In a world where the spread of COVID-19 is increasing and where consumers and businesses alike have encouraged “social distancing,” it is not without many sacrifices. The wine industry and other service-based businesses are certainly not immune and must be creative during a time where consumers and workers are staying home. Many wineries, breweries, distilleries, and cideries have made a tough decision to close their on-premises spaces or tasting rooms in an attempt to take proactive and admirable measures without knowing when their doors may re-open.
Below On Reserve outlines some ideas that alcohol beverage industry members can consider now as a means to be proactive and to continue to have cash flow while discouraging large group interactions as much as possible. Additionally, during a time period that may show significantly more “down time” for industry members, we address important internal options that winery operators can consider. Since we know and understand that this is an increasingly challenging time for business owners in the wine industry, we are offering courtesy consultations to industry members and readers of On Reserve who may need assistance with regulatory compliance, strategic planning, trademarks, trade practices, or other related matters. Please contact me at lazahn@winelawonreserve.com if you are interested in working together on any of the matters listed below or other projects you may have in mind.
- Consider Taking Advantage of Direct to Consumer Shipping: Encourage social distancing by alerting your customers of direct to consumer shipping capabilities. This is a great way for consumers to avoid social contact and order their favorite wines while bringing some revenue in the door. At a time when consumers should be staying home and are more likely to be cooking meals at the home, enjoying wine during home cooked meals can be a great way for consumers to connect and for wine sales to remain as consistent as possible. Always review the requirements of the state to which you are shipping, as each state that allows direct to consumer shipping has its own licensing, reporting, ordering, shipping, and other requirements. On the plus side, a good 40-something states do allow some level of direct to consumer shipping of wine.
- Local Delivery: Further encourage social distancing for your local crowds by offering local delivery to customers. Again, always check state and local regulations to ensure conformity with laws and other requirements. For example, some states may require holding a transportation permit or license in order to transport alcohol beverages from one location to another. Additionally, be advised that some states may not allow a winery licensee to deliver wine directly to consumers or may restrict how a consumer can order wine for delivery (i.e., perhaps not through the Internet and only through phone).
- Curbside Pickup: Where allowed, curbside pickup may be a great option to limit person-to-person contact if you’ve closed your tasting room to the public. Once again, always check state and local regulations to ensure compliance.
- Gift Card Purchases: Encourage consumers to purchase gift cards that can be used for purchases in your winery’s tasting room, toward its wine club, and other sales. Again, always check state regulations to ensure that state law allows gift cards to be used toward the purchase of alcohol beverages.
- Wine Club: Roll out a wine club if you have not already done so or further promote your wine club to your winery’s followers. Again, check state requirements if you have not already done so with respect to wine club allowances and limitations.
- Product Development: Consider working on new products for upcoming seasons. Maybe even venture into the world of wine-based hard seltzers and see if this is a product that meets your winery’s profile. If you are interested in discussing wine-based hard seltzer development and regulatory considerations, please e-mail me at lazahn@winelawonreserve.com for an initial, courtesy consultation.
- If Your Tasting Room Remains Open: If your tasting room remains open, consider offering guests single-use paper wine tasting guides to avoid the spread of contamination. Of course, thorough cleaning procedures should be followed regularly with respect to any hard surfaces, glasses, utensils, etc. Consider removing any baskets for crackers or other containers where tasting room guests would have to reach into and potentially soil or expose other food items for other guests. (In some states, serving food items is mandated in tasting rooms; consider options like pre-wrapped packages of crackers or pre-wrapped, small cheeses that the guest will have to unwrap themselves.) Tasting room operators should wear gloves to prevent spread of contamination; consider also offering hand sanitizer in any on-premises and employees-only spaces. Be sure to review local- and state-level health regulations to remain as compliant as possible (the above is not, by any means, an exhaustive list of precautions wineries and other operations should take).
- Compliance Checkup: Now is a great time to consider checking in on your company’s compliance. When was the last time your federal basic TTB permit was updated? Are all of your formula wines compliant and/or do the listed ingredients and method of manufacture still match how you produce wines? Do all of your wines at or above 7% alc/vol have COLAs that match the printed labels (or fall within allowable revisions)? Are you behind on any operational reports or excise tax returns? Are there new states that your winery has wanted to ship to but have not taken the steps to do so? It can often be the case that, unless there is a designated person who continually handles and remains up-to-date about regulatory compliance matters, many alcohol beverage businesses may not have current or accurate records with either the federal government or the state. Now is a great time to focus on internal paperwork and on ensuring that your winery is as up-to-date as possible with its permits and filings. If you are looking for assistance with compliance-related matters, please contact me at lazahn@winelawonreserve.com for a courtesy, introductory consultation on how we can work together to bring your compliance up-to-date.
- Social Media Update: Social media is another area of compliance where wineries may be lacking with respect to regulatory requirements. Do you regularly see accounts owned by other industry members and wonder why or how these posts comply with TTB advertising regulations? Or maybe you are more concerned about your own account. Who is in charge of your company’s social media accounts (Facebook, Twitter, Instagram, YouTube, etc.) and how familiar are they with TTB’s regulatory requirements on advertising? Have they been thoroughly trained to be aware of advertising regulations, which often do extend to social media platforms? Do all of your social media accounts (and posts) comply with federal and/or state regulations? Again, now is a great time to consider brushing up on compliance for your social media accounts. If you are looking for assistance with social media compliance, please contact me at lazahn@winelawonreserve.com for a courtesy, introductory consultation on how we can work together to bring your compliance up-to-date.
- Familiarize Yourself with TTB’s Policies on Returned Alcohol: Very generally speaking, the federal alcohol beverage regulations prohibit the sale or purchase of alcohol with the privilege of return. Of course, there are some limited exceptions. In its industry newsletter for March 13, 2020, TTB recognized the ongoing COVID-19 outbreak as well as the fact that many industry-related events (e.g., festivals, parades, concerts, etc.) have been cancelled. The agency announced on Friday that it will not consider returns of alcohol purchased to sell during these cancelled events to violate federal consignment rules as long as the products were not purchased or sold with the privilege of return. Of course, TTB noted that a supplier or wholesaler is not required to accept the return (within the above scope).
- Review Contractual Force Majeure Clauses: With so many events and commitments in the coming weeks cancelled, now may be a great time to review and familiarize yourself with your force majeure clauses in any contracts your winery may be party to. Simply put, a force majeure clause guides a contractual relationship when unforeseeable events occur that limit or prevent one party from fulfilling its contractual obligations. Is your winery obligated to provide a distributor (or retailer) with a certain amount of bottles that you may not be able to fulfill? Do you contract produce/custom crush for third parties and are concerned about fulfilling your obligations? Or perhaps you are committed to selling grapes (or apples or pears or another agricultural product) to a buyer and you’re concerned you may not be able to meet the agreed-upon quota? Does the force majeure clause guide the relationship and, if so, is it worded strongly enough to protect your winery’s best interest? (Does the contract even have a force majeure clause?)
- Call Your Insurance Broker: Check in with your insurance broker to see if there are any insurance polices that may be outdated or if your winery may need to consider additional policies under the current environment.
The above are just some ideas of steps industry members can take now to put their business in a better position during what may prove or continue to be a challenging environment. Of course, the above in no way discounts the importance of following updates from institutions like the Centers for Disease Control and Prevention or from ensuring employees are reminded of proper sanitary routines (regardless of whether or not your property remains open during this time).
For more information on wine or alcohol law, please contact Lindsey Zahn.
DISCLAIMER: This blog post is for general information purposes only, is not intended to constitute legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.