Entrepreneur. Cocktail and spirit champion. Old world wine provocateur.
Well, I figured I’d continue my series of rants about things that I feel are ridiculous. Today’s topic is the three tier distribution system!
For those of you who aren’t familiar with this system, it is a system that was set up to regulate the distribution of alcohol after prohibition. The three-tier system was set up in the alcohol industry in 1933 for three main reasons: (1) to promote temperance and help to decrease over-consumption, (2) to ensure orderly market conditions, and (3) to raise money through taxes. Interesting idea, eh? The United States government certainly thought so. For this first post, let’s discuss temperance.
The temperance argument seems obvious. Over-consumption was one of the factors that led to prohibition in the first place, so the goal was to decrease how much people drank. The way to make that work, according to the thinking of the time, was to add a middle man. A middle man would drive up the cost of alcohol and, in turn, decrease the amount that people would buy. The fact that it would add additional levels of taxation to benefit the government is another issue that we’ll address later.
Another way that adding a middle man promoted temperance was by eliminating the brewery to bar distribution. Before prohibition, large breweries would invest heavily in bars, demanding exclusive taps and bottles in return. In essence, many bars were owned by breweries as additional outlets for selling their product. As a result, bars would push copious quantities of the large brewery beer and would be able to hawk it at cheap, cheap, cheap prices. The breweries would practically give it away to these exclusive bars in the name of marketing. This three-tier system eliminated the brewery to bar approach and, it was thought, made for a more level playing field. Without deep discounts and brewery supported bars, consumption would decrease.
This was certainly one way to address the issue of over-consumption although if you ask me, it certainly isn’t the best. What you see in a lot of other countries is a system that taxes based on the percentage of alcohol. The goal is similar – to keep drunkards from being drunkards – but the result is different. What you have is a vibrant brewing community pushing the limits with lower alcohol beer. Why do you think Guinness is in the 4% abv range? Because higher alcohol beers are taxed higher. You can drink five Guinness pints for the same amount of alcohol as two Dogfish Head 90 Minute IPAs. And if you are going to have five beers one way or another, maybe the goal should have been to decrease the alcohol you get in each beer.
Now don’t get me wrong, I love a good Imperial IPA from time to time and that type of beer wouldn’t be eliminated. But your classic American IPA probably would average in at 7% abv. Temperance isn’t always a bad thing, but given the change that has occurred since 1933 when this approach was taken, I’m certain we can find a better way to achieve it.