Alcohol industry seeks to lock in pandemic gains

Brewers, distillers and restaurants across the country are pushing legislators to make permanent some of the emergency provisions states enacted as coronavirus lockdowns took effect last year, a catalytic event that did more to liberalize alcohol regulations than anything since the end of Prohibition.

As mayors and governors put their constituents under stay-at-home orders last year, most elected officials decided to include the alcohol industry on their lists of essential businesses. Many rolled back century-old rules that banned certain types of sales of alcohol, from home delivery to takeout.

Thirty-three states and the District of Columbia now allow to-go sales of alcoholic beverages at restaurants and bars. Before the pandemic, no state allowed to-go sales.

The new rules amounted to a two-tiered bet, experts and industry insiders said: Allowing more sales of alcohol could help save the bars and restaurants put most at risk by the economic calamity of lockdowns, while restricting access to alcohol would prove disastrously unpopular at a stressful moment of crisis.

“Alcohol laws have changed more dramatically in the last year than they have at any point since 1933,” said Ethan Davis, a former deputy assistant U.S. attorney general who wrote on the history of alcohol regulations at Yale Law School. “When you’re in a situation of total crisis where people are really suffering, like they were back in the 1930s during the Depression and now during the pandemic, people want easy access to alcohol in those situations, not difficult access.”

Alcohol industry lobbyists moved quickly to get their establishments included on the list of essential workers. Those lobbyists started in New York, where the state liquor authority ruled that Gov. Andrew Cuomo’s (D) decision to list bar and restaurant workers as essential extended to breweries, distilleries and wineries. 

“We were able to take that example and go state by state, and talk with governors and regulators in control states,” said David Wojnar, who heads state public policy at the Distilled Spirits Council. “What’s happened in the pandemic when things are locked down is that the consumer experience shifted to the home.”

For restaurants, the new rules were an essential balm at a critical time. Alcohol sales make up a substantial portion of a dining establishment’s bottom line. A survey by the National Restaurant Association estimated that restaurants allowed to sell alcohol to go hired back an average of one to two more employees than those that were not.

“Alcohol sales in general, whether it be cocktail or wine sales, depending on the concept are probably 40 to 50 percent of your regular dining revenue,” said Kelly Clancy, a partner at the Chicago-based restaurant group Lettuce Entertain You. “We were extremely excited, because we were looking for any sort of creative outlet to generate revenue. This allowed us to have a revenue stream we never had previously.”

But the industry itself has suffered along with the rest of the in-person retail sector. An analysis by the Beer Institute estimated the pandemic caused a nearly $20 billion drop in retail beer sales over the last year.

The new rules shed light on one of the nation’s most strictly — and unevenly — regulated industries. While the 21st Amendment repealed Prohibition in 1933, it left rules governing the industry up to the states. 

Today, the relics of Prohibition remain. Each state requires alcoholic beverage producers to follow different rules, and sometimes those rules vary even by county. 

Some states allow consumers to order alcohol shipped to their door, while others do not. Most states have liberalized laws allowing distilleries or breweries to operate tasting rooms, a new revenue stream that did not exist in the 1980s. 

To this day, there are still dry counties or cities across the South, Appalachia and Pennsylvania.

In Virginia, a customer visiting a distillery is only allowed to consume three ounces of liquor, unless they are in one of the nine counties that prohibit the retail sale of distilled spirits. At the bar down the street, that consumer can order all the shots they like.

“We still have a lot of rules in place preventing access to alcohol in different ways. In some states you can’t get alcohol in grocery stores, or in some states you can’t get alcohol delivered to your door,” said Jarrett Dieterle, a senior fellow at the R Street Institute and author of “Give Me Liberty And Give Me A Drink.” “When you have an exogenous shock like Covid, it makes you rethink a lot of public policy.”

Now, the industry is trying to make permanent the gains that occurred so suddenly. Legislation to codify to-go alcoholic beverages has been introduced in each of the 33 states that temporarily allowed it a year ago, though the progress of those bills has been uneven.

“We’d love to see cocktails to go made permanent throughout the states. We also recognize the legislative process,” Wojnar said. “The more stability that the bars and restaurants have knowing what the rules are will help them with their business models.”

It is unclear whether post-pandemic consumer trends will continue rewarding to-go alcohol sales, or if Americans will return en masse to bars and restaurants. Clancy said she expected some of her company’s new products — virtual cocktail classes and virtual wine tastings have been a hit — will continue.

But in the nine decades since the end of Prohibition, the legal trends have all gone in the same liberalizing direction — albeit far more glacially than the tectonic shift of the last year.

“It’s going to be very hard to put the toothpaste back in the tube. We have become such a consumer economy that expects things to be able to be delivered to us on demand,” Dieterle said. “Consumers just expect that convenience.”