Craft beer cheaper without 3 tier system?

I am not an economist but I drink enough to qualify as a beer drinker.

Look at the beer market in the 70's and 80's. Same laws. Same big macro brewers, only less powerful.

Macro Brewers have a long and sordid history, ask any knowledgeable craft beer fan. There is not an invisible hand in this highly regulated market place. There is nothing transparent when a company so incredibly large that about half of the beer bought in America is produced by one company, soon to be close to 60% if the merger goes through. Millions of dollars to influence regulation. Buy elected officials, literally write their own legislation. All done legally of course. We are seeing a real effort to bury mid sized breweries or at least control their destiny.

Beer is not a typical business in America. Rational markets are not rational at all.

We have come a long way and still so far to go.
Cheers.

 

What you said pretty much applies to every huge industry in America. Have you ever wondered why marijuana is still illegal AND on Schedule I? Pharmaceutical companies are lining the pockets of politicians (along with private prisons and a few others). This is literally EVERYWHERE. When people say money runs the world, it is not the least bit hyperbole.

 

Why is it that they teach in schools that Congress writes the laws? I believe that's a disservice to our students and therefore our country. Lobbyists write the laws. Literally. They draft them and hand them to congress, state legislatures, bureaucrats, city counselors. Everyone knows what a lobbyist IS, but no one seems to get exactly how deep they are in the process.

 

OK folks...long post ahead. I'd recommend pouring a fresh pint first and maybe some popcorn as well.

This is a very thoughtful response. Please allow me to use my 2+ decades of beer wholesaling experience in an attempt to break it down.

In the end, we may agree or we may agree to disagree.

 

"If it's the best, the free market will create it". What "free market" are you speaking of? Some concept or an actual functioning economic factor? Beer, wine, and spirits are heavily regulated, taxed, and otherwise legally directed. If you seriously believe that a disbanded regulatory environment for alcoholic beverages would be wise, please think again. I'm no staunch 3 tier system apologist, but having worked within the industry for decades, I do realize that any repealing or replacement of this system would create distribution havoc- unless a wise an prudent new plan was ready to be in place. What would be your plan be?, or "the free market" plan for the brands and how they might end up being distributed? Fedex, UPS? I'm all for reform and tweaking, but the way that 50 states currently move product around works fairly well. 50 states is like 50 countries, not to mention the rest of the world.

 

I find it interesting you assume the wholesaler would disappear if the three tier system were dropped.

What would my plan be? I don't need a plan. I own neither a brewery nor a wholesaler. Each could do as they chose. I would assume some brewers would still use wholesalers. Other types of manufacturers do. Wouldn't you agree?

50 years ago, there was no computer business. Somehow, computers get to consumers without being regulated to death.

 

Like it or not, we got to where we are because of alcohol's sordid past in this country.

The following is a mixture of what I believe to be true or largely true and opinion.

Pre-prohibition, the (I assume) largely unregulated alcohol industry resulted in too many men drinking away the family income. ("Too many" means enough to cause a movement to spring forth.) Unlike what most today seem to believe, the temperance movement that eventually resulted in prohibition was not a religious movement, but was a women's rights movement, aligned with the women's suffrage movement. The connection to women's rights was the drunken louts not providing for their families. Oraganized religion joined in, but they were not the impetus that resulted in prohibition.

During prohibition, alcohol was not actually prohibited; it was merely illegal (fine point, I know). This means the demand was served by a variety of corrupt individuals and organizations. This resulted in the well-known mob connections, Al Capone, the Untouchables trying to enforce the law (as the story goes), etc.

Once prohibition was repealed, there was also an effort to clean up the alcohol industry from the corruption that resulted from the black market under prohibition. This resulted in the hodge-podge of laws and regulations we are still dealing with today.

By now, however, various vested interests both for and against different attempts to dismantle some of these laws and regulations have motives that have no connection to the original purpose of the laws and regulations. They merely have money to be made by keeping the status quo or money to be made by changing it, even it they make statements that sound noble, it is usually about money. Vested interests are hardly all private business, either. The state taxing and regulatory agencies are also about keeping the money flowing and keeping their jobs, etc.

When was the last time you bought a mattress? You can choose a national brand (e.g. Sealy) from your local furnature store; you can choose a national brand (e.g. Sleep Number) from a company store; or you can choose an integrated manufacturer/retailer operation (e.g. Original Mattress Factory).

I doubt alcohol could ever get to that level of business model variety and/or consumer choice, but it is due to its sordid past and history, not due to any inherent difference between brewing beer and distributing it to market and making mattresses and distributing them to market.

 

Corporations may hold too much power and influence. That is not a debate for a beer forum. The status of marijuana in US is certainly a good topic to discuss, but irrelevant. Does one grower control 50% of the production btw? Any product? Anywhere?

The fact that one company monopolizes nearly every other sale of the product is unheard of in every other business. That kind of market share and influence is a whole other world.

I have no solution to the three tier system, and I'm not even sure it's really broken. But I know for certain that free market ideals simply do not play out in a highly regulated industry that is dominated by very few giants.
Cheers.

 

While the NBWA might claim that, I doubt you could find any lawmakers who created the state(not Federally)-mandated Three Tier laws primarily in the post-WWII period who justified them as being necessary for an "efficient" distribution system.

Did anyone claim that in this thread? A system of wholesale distribution can be more efficient for some brewers - certainly the majority of brewers who voluntarily choose to use distributors even in the many states that allow self-distribution probably think so.

Well, different laws - most of the most objectionable parts of what many lump into the "Three Tier" laws are the franchise laws- most of which date from that period of 1970s-1990s. In part, those laws evolved because of the growing power of big brewers who weren't the same - what was once a group of 6 or 7 National brewers has now been winnowed down to a mere two - AB and MC. And, at the same time, the number of independent distributors has shrunk from over 5,000 in the '70s to around 2-3 thousand today (< the Feds and the NBWA disagree on the total for some reason). Partly due to the disappearance of the other big brewers (Stroh/Schlitz, Heileman, S&P, Pabst for all intends) and because both AB and MC have "encouraged" their distributors to merge or buy one another out.

Also, many of the other three tier laws are very different today - besides the many states that have expanded or created an allowance for self-distribution for smaller brewers (other states always allowed), every state has amended its laws against the "Tied House" (< the primary prohibition in the Federal Repeal laws - there was no mandate for a Three Tier System in the 21st Amendment or the FAA Act) to allow brewpubs - Brewery>Customer - eliminating both the wholesale and retail tier. Many other states now even allow retail off-premise sales by breweries.

The AB-SABMiller merger will have no initial effect on the US beer market or AB's market share since it has already been agreed that MolsonCoors will buy SABMiller's share of MillerCoors AND the rights to all the SABMiller imported brands. MillerCoors will still exist, with its ~26% of the US market - it will just have a single owner.

 

I do not assume that wholesalers would disappear. The regulatory and bureaucratic mess caused by what you seem to be proposing would be a nightmare. Just so you know, it's bad enough as it currently is and working to make things work more smoothly has always been my goal.

 

But having competition at the Brewer level and competition at the Retail level is only so good, if there is limited competition at the Wholesale level. If all Brewery X's beers are getting to all of your local retailers from the same wholesaler, they can only go as low as their costs from that single wholesaler.

 

My issue is that as the Macro brewers consolidate, they consolidate power. As they increase market share, they increase power. As they collect ever larger revenues, they distribute more to politicians and have more power over legislation.

The distributors aren't the Girl Scouts neither and I have little sympathy for their controlled business.

As for market share, globally and domestically the level of control of a single product is just absurd. I think you'll agree we wouldn't tolerate 2 cell phone carriers. 2 auto makers. 2 pharmaceuticals. 2 banks. 2 insurers. etc. it's not very good for brewing either.
Cheers.

 

I would be happy to pay those prices!!

But in all seriousness the aspect of Wholesale Distributors is the same in other states. I simply want to be able to have the convenience and prices of buying beer at a supermarket (or convenience store or ...) that is available in other states.

If you are satisfied with the stupid PA alcohol laws (both liquor/wine and beer) I have just one request: please keep that to yourself and don't send any letters to your legislators.

Cheers!

 

No, I'm not happy about having to shop at both beer distributors for cases (and now limited 12 packs) and then different places for 6 packs/singles.

But I'm not sure that prices would get much lower than Wegmans and Weis already have. They are already a lot cheaper than bottle shops/bars.

 

I am pretty confident that if all supermarkets (and convenience stores and ...) are permitted to sell beer in their regular aisles that the increased competition will result in lower prices. This happens in every state in the US which permits wide spread selling of beer at a number of different type of retailers (including Costco). Have you never bought beer off of a regular supermarket aisle in another state?

Cheers!

 

Well, no, not quite unheard of.

USA market shares:
American beer market:
MillerCoors about 27 percent share
AB InBev about 45 percent share
Total 72

American soft drink market: (numbers approx from reading a bar chart)
PepsiCo about 30 percent share
Coca-Cola about 41 percent share
Total 71

 

Yes, I have. Which I agree would be good for "everyday drinking" beer, but likely special release beer or beer from smaller local breweries would still require a trip to a beer store. As there is only so much shelf space, likely dominated by big breweries.

According to Wegman's website, their price for a 12 pack of Yuengling in Montgomeryville, PA store is $10.99. Princeton NJ, $9.99. Buffalo, NY, $9.99. Alexandria, VA $10.99. Westwood, MA, $10.99

 

Oh, no it's not - economies of scale is what makes independent wholesale distribution of multiple brewers' beer more efficient than those small brewers all doing it themselves.

"Free markets"? Oh, as MNAle pointed out above, like the relatively unregulated soft drink industry?

 

I don't know about the other states but in NJ you have to add 7% sales tax to that $9.99.