Craft distillers seek looser sales rules after an 8% drop in 2025 volume

U.S. craft distillers are pushing for broader access to consumers after another year of weaker sales, arguing that demand for their products remains stronger than the current system allows them to capture.

Two recent reports from the American Craft Spirits Association, one produced with Park Street and another with Sovos ShipCompliant, describe an industry that continued to contract in 2025 while making market access its top policy goal in 2026. The findings show declining sales and employment at small independent distilleries, alongside strong consumer support for direct shipping of spirits and fewer restrictions on where distillers can sell their products.

According to the association’s annual Craft Spirits Data Project, craft spirits sales volume fell 8% in 2025 and sales value declined 3.7%. It was the third straight year of declines. The craft segment accounted for 11.7 million nine-liter cases and $7.3 billion in sales.

Employment also fell sharply. The report said the number of full-time workers in the craft spirits industry dropped to 21,285 in 2025 from 28,628 in 2024.

The data point to an industry that is still under strain, but not uniformly shrinking in the same way across all businesses. The number of active craft distilleries declined by 150 in 2025 from the prior year, yet the distilleries that remained in business sold an average of 800 more cases each, an increase of nearly 18%. Emily Pennington, the association’s chief executive, said that pattern suggests many of the closures involved the smallest operators, including some with little or no storefront presence and limited marketing.

Pennington said the mood among distillers has improved even as conditions remain difficult. She said unpublished sentiment findings from the association’s 2026 survey showed 42% of distillers describing themselves as optimistic, up from 40% in 2025. Another 31% said they were neutral, up from 25%, while 27% said they were pessimistic, down from 33%.

That shift in sentiment appears to reflect adaptation rather than recovery. Pennington said many distillers spent the past two years adjusting to slower demand, higher costs and a tougher wholesale market, and some now have a clearer sense of how to operate through those conditions.

The second report, focused on consumers, strengthened the association’s argument that the industry’s problem is not simply a lack of interest. The survey found that 68% of legal-drinking-age Americans and 81% of craft spirits consumers want laws changed to expand direct-to-consumer shipping of spirits. Among craft spirits consumers specifically, 82% said they want to be able to buy craft spirits legally through direct shipping.

That level of support has stayed high for several years. The same measure stood at 80% in 2022, 87% in 2023, 85% in 2024 and 84% in 2025, according to the report.

Legal access remains limited. Only 10 states and Washington, D.C., currently allow spirits shipping, compared with 49 states and Washington for direct wine shipping. California’s direct-to-consumer shipping law for spirits is set to expire on December 31.

Pennington said the data support the association’s position that falling craft sales are tied in part to barriers between small producers and consumers. She said demand exists, but many buyers still cannot legally order products from distilleries in the same way they can order wine in most of the country.

The association’s agenda goes beyond shipping. Pennington said its highest state-level priority is broader market access, including rules that affect tasting rooms, bottle sales, cocktail sales, farmers markets and self-distribution. In some states, small distillers still face limits on selling bottles or drinks from their own premises, a restriction the group says can make a business model much harder to sustain.

Self-distribution is another focus. Pennington said a handful of states are expected to examine self-distribution rules in 2027, and the association plans to support those efforts. For small distillers, the ability to place products directly with retailers can be especially important when securing a wholesaler is difficult or when a distillery wants to build a local market before trying to expand.

That pressure has increased as the wholesale tier has grown more unstable. Pennington said the fallout from the collapse of Republic National Distributing Company, the nation’s second-largest distributor, is still developing. Because the company handled thousands of spirits, wine and beer brands, its failure added to a scramble for representation across the beverage industry and left many smaller suppliers competing for space in already crowded portfolios.

The issue could matter well beyond craft spirits. Distributor consolidation, state shipping laws and retail access rules can shape whether small alcohol producers of all kinds can reach consumers directly or remain dependent on a shrinking number of middle-tier partners. For the broader beverage sector, the fight over spirits shipping and self-distribution may become part of a larger debate about how wines, beers and liquors move through state-regulated markets.

The association is not calling for the end of the three-tier system, which separates producers, distributors and retailers. But Pennington said the current structure is not working well for many small distillers, especially during distributor transitions. Research cited by the group indicates that suppliers often see sales fall when they move from one distributor to another, a risk that becomes more severe when many brands are seeking new homes at the same time.

Some distillers are trying to offset those pressures with new business models. Pennington said smaller producers are sharing resources, offering contract distilling services and buying other brands to make better use of idle production capacity. Others are narrowing their focus to their home states or leaning more heavily on tasting room sales, where margins are usually higher and the sales channel is easier to control.

Ready-to-drink cocktails remain one of the stronger parts of the market. Pennington said some distillers have reshaped their businesses around canned or packaged cocktails after seeing stronger demand there than for traditional 750-milliliter bottles. She also pointed to ready-to-pour bottled cocktails, amaros and unusual liqueurs as categories that may appeal to consumers looking for simple at-home drinks made with two or three ingredients.

Distillers are also relying more on online sales data, social media and other direct consumer feedback to decide what to make and how to sell it. Pennington said the businesses performing better in the current market tend to have a clearer understanding of their customers and the occasions they are trying to serve.