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The Buzz

A Beerfly's view. If you see anything here that seems crazy, click here.

Vintage Buzz

2004 Buzz

April '04: Keg Party

March '04: Ultra Madness

February '04: Case Law

January '04: Best of 2003

2003 Buzz

January '03: Taxes

February '03: Coffee

March '03: St. Patrick's

April '03: Liquor Taxes

May '03: Extreme Beer?

June '03: Screw 'Em!

July '03: RIP, Corner Bar

August '03: Subtlety

Sept. '03: Pay For It!

Oct. '03: Shots at Saveur

Nov. '03: Say Anything

Dec. '03: Wine good!

 

 

May, 2004

Shedding Tiers

What would you do if you woke up tomorrow and found out that every road in the country was gone?

Interstates, two-lanes, boulevards, alleys, and avenues, all suddenly, inexplicably gone, replaced with rolling, grassy, open lands. There is suddenly no way for you to quickly get from your home to your work, to the market, to the bank, and no way for them to get to you. There is no effective postal or delivery system; those delivery trucks are not off-road vehicles.

Youíve still got utilities, and your neighbor can get you to the grocery store in his SUV (that you laughed at just last week, admit it), so you limp along through the weekend, still wondering what the heck happened to those roads...and how the next load of milkís going to get to the store.

Monday, things are a little better, but still weird. The interstates are back and the big trucks are rolling again; 10-4, good buddy! But thatís all. So if you live near an exit you can get all the food and drink and stuff you need...as long as itís food, drink, and stuff thatís made near another exit. Lucky you, youíre only a mile from an exit. You take to eating a lot of frozen and canned food, big brands...the same stuff everyone on the interstate gets.

But itís a lot cheaper than it used to be. Transport is simpler: pick it up, drive it to the exit, drop it off, no more 50 stores in every town of 20,000. Now thereís ONE store, a really BIG store. Itís cheaper for the store, too: no more advertising, and they can hammer the producers on price, because where else are they going to sell their stuff? Some smaller producers and stores eventually cobble together delivery systems from rail lines and off-road vehicles, helicopters and even blimps, but it takes months, and costs a lot more. Most of the smaller producers and stores go out of business before this comes along. Mmmm, so what...more Spam and canned peas, please!

What the hell am I blathering about? Obviously, Iím not really talking about some weird sci-fi movie where the roads disappear. Iím talking about the impending end of the three-tier system, that legal set-up of channels that bring beer from the brewers to you. Itís coming, and I may be wrong, but I donít think youíre going to like it.

It is consistent state law in the U.S., surprisingly consistent state law, that mandates a separation between producer and retailer of fermented and distilled beverages Ė booze Ė in the form of a layer Ė or tier Ė of wholesalers. First tier: brewers. Second tier: wholesalers. Third tier: retailers, either bars/restaurants or package stores, or as we say in the trade, on or off-premise. With a few small exceptions (like brewpubs and small brewery self-distribution), brewers must sell to wholesalers, retailers must buy from wholesalers.

The big producers and the big retailers donít like this, because they know they could be doing business on their own and saving all that markup money. Many small producers donít like this, because onerous state laws put the wholesalers in the driverís seat in contracts with producers. Most consumers donít like this, because they feel the three-tier system is strangling their access to any beer or wine they want.

All those bad feelings (and arguably bad law) are driving this issue to court. This constitutional issue (and the enormous sums of money involved) will drive this to the Supreme Court, where I expect the three-tier system to be broken like a beer bottle in a barfight.

I see hard times for wholesalers, and a LOT of people out of work. But youíll be happy, because now you can get Midnight Sun Sockeye Red IPA delivered direct to your door! Sure. And every single damn little brewery in the country is going to spend the money to set up a whole direct shipping department and wait for your one stinking order...sure, they will.

Okay, maybe the direct shipping thing wonít work. But specialty wholesalers will fill the gap! Sure, they will. In the big markets, where there will be enough demand to support small specialty stores...which is pretty much where thereís a good supply now, anyway. Specialty wholesalers have a pretty short average lifespan these days, anyway, because itís hard, constant work, and thereís not a lot of money to be made. A few survive; most go under or get bought. Thatís simple facts.

Iím not optimistic about the end of three-tier. I think that when three-tier goes under, a lot of small producers are going to go down with it, because they wonít be able to get their beer to market. If the big chains Ė and I mean supermarket chains, too, not just discount houses Ė have a chance to sell just the big brands at the prices they want, they will; it makes sense for them. A lot of opportunities are going to shrink up or close entirely.

What to do? Some suggestions to small brewers. Re-double your efforts in your local market. Remember, if three-tier goes away, you will get self-distribution even if you donít have it now; be ready for it with strong local sales you can easily support. Strengthen your ties with your consumers, and support any small specialty wholesalers youíre in with.

Some suggestions to small wholesalers. Hang on. You may well be sitting pretty if you can hang on and provide the kind of service that makes you valuable to both retailer and producer. Think about expanding your offerings: one-stop shopping for the gourmet store, with fine beer, wine, cheese, local produce or meats.

Some suggestions to you, the consumer. Speak up! Everyone whoís talking about this issue is missing the point that this is a four-tier system: producer, wholesaler, retailer, consumer. You have a very important stake in this as well, and you need to look out for your interests. If you donít see a beer at your local store that you would like to see there, ask. If you donít see a beer at your local bar youíd like to see there, ask. If you canít figure out your stateís laws on booze, get your legislatorís e-mail address and ask!

And if your local brewery is a good one, and needs help, stand up and be counted. You never know when you might have to take your kidís wagon down to the brewery to pick up a case or two for the weekend...if the roads suddenly disappear.

 

 

Copyright © 2008 Lew Bryson. All rights reserved. 
Fee required for reprints in any commercial media.
Revised: May 02, 2004