Over the last couple of years, a supposedly new industry has blossomed in the United States—direct to consumer alcohol delivery. Services like Postmates, Instacart, and Drizly all provide streamlined apps for thirsty consumers to order their next drink as easily as they might call an Uber. London based IWSR, a market analysis firm for the drinks business, values the global ecommerce alcohol business at 24 billion USD by the end of 2021. Surely lockdown and the pandemic have bolstered this growth as it is up 42% from 2020. By itself, the delivery company Drizly was acquired by Uber for $1.1 billion in February 2021.
This is big money and perhaps a harbinger of a sea change in how we buy alcohol (and where we consume it) in the future. Bars and liquor stores now have to compete with alcohol sold directly to consumers and delivered to their doorstep. But just how new is this threat? As it turns out, this is the second wave of direct-to-consumer alcohol sales in the history of America’s booze industry. Back in the era of pre-prohibition, when dry laws differed by county and state, direct-to-consumer sales were common due to legal loopholes in dry states. Anyone in a dry state could purchase beer, wine, or spirits by mail from businesses operating in wet states.
From the 1880s until 1913, Americans were buying alcohol in the mail in states where the sale of alcohol was prohibited. Liquor dealers advertised in newspapers or sent around circulars advertising their wares. They shipped the out-of-state hooch on the rails and they hired men known as drummers to take the orders for liquor before it was brought to the state. In his book Shaping the Eighteenth Amendment, Richard Hamm reports, “Other firms relied on soliciting drummers to generate their business. Such agents took ‘orders for liquor in every nook and corner of prohibition states.’ Students and others were recruited to work for commissions of 50¢ per gallon and $1.50 per case.” Railroads and other express services were complicit, although some stayed out of it. Wells Fargo would not carry liquor into the dry state of Kansas. Advocates of temperance and Prohibition who had worked so hard to make their states dry were furious.
At first, the legality of such shipments was in question. The ASL (Anti Saloon League), which was the most legally-minded of the temperance organizations, was uproarious at the de facto elimination of dry status in the states where these shipments were received. They pushed the issue to the courts but were rebuffed twice, once in 1888 with the Supreme Court’s ruling on Bowman v. Chi. & Nw. Ry. and again in 1890 with Leisy v. Hardin. Both of these cases upheld that dry states could not regulate the shipment of spirits because it hindered interstate commerce. States do not have the right to regulate commerce between states. As the Constitution clearly lays out in Article I, Section 8, Clause 3 (and the Supreme Court had early confirmed): [The Congress shall have Power . . . ] To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.
The sale of liquor into dry states from wet states continued until Congress enacted the Wilson Act in 1891, which allowed states to apply their laws to goods entering their commerce. In other words, dry states could prohibit the sale of alcohol into the state, once it entered the state.
The Wilson Act stood and complicated the shipment of liquor until the Supreme Court once again intervened in 1989 with its ruling on Rhodes vs Iowa. The ruling, which addressed a shipment of liquor from Illinois into Iowa that was intercepted by authorities before reaching its destination, concluded “It is enough to say that the power to regulate or forbid the sale of a commodity, after it has been brought into the state, does not carry with it the right and power to prevent its introduction by transportation from another state.” The ruling meant that alcohol could once again be shipped from wet states to consumers in dry states, so long as it was not resold and was in the original packaging.
Once Prohibition came into force, the doctor was one of the only people who could buy and sell alcohol in the country. This is a prescription form for alcohol.
The result of Rhodes was another 15 years of delivering alcohol to the doorsteps of drinkers in dry states. The ruling blew the prohibition laws of dry states so wide open that shippers in wet states would ship alcohol without an actual recipient in mind. Cash-on-delivery stores would receive the packages and sell them to any buyer in the dry state. Hamm writes, “Many packages arrived addressed to fictitious consignees and were stored in the express warehouse, available to anyone who wished to ‘claim” them.’” And a 1908 report on the ASL writes of West Virginia, “the law was poorly enforced, with the “speak-easy” and “C.O.D.” business everywhere” For the tee-totaler, the barely legal C.O.D. had the same moral repugnance of the illegal speakeasy.
In a 1909 win for prohibitionists, Congress legislated the prohibition of C.O.D. alcohol sales. Alcohol had to be delivered to the person who ordered it, but it could still be shipped to dry states. Finally, the direct-to-consumer era of alcohol sales ended in 1913 with the Webb-Kenyon Act. The law, which would be reaffirmed in the 21st Amendment, stated that “spiritous, vinous, malted, fermented, or other intoxicating liquor [which] is intended, by any person interested therein, to be received, possessed, sold or in any manner used, either in the original package or otherwise,” if in violation of the law of the state it was in. Shipping alcohol came to an end. Six years later selling alcohol would go on its infamous 13 year hiatus during Prohibition.
If Prohibition has been off the books since 1933, why has it taken booze-laden Uber drivers to deliver alcohol to our front doors again? For starters, pre-Prohibition direct-to-consumer shipments were always from out of state. Most delivery services today are delivering beer, wine, and spirits that have already been introduced into the commerce of the state, that is they are just delivering products from local package stores or warehouses.
The framework for out-of-state shipments of alcohol today is a mosaic. The legality of shipping depends on the destination as well as the kind of alcohol being shipped. Alabama prohibits shipments of alcohol “from without the state” altogether. On the other end of the spectrum, Florida, Hawaii, Kentucky, Nebraska, New Hampshire, Rhode Island and DC allow all shipments. There is plenty of gradient in between, but interestingly, many states restrict the shipment of wine.
Our modern alcohol delivery services are not even attempting to ship from out of state, but the framework for instate shipments is still complicated. The alcohol industry is segmented into tiers that are rigidly controlled. Producers (or importers) sell to distributors, distributors then sell to retailers, and finally retailers sell to thirsty folks on the street. Like shipping from out-of-state, there is a wide array of differences between states controlling alcohol sales in state. The business model of Drizly and other alcohol delivery services is simply to know all of these legal nuances and to find the space where delivery to consumers is possible.
At the end of the day, shipping alcohol is just a legal headache. Whether as a distributor in a wet state undermining the dry laws of your neighbor, or an app-based service delivering for the liquor store a couple blocks over, liquor is being delivered down a very narrow and winding legal pipeline. It takes a more legal and a more sober mind than mine to ensure that shipping a bottle of wine from Missouri to Maine won’t land you in jail.
Hamm, Richard F. Shaping the Eighteenth Amendment: Temperance Reform, Legal Culture, and the Polity, 1880-1920. University of North Carolina Press, 1995.
Jackson, J.C. “The Work of the Anti-Saloon League.” The ANNALS of the American Academy of Political and Social Science, vol. 32, no. 3, 1908, pp. 12–26., doi:10.1177/000271620803200304.
Mendelson, Richard. From Demon to Darling: a Legal History of Wine in America. University of California Press, 2010.
“RHODES v. STATE OF IOWA.” Legal Information Institute, Legal Information Institute, www.law.cornell.edu/supremecourt/text/170/412.
https://tile.loc.gov/storage-services/service/ll/usrep/usrep170/usrep170412/usrep170412.pdf
https://scholarship.shu.edu/cgi/viewcontent.cgi?referer=https://scholar.google.com/&httpsredir=1&article=1599&context=student_scholarship
https://www.fedex.com/content/dam/fedex/us-united-states/Small-Business-Center/images/2020/Q1/Direct_to_Consumer_Wine_Shipping_State_Reference_Guide_0719_1617352393.pdf
https://www.ncsl.org/research/financial-services-and-commerce/direct-shipment-of-alcohol-state-statutes.aspx
https://www.theiwsr.com/beverage-alcohol-ecommerce-value-grows-by-42-in-2020-to-reach-us24-billion/
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