America's Beer Distributors - Why do Distributors exist and what is their function in the American system of beer distribution?
We all know Prohibition was a failure. The public demanded the legal right to purchase and consume alcohol. Prior to Prohibition, there were many aspects to the American alcohol distribution system that caused a lot of societal problems. When Prohibition was repealed by the 21st Amendment, the 3-tier system (brewers, distributors, and retailers) was introduced to highly regulate the sale and distribution of alcohol. The system is designed to control alcohol beverages and protect consumers by insulating retailers and on-premise accounts from the large brewers and vice versa.
The 3-tier system has 4 primary goals:
- To facilitate state and local control
- To generate tax revenues that can be collected efficiently from the industry
- To promote temperance, moderation, and an orderly marketplace
- To avoid the overly aggressive marketing and sales practices of the pre-Prohibition era
State and Local Control
Alcohol is not like chewing gum or toothpaste and is not regulated the same way as these and other consumer products. Alcohol beverages are unique and can have consequences if abused. Effective alcohol regulation is critical to address problems like underage drinking and drunk driving.
People in New York feel very differently about alcohol than those in Utah, and as the U.S. witnessed during Prohibition, a one-size-fits-all approach to alcohol regulation does not work. State-based regulation provides each state the flexibility to deal with local needs, demands and circumstances.
Distributors are the mechanism through which State alcohol regulators do their function of regulating the marketplace. With thousands of breweries, wineries, and distilleries as suppliers of alcohol, and thousands of retail stores and bars, nightclubs, and restaurants, it would be impossible for State regulators to ensure that alcohol laws are being enforced and followed. By having all products flow through several dozen Distributors, State regulators have a small group that can be tightly controlled and monitored.
You don't see headlines such as these about American alcohol: "40,000 Russians die annually of poisonous alcohol" or "Nearly 60% of liquor found in Chinese cities is fake" or "125 Die in India after drinking illicit liquor". It's not just developing countries either...one estimate is that 9% of all the alcoholic beverages in the marketplace in Great Britain is illicit. You don't see these headlines in America for a reason. American consumers enjoy unequaled safety thanks to state-based "chain of custody" laws for alcohol products.
Earlier in 2008, Boston Beer's Sam Adams product had an issue with one of their glass bottle suppliers. Their bottle supplier discovered that in their manufacturing process, it was possible that small glass chips or ground glass could get into the product. Within a week of this discovery, Boston Beer's distributors were able to pull 95% of the product from the shelves, and within two weeks, 99% of the affected product was removed from the marketplace. No other product in the American marketplace could have been so effectively recalled.
Only federally-registered manufacturers can produce or ship beer into the U.S., and they may only provide their products to a distributor that is licensed by both the state and the federal government. The distributors are then required to sell only to state-licensed retailers who then sell the product only to consumers of legal drinking age. This system of alcohol distribution ensures products are transparent in the supply chain from the day they are bottled or canned to the day they are purchased by a consumer. This transparent system ensures that retailers hold the appropriate license, do not sell to those under the legal drinking age, pay state and local taxes, and generally comply with state and local alcohol beverage laws.
Because distributors have the ability to monitor the sale of the products from the time the beer leaves the brewery until it arrives at a licensed retail outlet, we are often best equipped to collect state taxes. For this reason, many states find it easier to collect taxes from a limited number of federally and state licensed beer distributors than the hundreds or thousands of retail establishments in their states that sell alcohol products.
Most Variety In The World
With nearly 13,000 labels of beer available across the U.S. from brewers large and small, domestic and international, America's distribution system gives retailers and consumers access to unparalleled choice and variety. No other country in the world offers as many styles and flavors.
Keeping The Perishable Product Safe And Fresh
Beer is a perishable product, and distributors preserve beer by utilizing state-of-the-art, temperature-controlled warehouses and transportation systems. After delivery, distributors monitor retailer shelves, taps and keg lines to ensure consumers are receiving the freshest product. While providing choice and value to retailers and consumers, distributors work simultaneously with state regulators to ensure accountability of these unique products and an orderly marketplace.
"STOP" Underage Drinking Act
America's beer distributors partnered with several like-minded and nontraditional organizations to support the "Sober Truth on Preventing (STOP) Underage Drinking Act," which addresses the serious health and safety issues involved with underage drinking. The STOP Act specifically provides the necessary tools at the federal, state and local levels to help prevent alcohol consumption by those who are not of legal drinking age.
We are active in our community, working tirelessly to sponsor programs that combat underage consumption and fight drunk driving. Although we are small businesses, the impact of our civic programs is far reaching. Initiatives such as free taxi rides, server training and tips, inspirational speaker presentations and educational materials are just some of the many ways we work to keep citizens in our local community safe and healthy. Additionally, we support countless charities and philanthropic causes.