What is the three-tier system of alcohol distribution?
1. Producers
2. Distributors
3. Retailers
Alcohol Distribution in the United States has had a deep and controversial history during the early decades 20th century, with the Prohibition banning the sale of alcohol in the country altogether from 1920 to 1933. This era was marked by organized crime running the illegal alcohol trade, people crafting numerous homebrewed alcoholic mixtures as substitutes, and public outcry over the ban itself.
Eventually, Prohibition was repealed, in its place, a new policy called the three-tier system. This new system aims to regulate how alcohol is sold and is a policy that is still being followed today. With that in mind, here’s what you need to know about the Three-Tier System, and how it has impacted alcohol distribution in the United States.
What is the Three-Tier System?
The three-tier system is a highly regulated system of alcohol distribution that is divided into producers, distributor, and retailer. This system aims to ensure that each tier would adhere to the rules and regulations imposed by the government, and make sure that the consumers would only be purchasing alcoholic beverages from licensed distributors and that these products would be safe for consumption and retail.
The three-tier system is divided into these specific roles:
Producers
Also known as manufacturers and suppliers, this tier is in charge of producing alcoholic products for distribution. This tier covers companies that brew and packages beer, wine, and other alcoholic beverages. These producers would then send their products to licensed alcohol distributors in the country.
While most brewing companies are only tasked to produce alcoholic beverages, some smaller breweries have been allowed to become distributors themselves with the help of laws present in some states. These breweries ensure that the products they are producing must be of the best quality and must be safe for distribution and consumption in the market.
Distributors
Also known as wholesalers, distributors are tasked with purchasing alcoholic products from the producers. These alcohol distributors work with the cooperation of the United States government to ensure that these alcoholic beverages are fit for retail and that beverage taxes are paid accordingly.
Alcohol distributing companies vary in size, from small operations usually identified as “mom-and-pop” business, to large distribution companies that distribute millions of liters of alcohol on a yearly basis nationwide. After distribution, alcohol products can be sold by licensed retailers purchased by consumers in their establishments.
Retailers
The final step of the three-tier system, retailers purchase products from their local alcohol distributing companies and sell them to the consumer. These products are then sold at retail locations, which include convenience and liquor stores, groceries and supermarkets, restaurants, wine shops, and gas stations.
Alcohol retail laws can vary depending on which state you are in, as some states restrict the sale of liquor in certain establishments. These are also some states that allow alcohol to be sold on almost any type of retail chain or establishment. Policies on selling wine and beer are also noted by retailers, as some states do not permit an establishment selling both types of beverages. Along with specific laws and policies on what type of alcohol can be sold, retailers also ensure that the customers are at the right legal age to purchase and consume alcohol.
Advantages of the three-tier system
The three-tier system was crafted by the United States Government to ensure that alcohol distribution would be done by a licensed alcohol distributor and producer. The law has provided a number of advantages that have helped the country’s alcohol industry grow and thrive. One of the advantages of the system is that it helped connect breweries, distribution companies, and producers to each other and form one massive network that allows them to work together and create a coherent and efficient alcohol distribution process.
The process also prevents alcohol monopolies from being established, thus making the market competitive. This aids in the continued growth of the industry, as it ensures that each section of the three-tier system is able to generate a substantial amount of revenue. Product quality and safety are also monitored more thoroughly using this system, as producers and distributors have policies that keep these products in check.
Key Takeaway
The three-tier system of alcohol distribution has not only helped regulate the sale and production of alcoholic beverages, but it has also helped the industry thrive by creating a system of breweries, distributors, and retailers that coordinate with each other, allowing each one to benefit and generate revenue. The system continues to be used today, and with the alcohol industry growing and thriving in the United States, these laws should remain in place for the foreseeable future.