Three Cheers for Three-Tier And Your Craft Beer Distributor

Craft beer distribution truck waiting for final loading

I’d like to present a handful of scenarios to you:

It’s 5:00 P.M. on a Friday (finally), and like many Americans, your work week is ending. You’re ready for two things: the weekend, and some good damn beer – because let’s be honest, the weekend isn’t the weekend without the good damn beer. Lucky you, because this is America. Prohibition is dead, and you’ve got options!

Maybe you stop by your go-to gas station and pick up a six-pack. Easy. But maybe you put off buying groceries all week and consequently are kicking yourself for it. Now, you have to go because your pantry resembles one ransacked during the zombie apocalypse. So, you pick up your weekend beer at the grocery store since you have to go there anyway. Or maybe you’re feeling froggy because hey, it’s Friday! So, you decide to meet your friends downtown for drinks to celebrate the first moments of a weekend so fresh and young it’s still in diapers. There are many roads you could travel, my friend, but they all end in the same place: that magical, perfectly carbonated and balanced oasis of craft beer.

Now, I’mma let you finish that beer and all……but did you ever stop and wonder how your favorite beers end up in the places where you like to buy them? If not that’s alright; you probably never had a reason to think about it before. You were able to buy the beer you wanted where you wanted to, so all was right with the world.

You already know that beer comes from breweries (at least I hope you do). Breweries brew the beer, and then it magically ends up available for purchase by the consumer (that’s you!) in bars, restaurants, gas stations, grocery stores, and craft beer bottle shops and markets. Oh, you don’t believe in magic? So, then how did it get there?

Chances are, most of the beer you drink ended up wherever you bought it by means of a distributor. Distributors, also known as wholesalers, receive the beer directly from the breweries (or sometimes from importers) and distribute the beer out into their local or regional markets, at which point it is available for purchase by the consumer.

It looks like this: Brewery –> Wholesaler/Distributor –> Retailers

This system is called the Three Tier System, which according to Wikipedia is :

 …the system for distributing alcoholic beverages set up in the United States after the repeal of Prohibition. [1] The three tiers are producers, distributors, and retailers. The basic structure of the system is that producers can sell their products only to wholesale distributors who then sell to retailers, and only retailers may sell to consumers. Producers include brewers, wine makers, distillers and importers.

You might be thinking something along the lines of, But why does the beer even have to go to the distributor? It seems like it unnecessarily adds a middle man to the equation, and I just want my good damn beer, damnit!

The most simple answer to this question is that in most places it’s the law. However, there are some benefits for some form of three-tier being the law in your state, and some other perks of having a “middle man” in the equation. Crack open another craft beer and read on.

craft beer brands in distribution warehouse

Distributors bring craft beers from breweries outside your state, giving you more choices.

The first reason is that beer distributors protect both consumer choice and open markets. In its simplest terminology, three-tier is in place to prevent monopolies from forming. The presence of distributors wards off potential monopolies by not allowing larger breweries (I mean the Big Guys) from sending their beers directly to stores and restaurants and a) exclusively distributing their beer to these accounts or b) only allowing their beer to be sold at these select accounts.

The distributor also eliminates the possibility of some breweries only allowing their beer to be sold at accounts they unfairly favor, which would also create monopolies and make it harder for consumers who want that brewery’s beer to get it (what if the only accounts allowed by that brewery to sell their beer were an hour or more drive away for you?).

In the end, preventing monopolies means that the consumer (hey, that’s you!) has a wider and more fair variety of  beer – namely, craft beer – to chose from at your favorite haunts. This also creates an environment in which smaller breweries actually have a chance and can get their product out to more people. More on that later.


What The Beer Monopolizer In Chief Wants To Sell You That You Shouldn’t Be Buying here


The second reason is that it is not cost or time effective for most breweries to self-distribute. I live in Chattanooga, TN: a wonderful city in which some awesome beer from breweries all over the United States (and beyond) is available. Imagine that Abita Brewery in Louisiana, or Lagunitas Brewing Company in Chicago and California, or Dogfish Head Brewery in Delaware, or Southern Tier Brewing Company in New York, didn’t have a distributor. It’s just not practical for those breweries to transport their beer to Chattanooga themselves, and frankly, I’d hate to live in a world in which the good damn beer from these fine breweries (and many more!) wasn’t available to me as a consumer in Chattanooga. I don’t know about you, but I’d rather my favorite breweries be able to focus all of their time and resources on making the best and most consistent beer they can make, instead of having to worry about the intricacies of how they’re going to get deliveries from across the country to their destinations by a certain time and date.

craft beer kegs at distrubtor

It’s a big job getting all this good damn beer to market, but somebody’s got to do it.

Distributors, by their nature, are pros at these intricacies! Breweries are pros at….well, brewing beer! This is not to say that all breweries are required to have a distributor. In most states, breweries producing under a certain amount of beer are allowed to self-distribute. Usually, this works fine for smaller breweries, as they just can’t produce enough product to cover an entire distribution area, or multiple distribution areas. When smaller breweries are ready to get their beer out to a wider audience, a good distributor will go by the quality of their beer, and not off of whatever reputation/representation that brewery does or does not already have in the market. Tony Giannasi, Certified Cicerone and National BJCP Judge says, “This is how breweries grow.  Without hometown support, the deck is stacked high against small local breweries. This early partnership is so very important, as you both grow or fail together.”

One such exception to the Three Tier System is one of my favorite local breweries, Moccasin Bend Brewing Company in Chattanooga. MBBC began as a microbrewery in 2006, and by 2010 they had a fully functioning tasting room attached to their brewery. Previously located in historic St. Elmo, Tennessee (a quirky little suburb of Chattanooga near the city’s downtown area), Moccasin Bend quickly became a staple for not only that neighborhood (think your favorite local pub, but weirder and cooler), but also craft beer lovers regionally.

MBBC was my hangout spot on those beautiful southern Sunday afternoons, and I would frequently encounter folks who had driven an hour or more just to visit the brewery. The brewery’s slogan, “Weird is Good”, is an accurate reflection of lead brewer Chris Hunt’s attitude towards the beers he and assistant brewer Braden Morris create. The brewery offers local favorites like Unbalanced IPA and Lookout Mountain Lager, as well as Evictus IPA, Egregious Electric Ale, and Rover Capacity Red  (clever nods to the circumstances surrounding their current efforts to relocate the brewery).


 

Mississippi Needs Beer Law Reform here


 

For the time being, MBBC remains a small-ish local brewery, and are content being such. In fact, they’re so popular locally, it’s sometimes difficult for them to meet the local demand for their beer, let alone the potential for meeting the demand of a wider distribution area. Currenly, MBBC produces around 400 bbls a year. Another one of my favorite local breweries, Chattanooga Brewing Company, made the decision to sign with a local distributor just this year after years of successful self-distribution. CBC can trace its roots back to the original Chattanooga Brewing Company (originally called Conrad Geise & Company) from 1890. Fun fact, a few antique bottles from the original Chattanooga Brewing Company reside safely within the walls of the new brewery today.

In 2009, CBC’s lead brewers Mark Marcum and Jonathan Clark met at Tremont Tavern (a small and popular local hangout) and soon joined together in making their dream of starting a brewery a reality. By 2010 they had sold their first kegs to Tremont Tavern, and Chattanooga Brewing Company was well on its way to being birthed again from the ashes of Prohibition. From 2010 to 2015, the brewery experienced tremendous growth solely at the hands of those who’d started it and those they’d hired and trusted to help them build the company. The decision to sign with a distributor wasn’t an easy one for owners Mark and Jonathan and the rest of the CBC team; after all, this was their baby, their brainchild. But, in fall of 2014, they decided they were ready to reach a larger distribution area and made a leap of faith by signing with a locally owned and independently operated distributor, and the brewery continues to grow.

Of course, there are those who worry that adding a distributor/wholesaler unnecessarily complicates things, and could potentially lead to issues with a beer’s freshness or the ability of smaller breweries to expand into wider territories.

To address the first concern: a good distributor knows how to properly store and rotate their stock. Beer is kept in climate controlled warehouses in its original packaging away from the sun/excessive lighting. Kegs that arrive at the distributor refrigerated will be kept refrigerated in designated keg coolers. When new stock comes in, it will be placed behind existing stock to keep the proper rotation going and prevent anyone from drinking “old beer”.

Distributors care about and enforce quality control. After all, the beer we distribute (I have worked for an independently owned local distributor for six years now) is the beer that we’re drinking, too. Distributors should and do monitor the code dates on not only the beer stored in their warehouse, but also the beer they have already distributed out into the market. If out-of-date beer is found in an account, someone’s gonna have some ‘splainin’ to do. Another benefit of having a distributor is that in the event of a quality control issue or recall on a brewery’s end (we’ve all heard the stories about glass fragments in bottles or exploding beer bottles), the distributor is able to send manpower out into the market that day to remove any affected packages. Some worry that “big distributors”, like “big breweries”, make it tough for new/fledgling breweries to break into the market. Again, a good brewery is going to judge a brewery by the quality of their beer and not by their size. If a small brewery makes good damn beer and is picked up by a local or regional distributor, that’s one of the best things that could happen to that brewery, because their beer is automatically going to reach a wider audience of curious palates and craft beer lovers alike.

Having a distributor to support your brand is beneficial for many reasons, the most important being that distributors are great at growing brands. Not only are they experts in the transportation and delivery aspect of the industry, but they also have existing relationships with all of the accounts within their given territory, meaning brewers or brewery employees don’t have to walk into these accounts themselves where the owners and managers don’t know them and convince them to sell their beer. Most distributors have state of the art sign departments capable of producing case cards, static stickers for cooler doors, table tents for bars and restaurants, and window signs to effectively advertise and promote the brands they carry.

Finally, some distributors (like the one I work for) take it a step further, and require all of the employees in their sales department to at least earn a level one Cicerone certification. After all, how could they effectively sell a beer if they couldn’t tell you what exactly it is and what makes it what it is? At the end of the day, distributors do two things: 1) They put the beers people want into the hands of the people who want them and 2) allow some really good beers from some really good breweries to be available to more people, which grows these brands as well as the industry as a whole. The result? A local and regional market full of great beer, to which I say: could there ever really be such a thing as too much great beer in one place? Cheers!

 

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Keeli has worked for an independently owned beer distributor in Chattanooga since 2009. In addition to working in their sign department, she has managed their social media presence since 2010. She also dabbles in homebrewing on the side.
In 2013 she graduated from the University of Tennessee at Chattanooga with a Bachelor of Arts degree in English: Writing.
In 2013 she also completed an internship at an alternative newsweekly magazine in Chattanooga, TN named The Pulse.
Keeli loves good damn beer, playing music, tattoos, and writing. She lives in Chattanooga with her dog, girlfriend, and their two cats.

2 Comments

  1. BrewstudNo1

    August 3, 2015 at 7:55 AM

    A debate is brewing on Reddit regarding this post. It is the position of this editor and several other writers for the Brew Studs blog that a modern, reformed version of the 3-tier system is not just indirectly beneficial to craft beer brewers and consumers, but that it played an irreplaceable role in creating the craft brewing and drinking movement that has been experienced all over the world in recent history. The Brew Studs encourage you to join the debate, regardless of your opinion: https://www.reddit.com/r/beer/comments/3fj9j1/the_threetier_system_and_your_craft_beer/. Cheers!

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