A recent study by economists at John Dunham & Associates estimates that America’s wine and spirit wholesalers can expect to lose up to $921.4 million in uncollectible or difficult-to-collect receivables alone due to on-premise accounts such as restaurants, bars, clubs and other similar establishments adversely impacted by the “Shelter in Place” environment.
Roughly 60 percent of all sales within the 31 states that allow for the wholesale delivery of alcohol on credit are done on credit - meaning, wholesalers aren’t paid for delivered product until after a set period of time, on average, 30 days or less depending on that state's finance and tax regulation.
At the time of the study’s publication, 29 of these 31 states ordered a total, or near total shutdown of the hospitality sector in response to the COVID-19 pandemic. Closures of non-essential businesses, including restaurants, bars and hotels that routinely receive product on limited credit schedules severely limit the ability of these accounts to pay vendors. Social distancing requirements have also severely curtailed on-premise alcohol sales in areas that have allowed the establishments to remain open, also creating cash flow problems for those businesses.
Economists predict that America’s wine and spirit wholesalers could lose as much as $921.4 million in uncollectible or difficult to collect receivables from these accounts if all states that accept credit see closures of non-essential businesses.
As the hospitality industry reels from unprecedented total or near shutdown from the COVID-19 pandemic, and with an unknown number of these impacted businesses unable to reopen their doors, America’s family-owned wine and spirit wholesalers may be left holding a very large, never-to-be-paid bill.