The Three Tier System of Regulation

Why do we have beer distributors? The simple answer is Prohibition. There are several factors that led to the Great Experiment that was Prohibition: a rise in stricter forms of Christianity, the strengthening of the women’s equality movement, and a strong anti-German sentiment following WWI – and it was largely the German’s who brewed our beer. But most importantly, overconsumption was a big problem. But why?

Prior to Prohibition brewers and distillers and vitners were also allowed to be retailers, which meant they could own their own bars (also known as “Tied Houses”). And these manufacturers obviously quickly realized that the more bars they owned, the more alcohol they could sell and the more money they could make. So at one point prior to prohibition, there was 1 bar for every 100 Americans. And the goal of many of these bars was to sell as much alcohol as humanly possible regardless of quality or safety – which led to public disorder, addiction, squandering of family wages, prostitution and gambling. So families suffered, workplaces suffered and people’s health suffered.

Twenty-First Amendment

Prior to Prohibition, alcohol regulation was non-existent. Upon the ratification of the 21st Amendment, which repealed Prohibition, leaders vowed that market practices fueling alcohol problems would never return. The 21st Amendment granted each state the primary authority to enact and enforce alcohol laws which led to a comprehensive regulator system that included: (1) a three-tiered system of regulations, consisting of brewers, distributors and retailers; (2) a set of Fair Trade Practice regulations; and (3) enformement mechanisms.

Three-Tier System

After the repeal of prohibition, states needed a way to provide alcohol to the public in a safer and more responsible manner (i.e. eliminating the undue influence brewers once had over retailers), so the three-tier system of regulation – and the integral tier of beer distributors – was developed. Because beer distributors are independent of brewers and retailers and were essentially created by government, they have the unique role of providing assistance to not only brewers and retailers, but also the state and the public at large by performing the following functions:

Accountability

Beer distributors essentially serve as agents of the state, ensuring that all appropriated taxes are collected from brewers and remitted to the state.

Safety

Thanks to their extensive tracking systems, beer distributors know the precise location of every can, bottle or keg that left their warehouses. Therefore, if a tainted batch of beer is found, distributors immediately go into action and make sure that every tainted product is removed from stores, bars and restaurants before they reach the consumer.

Also, by eliminating the undue influence brewers once had over retailers, retailers can no longer be punished for selling too little, allowing retailers instead to sell safely and responsibly.

Finally, independent beer distributors provide public education and awareness. If ever you see a “know when to say when” commercial or free cab rides on New Year’s Eve, there is a very good chance that it’s sponsored by a beer distributor.

Consumer Choice

Prior to prohibition when a brewer owned a bar you could only get that brewer’s product in that bar – you would never see Bud Lite and Miller Lite served in the same establishment. But thanks to the Three-Tier System of Regulation, independent distributors provide a buffer between brewers and retailers so brewers no longer have an undue influence over retailers, allowing that retailer to offer any number of beer brands (including local craft beers) and maximize consumer choice.

Additionally, beer distributors are nondiscriminatory in their service and must deliver to every retailer in their territories who are licensed to sell beer, ensuring everyone has access to a variety of beers at competitive prices.