're most likely to benefit from the SB 620 DTC shipping privilege. Type 7 rectifiers are not well represented, and, to boot, no one really knows how we operate, or that we're the most likely people to start the next successful craft distillery.

SB 620 should be for us, too!

But we also hear that big distribution interests are pushing back on letting rectifier's in to DTC shipping. That's why, in collaboration with the good folks at Mosswood Spirits, we sent a letter to Senator Nancy Skinner last week to plead our case. We haven’t heard back yet, but here's hoping the message gets through!

Interestingly, while we're waiting for SB 620 at the state level, it seems like the federal government is at least casting a sympathetic eye in our direction. The Treasury Department commented in their recent report on competition in US alcohol that “The market for wholesale spirits distribution in the U.S. is effectively closed to new entrants” because of “consolidation in the middle tier.”

That “middle tier” refers to big distributors, the same ones who are lobbying to keep small business out of DTC shipping.

So, what’s to be done?

Well, we just have to wait. We're keeping in touch with other small producers like Mosswood Spirits, and over 220 other craft spirit producers in California through the California Artisanal Distillers Guild, and we remain hopeful that through their efforts and the Treasury’s interest in levelling the playing field, someone will listen.