Tag Archives: three tier system

500 Words On One Article You Need To Read And Why, 9/28/16

If this weren’t so pathetic it would be laughable.

I’m not one of the craft beer people who has a problem with the three-tier system.  When it is enforced fairly and evenly over all three-tiers everyone makes money.

I don’t have a problem with distributors in general.  Most work hard for the brewers they represent and push their product at a sometime annoying level.

My problem is that many distributors have refused to adapt to the changing landscape of the American beer industry and feel entitled to run the beer industry anyway they see fit.  In almost each and every state, the large distributors have enough money to give them a political influence they use to keep a strangle hold on the industry because, since the end of Prohibition that is the way things have been.  So, anytime I hear an argument from a distributor about why they are necessary that isn’t a business based argument, I know they are slinging b.s.

The thing is, there are good business arguments as to why distribution companies are necessary for the beer industry.  Right now, here in NC, one of the many things our state legislature has managed to screw up is the raising of the self-distribution cap on breweries.  The current limit is 25,000 barrels. Brewers want it raised to 100,000. Distributors are worried that if the cap is raised they will lose many of the small brewers who they are contracted with currently.

This ignores the fact that none of the breweries in NC save maybe 3 or 4 produce anywhere near 25,000 barrels much less 100,000 and many still use distributors.  Why? They want to be brewers and not distributors.

I’ve talked to a few of the brewers who self-distribute when they deliver beer to us. It is hard to distribute your own beer.  You have to pay for salesmen, drivers, and trucks/vans that you have to maintain.  These are good business people who know that there is going to be a point where it will no longer be cost effective to self-distribute.  They also know that point might come well before they hit any self-distribution cap.

Here is my advice when asked by brewers:  Self-distribute as long as you can and when the time comes find a distributor with a small enough portfolio to keep you from getting lost.  That mistake causes many brewers to sour on the distribution model.  They look for a distributor and get wooed by one of the big houses with talk of grocery stores and convenience stores and multi-county reach.  Then they get lost in huge portfolios and stop getting into accounts that carried them from the beginning.  I have seen this happen multiple times in the past two years.

To sum up: The three-tier system isn’t inherently bad, but bad distributors are horrible.  Distributors who care more about money and political influence instead of their portfolio short circuit a system that should work and make money for everyone in the industry.