Regulatory Accommodations in the Age of COVID-19

By: Brian D. Kaider, Esq.

The COVID-19 pandemic has affected virtually every industry, from government-mandated shutdowns, to limitations on occupancy, to changes in consumer behavior even in the absence of mandatory restrictions.  Some businesses, such as live theaters, have been completely shuttered; Broadway recently announced it will be dark until at least January 3, 2021.  But, breweries, wineries, and distilleries have the advantage of being both retail centers for their products and also manufacturers.  This dichotomy has allowed many to keep their doors open in some capacity throughout this emergency.  Every U.S. state has allowed alcoholic beverage manufacturing to continue.  How manufacturers have been able to get their products into the hands of consumers, however, has varied widely from state-to-state. 

  This article is not meant to give a complete status of the law in any, much less every, state.  Nor is it to point out that one state is doing more than another for the beverage industry.  Each state is facing its own unique challenges in the face of this pandemic due to differences in infection rates, hospital capacity, population density, economic conditions, political climate, culture, and various other factors.  So, it is not surprising that their approach to these challenges differ, as well.  It is also important to note that as circumstances change, so does the government response, so what is described below may have changed by the time this article is published, and may continue to change.

  Rather, this article is meant to illustrate that there are many options available to help industry members survive the crisis.  As conditions change in any given state, so to do the accommodations needed to help the industry.  So, for industry members who are in a state where the pandemic is growing, the information below may provide suggestions to take to state and local officials to seek further accommodations, as needed. 

Carry-Out

  Nearly every state is allowing manufacturers to sell their products from their licensed premises for off-site consumption.  The details, however, vary widely.  For example, many states require that the carryout alcohol be part of an order for food.  Alabama and Montana have limits on the amount of alcohol a customer may purchase to-go.  Maryland, on the other hand, suspended these limits during the emergency. 

  Most states require carryout alcohol to be in “sealed containers,” though even that definition varies.  In many states it includes growlers, but in Alabama only if the local jurisdiction allows draft beer, in Maine only if with a food order and in the brewery’s own branded growler, and in Nebraska only if the growler has a capacity of no more than 64 ounces.  In Colorado, a to-go cup with a lid may be secured with tape that says: “WARNING: DO NOT OPEN OR REMOVE SEAL WHILE IN TRANSIT.”  In Vermont, manufacturers may sell beverages in a paper cup with a lid that has a hole for a straw…but may not provide a straw.  Nebraska allows these cups and straws can be provided, but not inserted into the cup on the premises.  In Virginia, due to supply chain issues, the state allowed for “alternate/novel” containers, such as flip-top bottles.  Missouri originally required “factory sealed” containers, but changed the rule in June 2020 to allow for “retailer packaged” beverages.

  The manner of carryout sales varies, too.  In Arizona, Montana, and South Carolina, licensees are allowed to operate a drive-thru window for beverage sales.  But, in Washington State, they can have a “walk-up” window, but not a drive-thru.  In Wisconsin, the carryout sale must be conducted face-to-face, not over the phone or internet for pickup.

  Some states, such as Arizona, Arkansas, Idaho, Michigan, Missouri, and Nebraska are also allowing mixed drinks or cocktails to go.  California and Maine require mixed drinks to accompany a food order and Maine and Virginia have limitations on the amount of alcohol in the to-go container. 

Curbside Pickup

  In order to keep patrons from congregating inside the tasting room to pick up beer, some states have allowed curbside pickup, where the customer orders the product online or over the telephone and drives to the licensee’s parking lot.  The licensee then brings the order out to the customer’s car, often putting the order in the trunk so there is no direct contact between employee and customer.  At least Alabama, Alaska, Arizona, Hawaii, Kansas, Maine, Maryland, Missouri, Montana, Nevada, New Jersey, Oregon, South Carolina, Vermont, and Virginia allow curbside pickup.  Tennessee only allows curbside pickup for beer and wine, not spirits.  But, New Mexico expressly forbids it because all sales must be made on the licensed premises, which does not include the parking lot.

Delivery

  Even before the COVID-19 pandemic, Ohio, the District of Columbia, and Missouri allowed manufacturers to deliver beer, wine, and spirits to consumer’s homes.  Since the outbreak, many other states have followed suit, at least on a temporary basis, including Arizona, Arkansas, Colorado, Idaho (beer and wine only), Illinois, Indiana, Iowa, Michigan, Montana, Nebraska, New Jersey (beer and wine only), Oregon, Vermont, Virginia, and Washington.  In Oklahoma, the Alcoholic Beverage Laws Enforcement Commission was allowing breweries and wineries to do home delivery in April/May 2020, but the legislature stepped in and gave that right only to retailers, not manufacturers.  Most states that allow home delivery require that the delivery be made by an employee of the licensee, not by a third party service.  Idaho, Illinois, and New York, however do allow third party services, though in Illinois, mixed drinks can only be delivered by third party from licensed retailers, not from distilleries.

  Most states also require that payment be made in advance either over the phone or online.  California, however, is allowing payment, even in cash, to be made at the point of delivery, but will not permit a “mobile sales apparatus” to sell and deliver in real time in a public space.  In other words, one cannot set up a “food truck” type of service for alcoholic beverages.

  The majority of states also require that the delivery be made directly to a residence or other building.  North Carolina, on the other hand allows breweries and wineries to deliver within 50 miles of the licensed premises and to make deliveries outside a home to any place the customer requests, except to other licensed premises.

  In Maine, New Hampshire, and New York, the delivery must accompany a food order, though, to borrow a phrase from the movie “Pirates of the Caribbean,” some may be treating that requirement “more as a guideline than an actual rule.”  Hawaii has four individual county liquor commissions and liquor control departments.  Three of the counties have allowed brewpubs to deliver beer along with a food order, the fourth has not, as of this writing.

  Maryland is not only allowing manufacturers to deliver their own products directly to consumers, but also products from other manufacturers, who may not have the resources for home delivery.   At least two breweries in another Northeastern state have teamed up to share their delivery resources, though it is unclear whether there is any official or unofficial approval in that state.  In Ohio, if a manufacturer also has an “A-1-A” liquor permit, it may sell and deliver other brands of beer, wine, spirits, and mixed drinks (though mixed drinks must accompany a food order). 

  Some states have also begun to allow breweries, wineries and distilleries to ship their products to consumers within their own state using UPS or Federal Express (not the U.S. Postal Service).  These include at least Vermont, Maryland, New York, and North Carolina.

Other Accommodations

  When the COVID-19 outbreak began to spread in the United States and hand sanitizer quickly went out of stock in retail outlets, many distilleries and breweries sprang into action.  Licensing commissions and legislatures scrambled to provide necessary approvals for these companies to pivot their manufacturing activities.  This created a valuable revenue stream while tasting rooms were closed and provided a service to communities in need of protection.  In some cases, states allowed breweries to transfer fermented wort to distilleries for distillation and mixing with other ingredients and then to take the product back to the brewery for bottling and distribution.  One word of caution, however; at least one brewery in Hawaii received a citation for “inducement,” because they were giving a free bottle of sanitizer to anyone who purchased their beer.

  When taprooms were ordered closed in Ohio, the Department of Commerce recognized that some small breweries did not have bottling or canning capabilities and would struggle more than those who were able to package their products and sell for carryout or delivery.  So, the department created a procedure that would allow a manufacturer to have another manufacturer bottle or can their products for them.  Ordinarily this would be a violation of Ohio law.

  As various states begin their tiered reopening plans, many are still either prohibiting indoor dining/drinking or only allowing a limited percentage of normal seating capacity.  To further accommodate manufacturers, several states, including: Alaska, Arkansas, New Jersey, Ohio, Oregon, Pennsylvania, and Virginia, have been much more lenient about allowing outdoor seating areas to make up for lost capacity inside.  In many cases, states have allowed manufacturers to rope off sections of sidewalks, parking lots, and even closed portions of streets to enable outdoor seating.  New Jersey has even gone a step further and allowed breweries to occupy outdoor spaces that are not directly attached to the brewery, such as nearby parks.

  Finally, most states have been very flexible with licensing renewals and tax filings, extending deadlines and fast-tracking application processing. 

Final Thoughts

  No one knows how much longer this crisis is going to last.  As the number of new coronavirus cases falls in one state, it rises in another and the experts seem to agree that we are still in the midst of the first wave of this virus with a second likely to hit during flu season.  It is reasonable to expect that we will see state and local governments react to changing circumstances with an ebb and flow of restrictions on people congregating. 

  The manufacturers who have fared the best, so far, are the ones who have done two things: 1) applied early for federal, state, and local grant and loan opportunities, and 2) found creative ways to pivot their business to maximize their opportunities under restricted conditions.  Being based in Maryland, I would be remiss if I didn’t give a shout out here to True Respite Brewing Company.  Based in Rockville, Maryland, they were the creators of the craft beverage delivery platform, Biermi, which is now being used in at least 29 states.  This type of innovative thinking both in the private sector and in state and local governments will be critical as we navigate the COVID-19 emergency.  If worsening conditions require tighter restrictions in some states, hopefully the information presented above will be useful in discussions with licensing commissions and legislators as ways they can help accommodate manufacturers. 

  Lastly, with the constantly shifting regulatory structure surrounding this industry, it is essential that licensees stay in contact with their insurance companies and their attorneys.  A state may change the rules to allow a manufacturer to deliver alcohol to consumers’ homes or to serve its products in a parking lot, but that does not necessarily mean that the manufacturer’s insurance policy will cover those activities.  Further, the devil is always in the details.  In each of the states mentioned above, there are conditions and terms that must be satisfied in order to engage in the permitted activities.  Always consult with a knowledgeable attorney before engaging in a newly allowed process.

  Brian Kaider is a principal of KaiderLaw, a law firm with extensive experience in the craft beverage industry. He has represented clients from the smallest of start-up breweries to Fortune 500 corporations in the navigation of regulatory requirements, drafting and negotiating contracts, prosecuting trademark and patent applications, and complex commercial litigation.

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