Wednesday, July 9, 2008
Three Tiers and the NC Alcohol Laws
Post Prohibition, the government set up a three tier system to control the flow and sale of alcohol in the US. This setup has minor variations state by state and even county by county (Lynchburg Tennessee, home to Jack Daniels, is actually a dry county). The three tiers are 1. the point of origin (winery/brewery/distillery), 2. the distribution (wholesaler delivering the alcohol) and 3. the retail point (retailer or restaurant). The laws prevent anyone from controlling all three.
The reasoning behind the three tiers was to prevent monopolistic alcohol production, distribution, and retail/restaurant sales. In other words post prohibition, the bad guys would've been able to make the beer, deliver the beer to the bar on the corner, and own the bar; thus controlling all alcohol sales and eliminating competition. With the tier system we have an open market and the same bar could then offer all kinds of beer rather than just one brand. It also affords the opportunity for entrepreneurs to create different spirits, beers and wines with options to get them out to the public.
Again, this is the theory, but there are gray areas and places where at face value it sure looks like someone controls the entire market. You may have visited a town where you can't seem to find any small brewer beers, non-mass market wines or specialty spirits.
In North Carolina the retailers and the restaurants all buy from the same distributors. We have something like 60+ distributors in this state. That's an outrageous number. There are brands which the distributors have divided region by region making the maze even more confusing. For example the distributor which sells Veuve Clicquot in the beach area is different than the Triangle area and again different in the Triad area. I have experienced a wine being sold out in the Triangle, while in Greensboro, there is plenty, yet I can't buy any from that distributor. NC retailers can't sell to restaurants and vice versa.
If you are looking for a certain wine and one wine shop makes an inquiry to find out that the wine is sold out, then it's sold out for everyone. We don't have options to find other sources. Also, not every wine is available in NC. If you traveled to another state and tried a wine, we don't have the option to call someone and get that same bottle unless it's already distributed in NC. We can't call a winery and say ship us a bottle for the customer. That wine has to go through a distributor. A distributor cannot sell a bottle to the public directly. All wine has to be registered with state and go through label approval, all of which takes time and money, so a distributor is not going to order that bottle or case of wine, just for us as a special favor.
And of course all spirits are controlled by the state ABC system, but there is a strong belief that this will be changing to private ownership in the not too distant future. Mega distributors like Southern Wine and Spirits are working to see that changes happen in our state and then the flood gates will open. Just imagine how the Costcos and Sam's clubs will have to expand to carry the pallets of vodka, gin, bourbon and tequila on the sales floor.
One common exception to the three tiers system is that some states do allow self distribution by their local wineries and breweries when folks come to visit them, and to local restaurants. -Salamanzar