Wholesalers and 3 Tier System Biggest Threat to Alcohol Retailers

Big liePerhaps the biggest lie told by proponents of strict adherence to the three system of alcohol regulation is that by forcing retailers to purchase products from wholesalers, rather than direct from the producer, prevents undue pressure being put on the retailer by the producer. This position was most recently articulate by Tim Kent of the North Carolina N.C. Beer and Wine Wholesalers Association in discussing a proposal to raise the cap from 25,000 barrels to 100,000 barrels before a craft brewer must sell to the middleman wholesaler instead of selling directly to restaurants and retailers:

“Requiring larger brewers to contract with distributors keeps a brewery from putting undue pressure on bars or retailers, thus preserving consumers’ choice. In countries that don’t have that protection, bars are often limited to selling only one brewery’s products.”

This is a common claim made by wholesalers who don’t want to see their carefully cultivated protectionist laws dismantled and made by lawmakers who don’t want to be an affront to the protected wholesalers who contribute considerable amounts to their campaigns.

The problem, of course, is that the claim is not merely untrue, but the exact opposite of the situation that currently exists.

Given the strict tied house laws it is nearly impossible for a brewer to put any kind of pressure on retailers. In fact, its much easier for wholesalers to put intense pressure on retailers to buy what they don’t want in order for them to have access to what they do want.

Today retailers have access to a great variety of craft beer, artisan wine and cider, and artisan spirits. If one producer starts to place demands on a retailer, it’s as easy as pie to tell them to bug off and then buy some other producer’s products.

However, when a wholesaler demands that a retailer purchase a specific product that the retailer may not want, it’s quite easy for that wholesaler to put pressure on the retailer….particularly if the wholesaler is the only source for the products the retailer does not want to buy, but also the products that the retailer wants to offer their customers. All the wholesaler has to do is simply not come by to take an order or be very slow in fulfilling an order.

Here’s the fact: The biggest threat to retailer independence in an era of product plenty like today is the mandated use of wholesalers and the three tier system.