Three Tier System

Go check out the documentary Beer Wars if you already haven't. The beer distributors are the #1 lobbyists in the country in terms of total contributions.

The spirits industry also faces the same 3 tier system. Fortunately, alcohol has always been margin heavy, even after years of federal, state and local excise tax increases. Most distributors are private companies that dwarf their suppliers in terms of revenue and lobbyist muscle. If there was ever a time to challenge the system it will be in the near future with a band of Craft brothers. Just look at Wa state, just recently they disbanded the state owned control regulations in favor of open state much like CA. Who's next, Oregon?

 

The existence of brewpubs in every state in the union IS already an exception to Three Tier Laws (and in most states, new regulations had to be enacted to allow them in the past 3 decades). Nearly 2/3's of the states also allow some form of self-distribution (in some it's restricted to small breweries only), and many allow some retail sales at breweries, etc. Not too familar with the wine industry, but whatever exceptions to the Three Tier exist for them would be similar to the above and limited to in-state sales- out of state wineries still go through the wholesale tier.

 

It's far from useless. Outside of the largest breweries like Sierra Nevada and BBC, none of them have the logisitical networks capable of distributing their beer outside of their local regions. Without the purchasing power of the large distributors keeping shipping costs down you'd see a lot less beer from outside your region on the shelves, or it would be considerably more expensive.

I don't have time to fully get into right now, but to clear up one point: The "Three Tier system" isn't some single monolithic invention created by the federal government. It's fifty different systems designed by fifty different states that have varying degrees of exemptions regarding issues like whether or not breweries can self-distribute, whether they can operate production facilities as well as a brewpub, whether breweries can also own distributorships, whether they can sell beer to go from their brewpub, and many other things.

In short, other than setting label requirements and approving said labels, very little alcohol regulation happens on the federal level, so you have to petition all fifty states to fix the things you think are broken.

The only two things that are truly broken about the system are:

~Most of them are affiliated with one of the mega brewers and are thus compelled to push their products.
~Restrictive contracts that make it stupidly expensive for a brewery to switch distributors once they've signed on with one.

There's only so much you can do about the first point, because even if the distributor doesn't carry any BMC products they're inevitably going to have one customer that becomes larger than the others in their portfolio and will throw their weight around to ensure that their products get prime placement. The second point needs addressing, but it's a tough balancing act because if distributor A puts in years of effort building a brand they should be entitled to some compensation from distributor B who is basically being handed a a bunch of tap handles and store placements that they didn't have work for but will immediately profit from. The only question is what's fair for all parties, and at the moment the balance seems to be tilted in favor of distributor A.

 

Considering that the OLCC is one of only two profit-generating agencies in the Oregon government (the lottery being the other) I don't see this happening any time soon.

 

Bwahahahaha. Gotta love state gumbints...

 

Yes, the laws were set up originally to protect distributors from Big Brewers. That said, it isn't all bad having people focused on selling the beer so the brewers can focus on brewing it. And some of the small brewer/distributor relationships are pretty solid, so it's hard to paint with a broad brush here. Check out this article about Short's Brewing and Imperial Beverage:

http://allaboutbeer.com/daily-pint/...brewing-cites-partnership-as-fuel-for-growth/

 

Yeah, there are definitely positive aspect of the system. For example Ninkasi had no problem achieving 90% saturation at bars in Eugene, but there's no way they would have been able achieve that statewide with draft distribution (much less selling bottles to every podunk corner store in rural Oregon) without the help of a big ass distributor with a hundred sales people and a fleet of trucks.

 

And, IIRC, the Three Tier system was a response to the old "Tied House" system, where breweries would either own or lend money to bars, with the string being that the bars only poured the breweries beer. If ABI were able to own, or be tied to, bars now, how much MillerCoors would be poured, let alone craft?

 

Netflix had Beer Wars on instant que for a long while. It is a phenomenal documentary I'm confident every BA member would love it.

Correct - The three tier system is a federal law. My comment on WA was about the state level laws. I'm not sure if it applies to beer but in spirits, around 15 states are called "control" where you have to sell through the state at fixed prices or at designated stores. These state laws are why some states (Utah, Washington, Oregon, Idaho) are not permitted to sell in certain channels (i.e. grocery stores, gas stations, big box stores like Costco) or whether or not they can be sold on certain days like Sunday or contain ABV limits.

 

More that half the states allow breweries to self-distribute already. State Self-Distribution Laws But according to most sources, even in those states most breweries, especially once they get to a certain size and have a proven sales record, choose to go with distributors. Most breweries want to brew beer, not run warehouse, trucking and delivery services and it's just more cost effective for a distributor to delivery 50 cases of beer from 10 different brewers on one truck, than to have 12 different breweries vans out supplying 5 cases each to stores.

 

I just want to live in an America where I can go to a brewery's website and buy all the beer I want from them.

 

Most retail products have a similar system to the three tier one that beer uses. The three tier system is not the reason that PtE is not available at every grocery store. Do we have examples of how it hurts craft and of brewers that are longing to buy trucking fleets so they can self-deliver across multiple states?

 

I guess there are exceptions to this, especially once a brewer has grown to a certain size. Stone's distribution arm is supposedly way more profitable than the brewery side of their operation (or so I was told during the brewery tour).

 

Thus the use of "Most" in my post (big believer in CYA) and as I understand it, Stone's wholesale subsidiary, Stone Distributing Co., is not simply a case of their self-distributing only their own brand, it's more along the line of other mutli-brand wholesalers.

So, (using my example above) basically the same business model of one truck delivering 50 cases of various brewers' brands - simply in their case that company is owned by a brewery. According to this, they distributed for 18 different breweries in 2009.