They Don’t Want You To Drink What You Want To Drink

Where the consumer is concerned, there is basically one important position: “Allow me to get the beer, wine and spirits I want.”

Yet this most basic interest of the consumer is continually thwarted by the  predominant method of alcohol sales and distribution in the United States: the legal mandate that all alcohol flow from producer to distributor to retailer. This method of separating the production, distribution and retail sales aspects of the alcohol industry—known as the “Three Tier System”—has come under attack by wineries and wine lovers as the proliferation of wine products and interest in wine has grown over the past 20 years. Wine lovers found that the three-tier system’s greatest impact was to thwart their ability to get the products they want. Wineries found that the greatest impact of the three-tier system was to thwart their ability to get the products to consumers that wanted them.

The result was an expansion of direct shipping rights for wineries and consumers. While this has aided consumers and wineries, the continued mandate in most states that wine meant to be sold on retail shelves must flow through a distributor rather than the winery selling it directly to a retailer, still hampers consumer access to wine and wineries’ access to retail markets.

So as the craft brewing industry continues to grow and consumers take a greater and greater interest in these artisan products, it should be no surprise that beer consumers and artisan brewers are confronting the same systemic barriers to commerce that wineries and wine consumers have faced.

It should also be no surprise that the same interests that have defended the archaic, anti-consumer and anti-free trade three-tier system for wine are defending this system against calls for reform by craft brewers and lovers of craft brews.

Today in Washington, a collection of defenders of the Three Tier System will get together to talk to themselves about why the three-tier system is such a good thing, despite it thwarting the interests of consumers and free trade in general. The New American Foundation will sponsor this talkfest celebrating the Three Tier System. And not surprisingly, there will be no representatives of the consumer there to offer a counter point.

So, I urge you to take a look at the new paper issued by the Competitive Enterprise Institute entitled “Avoid A Beer Monopoly By Setting The Market Free: How the Mandatory Three Tier System Inhibits Competition.” Authored by Michelle Minton, a tireless proponent of free market policies and pro-consumer interests, the paper outlines the various ways by which the three-tier system hurts consumers and hurts the marketplace for craft beer.

Delving into the intricacies of systemic alcohol politics isn’t the first thing that enters the mind of consumers, the alcohol-related media or even those working in the industry. But it should be. It is critical that we all arm ourselves with real information about the industry we work in and the way the products we love become available to us. If we don’t, we will find ourselves at the mercy of those who have interests in direct conflict to consumes and a vibrant marketplace for artisan beer, wine and spirits.

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7 Responses

  1. They Don’t Want You To Drink What You Want To Drink (by Tom Wark) | SMART about wine - December 12, 2012

    [...] three-tier system was to thwart their ability to get the products to consumers that wanted them. Read on … -33.892967 18.620531 Share this:TwitterFacebookLike this:LikeBe the first to like this. This [...]

  2. gdfo - December 13, 2012

    Where I do believe that the three tiered system is archaic, there is another aspect that I seldom see discussed. I have seen products sold in the 3 tier system and the on/off-premise pricing was pretty much in line with the pricing concept from the producer. Also I have been in wineries and seen what they sell products at that were much higher than what a distributor currently sold that same wine at. Then I went online and saw the same thing. So, the winery, selling direct, was charging more than the distributor and did not have the expenses that the distributor had.

    I have also read and heard that the 3 tiered system keeps out products from smaller producers with high quality products. I also know that there have been or was an increase in the smaller boutique distributors that would offer products from those same boutique producers.

    If the individual States do not have the duty/right to control alcoholic beverages in their State, than who does?

    I will download and read Ms. Mintons work. Hope it addresses what I brought up.

  3. Doug - December 13, 2012

    Mark,

    The three tier system is abused by many large distributors (and is indeed abusive to many of their winery producer ‘partners’), but when done right it not only controls a controlled substance, but also provides on the ground marketing and support, which is essential to retailers and restaurants. A small or mid-size winery just doesn’t have the personnel to market their products around the country and get them in the hands of potential buyers, much as they wish they did.

  4. Tom Wark - December 13, 2012

    Doug,

    I’ve heard a lot of people snub the idea of self distribution for wineries and suppliers noting just what you did: They can’t sell and market their products in different states by themselves.

    However, shouldn’t they have the right to try if they like?

    For example, suppose a winery chose to focus on only 2 or 3 markets such as Chicago, Dallas and Illinois. Surely they might hire a local rep to market their wines (and maybe other suppliers’ wines), then fulfill the orders on a truck. They could easily charge the retailer or restaurant more than FOB, but less than the wholesale price. This might work particularly well for a winery that tends to only send one allocation a year to an account.

    But the point is that a winery ought to have the right to distribute the wine themselves, without a wholesaler, whether difficult or not.

  5. Terroirist: A Daily Wine Blog » Daily Wine News: Changed Perspective - December 14, 2012

    [...] From the Competitive Enterprise Institute’s Michelle Minton, How the Mandatory Three-Tier Distribution System Inhibits Competition. (H/T: Tom Wark.) [...]

  6. Daily Wine News: Changed Perspective | Wine 2020 - December 14, 2012

    [...] From the Competitive Enterprise Institute’s Michelle Minton, How the Mandatory Three-Tier Distribution System Inhibits Competition. (H/T: Tom Wark.) [...]

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