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Old 08-20-2008, 09:11 PM   #1
benko
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Default Three Tier Distribution System: Good or Bad?

I've been trying to educate myself on this subject, and have seen some conflicting information. I'm talking about the traditional three tier alcohol distribution system put into effect in most states after the repeal of Prohibition. This means that the producer (brewer) can only sell to a distributor, who can only sell to a retailer, or some variation on that theme depending on the state. My question is, is this good or bad for small craft breweries? On one hand, a small brewery doesn't have the clout to really deal with distributers, who don't give them nearly the attention or service that their "big" clients get. Not being able to sell directly to the public or distribute yourself seems to be a bad thing for the little guys. I know that some states do allow self-distribution for breweries under a certain size.

On the other hand, some say that the three tier system prevents the "big guys" from cutting deals with the big retailers directly, preventing a monopoly.
This makes sense as well, but isn't there a little of this going on already (i.e. I read that for a while, some of the big guys threatened to pull their contracts with distributors if they didn't stop selling other beers. After the Supreme Court ruled that illegal, they started offering "incentives" to the distributors to only push their beer.)

So, is the three tier system good or bad for the little guys?

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Old 08-20-2008, 09:22 PM   #2
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I say no if it is MANDATED by law like it is in Texas. It makes it very difficult for the little guy to get started.

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Old 08-20-2008, 09:42 PM   #3
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Quote:
Originally Posted by benko View Post
On the other hand, some say that the three tier system prevents the "big guys" from cutting deals with the big retailers directly, preventing a monopoly.
B A D

Ask yourself, what is it about this industry that it has to have this particular arrangement? Is Dell computer forced to sell to a computer distributor? Ford? GM? Farmers? Airlines? Coca Cola?
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Old 08-20-2008, 09:50 PM   #4
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Quote:
Originally Posted by olllllo View Post
B A D

Ask yourself, what is it about this industry that it has to have this particular arrangement? Is Dell computer forced to sell to a computer distributor? Ford? GM? Farmers? Airlines? Coca Cola?


But not one of those industries deal with that evil alcohol

It was started to stop monopolies, but that is no longer the problem
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Old 08-20-2008, 09:57 PM   #5
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Every brewer I've talked to in Oregon says it is a major blockage to growth. Not only are you locked into one distributor, you are locked into their network. If you change to another distributor, you lose all of your existing handles (bar placements).

On the retail side, if your distributor doesn't deliver, you're hosed. And the customer that didn't get his kegs for his wedding isn't going to blame the distributor.

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