New Hampshire is Rejecting All Retailer Direct Shipping Applications
May 10, 2018
By Jeff Carroll, Vice President of Product and Marketing
If you’re a retailer currently shipping wine to New Hampshire under a valid Direct Shipper permit, expect a rejection letter come renewal time. Over the last several months, the New Hampshire Liquor Commission (NHLC) has rejected both all new applications and all renewal applications coming from retailers. Retail businesses that have held permits for years are scrambling for answers right now after getting rejected on their recent renewal requests. According to the NHLC, the answer is simple. Those retailers must cease shipping to New Hampshire consumers.
E.J. Powers, Spokesman for the NHLC, clarified that wineries that are licensed as producers in their home state should not be affected and that the NHLC is only targeting “brick and mortar retailers”. According to Mr. Powers, 80 of the 1,069 licensed direct shippers are retailers. “The vast majority of wineries shipping to NH (nearly 1,000) and their customers will not be affected.” A few wineries have been mistakenly denied renewal requests already, but hopefully those issues will be resolved shortly.
Control System Competition
The NHLC believes it has the statutory authority to deny all retailer permits, even though Title XII, Section 178:27, I of the New Hampshire Revised Statutes (RSA) allows for retailers to obtain direct shipper permits. The NHLC points to Title XIII, Section 176:11 of the RSA, which states the following.
II. In the event that the commission determines New Hampshire liquor revenues are being diverted by actions taken by persons holding either liquor and wine representative licenses, liquor and wine vendor licenses, or direct shipper licenses who compete directly or indirectly with the commission for market share, the commission may take such marketing or merchandising action, or both, as it deems necessary, including sanctions against the competing entities.
If you read through the minutes from any of the recent NHLC Division of Enforcement & Licensing Meetings, you’ll find a section called “Direct Shipper Applications Recommended for Commission Denial”, with each application from retailers stating the reason for the denial as “because they are a retailer”, pursuant to RSA 176:11, II.
The NHLC did a review of December 2017 shipments from one “billion dollar retail operator” and found that the retailer shipped 115 products into New Hampshire. Of those products shipped, 60% are already available at NHLC stores, according to Mr. Powers. Of the 47 products not carried at NHLC stores, 36 were private label products. “So, this retailer is only offering 11 products we don’t carry – that’s 9%”. The NHLC estimates that, in total based on extrapolating these numbers, this amounts to losses of $3-$4 million in annual revenue.
Mr. Powers also notes that “New Hampshire was the first control state in the country to allow direct shipping of wines” and that the goal was to “help wineries gain access to new consumers and grow their business and to enable consumers to discover new wines”. Retailers, according to Mr. Powers, are “abusing their direct shipper designation by shipping name-brand products into New Hampshire that are otherwise available at NHLC stores.”