While baseline 10% tariffs on all imports to the United States and higher tariffs on specific countries — up to 125%, in China’s case — are affecting the experienced costs of goods for consumers, they’re also affecting small businesses in multiple, sometimes conflicting, ways.
“I just got a notice today from my glass distributor … they used to have a U.S. factory, but they closed that. They’re located in India. They will be affected by tariffs,” said Derrick Mancini, the owner of Quincy Street Distillery, 39 E. Quincy St., in Riverside. “Some of my raw material, particularly some of the malt I purchase, comes from Canada. That will be affected by tariffs.”
Mancini is hopeful that a potential change in state law that would allow distillers to ship directly to consumers could help.
The distillery, which Mancini opened in 2012, sells whiskey, gin, bourbon, vodka and other spirits.
He told the Landmark the tariffs, which would increase the prices of imported spirits, could make the market volatile. He said the “first thought” might be that less foreign competition would help his business.
“But there are a couple ways in which it might not work that way. For example, our hardest problem is that we have to compete with large manufacturers, who can produce product at a far lower price because of scale. If they see a reduction of foreign exports because of tariffs, it will, potentially, create a glut of domestic product in the marketplace and might result in their prices going down. For a small producer, that’s not helpful,” he said.
Mancini added that even the distributors the distillery works with could be negatively impacted.
“We generally have to work with small distributors. Many small distributors, the bulk of their distribution activity — this is actually the case for my distributor — may not actually be distribution of a product that’s domestically produced,” he said. “It may be that a significant portion of their portfolio is import, and they could be destroyed by these tariffs.”
Additionally, the on-and-off nature of the tariffs means the business can’t predict what will happen, he said, explaining: “It’s not just a question of tariffs, but, ‘Do we know what the tariffs are going to be?’ And the answer, of course, is, ‘We have no effing idea.’ We have no idea what’s going to happen to the marketplace, so we’re all sitting out with this risk, and we don’t really know what’s happening.”
However, a bill in the Illinois General Assembly could alleviate some of these issues. Senate Bill 1618 would amend the Liquor Control Act of 1934, established after the end of Prohibition, allowing distilleries to ship product directly to consumers and self-distribute while maintaining on-site bars. Mancini said the Quincy Street Distillery self-distributes a small amount of product already due to its specific state license.
“I would argue, probably, that self-distribution is the only way we think, currently, we can survive because we’re growing that self-distribution as we’re seeing the amount of product move through our distributor has been dropping,” he said. “For us, we think it’s critical.”
He said the ability to self-distribute could increase the number of products the distillery offers through retailers.
Mancini said he often receives requests to have products shipped to potential customers or to others as a gift, but it’s not allowed. Instead, he said the business has found a loophole that, if the bill is passed, would no longer be needed.
“If I want to sell my products by mail order in the state of Illinois, I have to work with a retailer who is outside the state of Illinois,” he said.
Right now, the distillery sells about seven different products through Shots Box, which is based in Los Angeles.
“California is a ‘dock-touch’ state. That means, even if I, just in time, ship product to that retailer, it must go through a distributor. It must go into the distributor’s warehouse — ‘touch the dock’ — before it goes to the retailer,” he said. “I have to ship it to a California distributor, who then ships it to the California retailer, who then ships the product back to somebody in Illinois. That’s silly, right?”
The ability to ship products directly could increase interest in the products it can’t offer online now, which might signal to local retailers that they should carry those products, he said.
If the state legislature does not pass the bill, Mancini said it could make the distillery less likely to survive.
“I don’t have exact numbers, but we’re probably doing something between 60% and 75% of the business that we were doing prior to the pandemic,” he said. “When the pandemic hit us, we dropped down to 20%. We only survived at all because we had [Paycheck Protection Program] money. Just before the pandemic, we were just about hitting break even after many years, and, now, we’re slowly recovering. But we are not at break even.”
