IWSR: How is alcohol legislation changing in the wake of the ecommerce boom?

Mark Willingham Uncategorized

IWSR: How is alcohol legislation changing in the wake of the ecommerce boom?

Source: IWSR

July 5, 2020

As ecommerce develops into a critical channel for alcohol sales, questions are being asked about what legislative repercussions there might be in markets such as the EU, US and India.

One of the biggest consumer shifts during the COVID-19 pandemic has been the widespread move to ecommerce. Established spirits and ecommerce markets, such as the EU, have been quick in providing enhanced online shopping solutions for consumers in recent months.

Meanwhile, a number of more traditional markets that previously prohibited alcohol ecommerce have started to amend their regulations.

In May 2020, India, the world’s second largest spirits consumption market, launched ecommerce trials for the first time in a bid to quell overcrowding in liquor stores, which followed the relaxation of the country’s lockdown measures. Maharashtra, Punjab, West Bengal and Chhattisgarh were the first adopters, with several other states later following suit.

The specifics of the operations in India will vary from state to state, with some offering more sophisticated logistics and others maintaining a more rudimentary framework. A number of state-backed apps have been launched with a focus on click-and-collect and home delivery services. Some states are also allowing third-party operators to deliver alcohol. In June, tech giant Amazon had received authorisation to deliver alcohol throughout West Bengal. The industry will be hoping India’s measures are made permanent once the market normalises, but the prospects of this happening are uncertain.

The Latvian government has similarly passed temporary measures to open up the beverage alcohol ecommerce channel, and there are signs that these measures will be made permanent. Meanwhile, South Korea is expected to introduce new regulation permitting click-and-collect measures, which would allow consumers to buy alcohol online and then collect it from shops, mostly convenience stores. Previously, South Korean consumers were allowed to reserve alcohol online for collection, but they could not pay for it online.

Some countries have been reticent to adopt alcohol ecommerce due to safeguarding concerns, and specifically the task of making sure robust age-verification checks are in place. “In some markets, there are concerns around the ease of access to alcohol that ecommerce can allow non-LDA consumers if not properly managed,” explains Guy Wolfe, IWSR’s strategic insights manager. “This could well lead to tighter regulation on online alcohol sales moving forward.”

As was the case with South Korea, Poland allows consumers to reserve alcohol online for store collection, but they must pay and undergo age verification in person. Poland’s local beverage alcohol industry is lobbying lawmakers to amend the legislation, but an outcome remains to be seen. Russia is another big alcohol market that does not offer a ‘true’ ecommerce channel for alcohol since it requires shoppers to pay in store.

Safeguarding concerns also persist in markets where alcohol ecommerce has been legal for some time, such as the EU. As it becomes easier for consumers to buy alcohol online, and as more consumers become comfortable using ecommerce platforms, there is a risk that the industry could face challenges if proper regulation not followed. On-demand providers such as Deliveroo are aiming to make this process easier and more robust by including a function in their app that prompts drivers to verify that their customer looks over the age of 25. If they do not, the driver can enter their date of birth into the app, which then tells them if the customer is of legal drinking age.

“It could be the case that as the more digitally developed nations around the world demonstrate that alcohol ecommerce can offer a safe and secure environment, the more historically reluctant markets will follow suit,” says Wolfe.

But as alcohol ecommerce gathers momentum around the world, lawmakers are having to play catch-up by amending legislation and closing existing loopholes. For example, this month Chicago changed its liquor tax policy to require that duty is paid on direct-to-consumer (DTC) wine sales shipped to people with a Chicago address. Previously, city liquor tax only applied to physical sales.

The US – which has a strict three-tier system – has been particularly active in amending its alcohol legislation in recent months. From cocktail deliveries to curb-side pick-ups, the US has initiated a wave of temporary legal relaxations to help the industry during the pandemic, and capitalise on consumers broad move online. “In the US, the rise of ecommerce coupled with COVID-19 is leading to a liberalisation of alcohol policy, for example allowing bars and restaurants to sell alcohol to-go and more direct shipping to consumer across states that previously had restrictions,” says Brandy Rand, COO of the Americas, IWSR.

One of the biggest temporary changes to the US’s legal system for alcohol has been the approval of DTC spirits sales in some states, including Kentucky and Virginia. The move has largely been seen as a lifeline for small distillers that rely on sales from the on-trade and on-site tasting rooms – two channels which remain only partially open.

While DTC sales are common in the US wine industry, legislative red tape has historically prevented spirits from moving into the space, and now distillers would like to see the measure made permanent. However, trade bodies are not advocating the dismantling of the three-tier system, rather an evolution of it, claiming that DTC sales for spirits can sit alongside the current system as an additional channel.

If the move is made permanent, it will mark one of the most significant changes to US alcohol law since Prohibition.