Tax equalization, expanded direct-to-consumer shipping and diversity, equity and inclusion (DEI) efforts are key focuses for the Distilled Spirits Council of the United States (DISCUS) in 2022, president and CEO Chris Swonger detailed in a press briefing Wednesday during the trade group’s annual conference in New Orleans, Louisiana.
Swonger was joined by Clarkson Hine, DISCUS chair, and Roland Guevara, DISCUS DEI Committee vice chair.
DISCUS Tax Fight ‘On the Side of the Consumer’
On June 7, hours before the DISCUS conference kicked off, Vermont Gov. Phil Scott signed H.B. 730, reducing the state excise tax rate for spirits-based, ready-to-drink canned cocktails (RTDs) from $7.68/gallon to $1.10/gallon. The bill also expands where RTDs can be sold from 81 state-operated stores, to more than 1,000 independent retailers, effective July 1.
DISCUS celebrated the law’s passage as another victory in its fight against “extraordinarily high” tax rates for spirits-based RTDs – the first of 2022 – “modernizing” state regulations that are still based on “historical practices,” Swonger said. Similar legislative moves were passed in Nebraska and Michigan last year, with the help of DISCUS.
“We are really, really, really excited about consumers around the country that are gravitating to spirits-based RTDs,” Swonger said.
“We’re on the side of the consumer,” he continued. “We want to make sure they’re not getting gouged, and when legislators learn about it and understand it… it’s a fairness issue.”
Last week, the Beer Institute (BI) – which has prioritized the fight against lowering spirits’ tax rates – published a blog post claiming changes were not in the interest of consumers, but instead would “increase out-of-state liquor company profits.” The BI noted that in the 12-week period ending February 20, the price of spirits-based RTDs increased in Nebraska and Michigan by +2.3% and +2.1%, respectively, in IRI-tracked off-premise channels, outpacing the -1.3% decline in the price of spirits-based RTDs nationwide during the same period.
Asked about those claims, Swonger said he had not seen those specific numbers, but noted that in Arizona, where “legislation is being debated right now,” the excise tax for 5% ABV spirits-based RTDs is about $0.28/can, while 5% ABV malt-based products are taxed at “1.5 cents” per can. Spirits are taxed at $3/gallon in Arizona, while malt liquor (including beer) is taxed at $0.16/gallon, according to the Arizona Department of Revenue.
“I can’t speak on behalf of what one company will do,” Swonger said. “But consumers are gravitating to these products, regardless, and just on face value, 28.5 cents a can versus a penny-and-a-half, it’s just not fair.
“We know we’re on the side of the consumer, and we’re on the side of right and fairness,” Swonger continued.
‘Ship My Spirits’ Platform Created to Modernize DTC Shipping
While Swonger said “there is no substitute” for the spirits industry’s “great distributor partners,” he said the world has “shifted dramatically” to e-commerce platforms to buy and ship goods, and direct-to-consumer (DTC) shipping “can be a great and strong complement to the three-tier system.”
DISCUS helped launch “Ship My Spirits” in March – a grassroots coalition created in partnership with the American Craft Spirits Association and the American Distilling Institute. The coalition guides consumers and industry members on how to engage with legislators to change state DTC shipping laws.
DTC shipping of wine is available in 47 states. Comparatively, complete intra- and inter-state DTC shipping of spirits is allowed in four states – Arizona, Kentucky, Nebraska and North Dakota – according to the Ship My Spirits website. In-state DTC shipping is allowed in Connecticut, Maryland, New Hampshire, Oregon, Pennsylvania, Washington and Wyoming, as well as Rhode Island (if purchases are made in-person). Alaska and Washington, D.C., allow only out-of-state DTC shipping, according to the site.
“I hear stories time and time again where tourists will visit a distillery in one state and fly back to the next state and are asking the distillery folks, ‘Could you have the product shipped? Because I can’t get access to it,’” Swonger said.
Swonger cited a July IWSR survey of 2,000 spirits consumers, which reported 80% of respondents were in support for DTC shipping of spirits nationwide. Three-quarters of respondents said wine and spirits should be subject to the same DTC shipping laws across states.
“DISCUS’ support for the three-tier system is tenfold,” Swonger said. “It is the foundation that has made the U.S. beverage-alcohol marketplace successful, properly regulated and all the above. But we also have a great deal of confidence in our great distilleries to do what’s right, to make sure their taxes are paid [and] to make sure product is being delivered to someone over legal drinking age.”
DISCUS and the Ship My Spirits coalition have active campaigns in three states currently considering new DTC legislation – Delaware, New York and Vermont. Combined, the three states have 207 distilleries, according to the Ship My Spirits website.
DISCUS Members to Fill 949 Roles with Black Candidates by 2030
Another significant priority for DISCUS this year is its DEI efforts. In May, the trade group announced its partnership with Pronghorn, a group dedicated to correcting inequity in the bev-alc industry, in which Diageo is an anchor investor.
While Black Americans represent 12% of alcohol consumers in the U.S., only 7.8% of the bev-alc industry’s labor force and 2% of executives are Black, according to DISCUS. And that lack of diversity “expands” to other minority demographics as well, leading to a “lack of diversity of thought” within bev-alc, according to Guevera, who also serves as director of cultural diversity, partnerships and engagement at Moët Hennessy.
“It’s impossible for us to talk about diversity of thought or new ideas or anything of the sort without having diversity in the room,” Guevera said.
In response, Pronghorn has committed to filling 1,800 roles over the next 10 years across suppliers, distributors and retailers, with Black candidates, “cultivating the next generation of leaders,” Guevara said. DISCUS and its members have committed to filling 949 of those roles.
“What Pronghorn is gonna help us do is get great candidates from the African American/Black community that should be competing for those roles,” Swonger said. “It’s going to be a great resource.
“This is a building block,” he continued. “We’ve got a long way to go with female leadership within the industry, we’re making progress. We’ve got a long way to go for other minority groups: LGBTQ and so forth. So this is a building block.”
Asked if DISCUS’ DEI efforts will be impacted by economic changes in the industry, Hine said the company has “ambitious targets” for DEI through 2030 “and beyond,” which are “not contingent on economic conditions” and are “business imperatives.”