The three-tiered beer distribution system has been an effective yet controversial method for alcohol distribution and regulation in the United States. When the 21st amendment ended prohibition in the United States, the decision of how to regulate alcohol was left up to the states to determine. Collectively, the states created a system that safely balances the access and control of a culturally significant but dangerous product.
In theory, the three-tiered beer distribution system is where brewers sell their beer to an alcoholic beverage distributor and the distributor markets, sells and delivers that beer to retailers who then sell it to consumers. The first tier is the manufacturer or brewery and the second tier is the distributor which range from small local wholesalers to larger multi-state corporations. The third tier is the retailer which would typically be a restaurant, hotel, grocery store, convenience store or a liquor store. The independent distributors within the three-tier system are essential because they act as the buffer between brewers and retailers ensuring that the distribution process is safe and that consumers get the best variety of beer possible.
Each tier is regulated and licensed separately from the other. Government mandated laws and regulations aim to prevent the return of the pre-prohibition era and its notorious reputation of alcoholism, gambling and crime by safeguarding the trade practices and handling of alcoholic beverages before they reach consumers. This creates necessary public health protections that lower the risk of dangerous, potentially tainted, “black market” alcohol from reaching consumers.
Every entity involved in each tier holds the other accountable and is responsible for ensuring that the laws and regulations are being enforced. In past years, the three-tier beer distribution system has shown its effectiveness by handling incidents, such as a recall on a major brewery, quickly and efficiently due to how thoroughly products are tracked across distribution channels in each tier.
This simple and transparent regulatory system is beneficial in numerous ways. It allows manufacturers equal access to the marketplace which they wouldn’t have had under any other system and creates vital commercial opportunities that ultimately helped spark the rise of craft beer with success stories like Samuel Adams. Instead of being dominated by larger competitors who aggressively control the distribution chain, smaller craft distillers and breweries are able to take advantage of better opportunities to increase sales through distributors and retailers nationwide giving consumers a greater choice of alcoholic products.
Additionally, alcohol sales from each tier streamline tens of billions of dollars in tax revenue to all levels of government improving education, infrastructure and the economy as a whole. The three-tier beer system also boosts consumer confidence because only licensed distributors and retailers can provide and sell alcohol. According to a 2012 survey, more than 70 percent of the public believe: states should regulate alcohol as a unique good, states should decide their own laws and regulations regarding alcohol and that states should have the right to regulate the manufacture, sale and distribution.
With the benefits come threats to the system as well. Although the alcohol industry and the public are in favor of regulating alcohol, advocates for deregulation argue that the current three-tier system is antiquated and that for each tier to run successfully, the cost of alcohol increases which adversely affects consumers. Deregulating would remove marketing restrictions which, in certain geographical areas, could lead to the dominance of larger companies and could eliminate a greater variety of alcoholic products for consumers. It would also create dangerous opportunities for tainted alcohol to get inside of the distribution stream which is prevalent in countries without regulatory systems in place.