Illinois craft distillers face tough future without changes to liquor law

Liquor regulations written at the end of Prohibition are strangling Illinois’ craft distillers. A new bill is trying to change that.

Under current Illinois law, craft distillers of spirits cannot simultaneously self-distribute and have on-site, full bars. They cannot engage in direct-to-consumer shipping. That’s all thanks to the state’s Liquor Control Act, a law implemented after Prohibition in 1934.

Senate Bill 1618 would remove those restrictions, allowing distillers to do all those things. The Class 3 licenses this proposed bill creates would allow for more economic opportunity in existing distillery businesses and draw more business in statewide.

Craft distilleries are primarily small businesses that employ anywhere from three to 50 people. They found in 2024 their retail sales were down 3.6%, according to the American Craft Spirits Association. Craft distillers make 25.3% of their revenue from on-site sales, and this percentage is growing.

Because of Illinois’ restrictive liquor regulations, local distillers are missing out on some of the benefits of this on-site boom.

Despite being the 10th largest producer of wheat and second in the production of corn in the U.S., Illinois has only 0.47 craft distillers per 100,000 residents – the least in the Midwest and 6th-least in the nation.

Unlike Illinois, other Midwestern states have taken advantage of their crops with business-friendly policies, making it easier for distillers to start small businesses and sell their liquor.

States allowing self-owned full bars and direct-to-consumer shipping have successfully been counteracting downward craft distillery market trends.

One example of this direct-to-consumer boom has been California. In 2020, because of COVID-19, the state of California allowed direct-to-consumer shipping for its 184 craft distillers. Since then, the number craft distillers more than doubled to 379 in August 2024.

“The state of the industry has changed drastically for lots of reasons,” said Nick Nagele, co-founder of Whiskey Acres Distillery and vice president of the Illinois Craft Distillers Association. “For us small craft distillers to be competitive, we need some additional routes to market that still include our distribution partners yet will also give us some flexibility to fill the gaps to give our customers better service and have higher visibility in the marketplace.”

According to Nagele, failing to pass the bill could have dire consequences for the craft distilling industry.

“I would estimate that if we don’t past this bill, anywhere from 10 to 15% of Illinois distilleries will go out of business within the next 12 to 18 months,” he said.

In a 2024 poll, 76% of Illinois Craft Distillers Association members said that direct-to-consumer shipping would make the biggest impact on their business. There were 71% who said they would be at risk of closing or downsizing if the bill were not passed.