Rigged System: Out-of-State Billionaires Spent Millions Lobbying the Legislature to Lock Out Local Craft Distillers

Small craft distillers in California are still sounding the alarm on the government-protected distribution monopoly owned by out-of-state billionaires who are locking small producers out of the market, Aaron Bergh, a 10 year veteran of the alcohol industry and owner of Calwise Spirits Co. in Paso Robles, told the Globe in July.

Craft distillers say direct-to-customer has become a significant revenue channel, and a way to reach customers without relying on distributors who may deprioritize craft distillers’ products.

Bergh explained that the alcohol distribution laws set up after prohibition ended still plague distillers. The government-mandated three-tier system requires distillers to sell exclusively to licensed wholesalers, who then sell to retailers. Distillers cannot sell to consumers directly. This creates a government-protected middleman layer that has resulted in a small number of distributors acting as gatekeepers to the market.

California has made it clear it does not want billionaires telling the state what to do, so why allow out-of-state billionaire distributor wholesalers to wag the dog?

California, as with most states, operates under a post-Prohibition three-tier system that primarily requires distillers to sell to licensed wholesale distributors, who then sell their product to retailers.

This structure was intended to prevent tied houses and other abuses, but craft producers argue it creates government-protected gatekeepers.

After Republic National Distributing Company (RNDC) exited the California market in 2025, the remaining large players—Southern Glazer’s Wine & Spirits and Reyes Beverage Group—consolidated further influence. Small craft brands have reported difficulty securing meaningful distribution, as larger houses prioritize high-volume national brands.

Without robust direct-to-consumer options, small producers are more dependent on wholesalers who may deprioritize them in favor of bigger, more profitable national brands. This dynamic is common across beverage alcohol and has been criticized as creating barriers for startups while benefiting established players and middlemen, VinePair reported in 2020.

Bergh told the Globe that in 2015 a bill was passed to allow distillers to sell directly to consumers, and allow distillers to offer tastings, as wineries have done for decades. The Craft Distillers Act of 2015, via Assembly Bill 1295, was signed into law by Governor Jerry Brown in October 2015.  This legislation leveled the playing field for California’s craft distillers, specifically those producing under 100,000 gallons per year, compared to wineries and breweries, which had long enjoyed more direct-to-consumer privileges. Before this, distillers faced stricter three-tier system restrictions and couldn’t easily sell bottles on-site or charge meaningfully for tastings.

But the direct sales are another story – big distributors don’t want to give up their government-protected position as middleman between distillers, retailers and the consumer, Bergh says.

During the COVID-19 pandemic, California’s Department of Alcoholic Beverage Control (ABC) issued temporary regulatory relief that allowed licensed craft distillers to ship distilled spirits directly to consumers. This began around March 2020 to support businesses hit hard by tasting room closures and restrictions.

Bergh said this was extended several times, but now California’s craft distillers are about to take hit courtesy of the big-money distributors and weasel lawmakers.

CalMatters just reported last week that by January 1, 2027, California craft distillers’ deliveries could end. “Distillers say powerful alcohol companies, the wine industry and Teamsters killed a possible extension of deliveries.”

Worse than that, it appears lawmakers have been stringing craft distillers along.

“The influential, well-funded groups lobbied the Legislature behind closed doors this year to block legislation that would have made permanent pandemic-era rules that allowed craft distillers to ship spirits directly to their customers,” CalMatters reports.

Assemblyman Josh Hoover (R-Sacramento) tried to amend one of his recent bills AB 2211, to let small distillers continue shipping directly to their customers, but the big money distributors’ lobbying efforts appear to be winning over lawmakers.

“We oppose any effort to make DTC (direct to consumer) permanent,” the Wine & Spirits Wholesalers of America, the California Beer & Beverage Distributors and the California Family Beer Distributors wrote in a joint statement to CalMatters.

Craft distilleries’ direct shipping “was always meant to be temporary pandemic relief, and it’s expiring exactly as designed, six years later” said the groups, which represent local and national companies that move many of America’s best-known beer, wine and liquor brands. They argue that after the law expires, spirits can still be delivered to customers through services such as DoorDash. DoorDash is listed as a member of the Wine & Spirit Wholesalers of America on its website.

“The distribution lobby went on the record that they will never support allowing distillers to ship to their customers. After claiming they have been negotiating in good faith over the years, this statement is damning,” Aaron Bergh told the Globe. “I cant help but feel that either legislators have been stringing us along or the distribution lobby has been stringing legislators along. The optimist in me wants to believe it’s the latter and some legislators will have the courage to step up and do the right thing for us.”

Calmatters continued, largely echoing what Bergh said, “Craft distillers say they’ve tried to work with the groups blocking their bill to address their concerns, but they have gotten nowhere.

In the meantime, Cris Steller, owner of Dry Diggins Distillery in El Dorado Hills, “has already started pulling back on shipping bottles to his customers because the Legislature won’t budge. ‘I don’t want to keep putting money into a program that’s going to get yanked,’ he said.”

“Legislators have a choice,” Bergh added. “They can keep protecting a system that benefits out-of-state billionaires’ mega-distributors, or they can give California’s own entrepreneurs and consumers a fair shot. The federal government has launched investigations into these anti-competitive conditions and a dozen other states have recently passed laws allowing their distillers to ship. It’s time Sacramento caught up – California should lead the way.”