KDA hails passing of direct-to-consumer legislation

The Kentucky Distillers’ Association has welcomed a bill that will streamline direct-to-consumer shipping for alcohol producers in the US state.

The House Bill 415 was ‘overwhelmingly’ passed by Kentucky’s House of Representatives last week. It will now go forward to the state’s Senate for consideration.

Trade group the Kentucky Distillers’ Association (KDA) said the law will allow the use of third-party fulfilment centres to proficiently ship bottles; set a level playing field for state tax collection on distillery gift shop sales; and create guidelines for shipping alcohol samples to media, business and marketing partners, among other measures.

The legislation is an ‘important update’ to the direct-to-consumer (DTC) alcohol shipping measure that was implemented in 2020, the KDA added.

KDA president Eric Gregory said there are now more than 15 states considering introducing or extending DTC rules, which will create many new reciprocal markets to ship Kentucky-made spirits, wine and beer.

Gregory said: “This key update to last year’s bold direct-to-consumer reforms will keep Kentucky at the forefront of spirits shipping to meet increasing consumer demand and strengthen our rightful title as the one, true and authentic home for Bourbon.”

Gregory praised representative Adam Koenig, who sponsored the bill, for helping to “modernise” the state’s “archaic” alcohol laws.

The KDA had called for the implementation of HB 415 as part of a modernisation of tourism rules in the state.

The KDA said visitor numbers to distilleries on the Kentucky Bourbon Trail declined in 2020 for the first time in 21 years due to the Covid-19 pandemic. Visitor numbers to the state’s Bourbon distilleries plummeted 66% last year.

Tariff impact

In another release last week (23 February), the KDA also said that the US tariffs caused exports of Kentucky Bourbon to nose dive by 35% in 2020, with shipments to the European Union (EU) falling by 50%.

In 2018, the US imposed a 25% tariff on steel and aluminium from the EU. The EU implemented a 25% tariff on American whiskey and other goods in retaliation, which now has escalated into tariffs on Scotch, Irish whiskey, rum, brandy, vodka, Cognac, cordials and liqueurs.

Gregory warned the situation could get worse in June 2021, when the EU plans to double tariffs on American whiskey to 50%. The EU had typically been Kentucky’s largest global market for Bourbon and American whiskey, representing 56% of all exports in 2017, the KDA said. It now makes up about 40%.

Gregory said: “Our signature Bourbon industry has sustained significant damage for more than two years because of a trade war that has nothing to do with whiskey. And it will get much worse if we can’t deescalate this dispute.

“We are officially asking president Biden and his administration to work with their counterparts overseas, suspend tariffs and settle these ongoing trade disputes before more long-term damage is done. A speedy resolution is in the best interest of our country and our Commonwealth.”

The KDA cited figures from the Kentucky Cabinet of Economic Development, which showed that total exports of Kentucky Bourbon and other whiskies were valued at US$455 million in 2018. That number plunged to US$319m in 2020.

Export values to the EU have plummeted 48% since the tariffs took effect, from US$257m in 2018 to US$135m last year.

As the largest market within the EU for whiskey, the UK saw sales drop 50% from US$67m in 2018 to just US$33m last year. The largest EU export country is now Spain at US$49m, the KDA said.

Total American whiskey exports declined 29% from 2018 to 2020. US whiskey exports to the EU fell 37% over that period and dropped by 53% to the UK.