Tuesday, February 19, 2008

Three Tier Contemplation

Everyday I hear someone in the Beverage Industry speak about the Three Tier System. In beverage terminology, the three tier system is the arrangement carved from the repeal of prohibition that sets legal boundaries between breweries, wholesalers, and retailers. Section 2 of the 21st Amendment to the Constitution of the United States gives the actual states authority to regulate the production, importation, distribution, retail, and consumption of alcohol beverages inside their own state lines. In most states, breweries can't own distributors, distributors can't own retail establishments, retailers can't own breweries, and so on. The restrictions imposed upon each tier are in place for reasons of control, such as taxation, consumption, and licensing.

Controls and restrictions on the beverage industry were set in motion by men of vision and moderation. They knew the excesses of pre-prohibition times all too well. Every corner saloon was owned, or tied to a brewery. This made the brewer a retailer. Therefore, it is my opinion that brewers' influence upon retailers was the fatal mistake that brought about prohibition. This influence over retailers is the reason why a "middleman" or distributor tier was created. Today, I see many instances of the breweries circumventing laws enacted to prevent the abuses of alcohol:

1.Suppliers never go empty handed into a sales presentation with a convenience or grocery store representative. It is common practice for them to give a gift when starting the meeting. Guess what...these retailers now have their hand out every time we see them.
2.Breweries giving away coupons to consumers. There are laws on giving away free or reduced price product.
3.Suppliers forcing distributors to host taste challenges in local bars. It is against the law in most states to buy a consumer a beer.
4.Breweries hiring sales forces that interact with consumers in stores and bars.
5.Breweries hosting websites that any teenager can gain access to.

Face it, the big brewers are trying to sidestep the wholesale tier. Wholesalers...never, ever think that brewers or retailers are your "partners". The 21st Amendment prevents this from happening. I love to see Brewery CEO's tout the praises of the three tier system. What a load of BS. It's painful to realize our business is more about politics than how hard you actually work.

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