Beer distribution

Lore & Background

Before American prohibition in 1919, breweries created deals with bars to sell only their brand, taking stake in bars and providing equipment, furniture, and beer. This excessive pushing of beer was seen as negative by the American government and was a leading cause for Prohibition, which lasted from 1919 to 1933. After Prohibition ended, a three-tiered system was required in every state except Washington, with producers, distributors, and buyers as the three tiers. This system eliminated direct sales from breweries to bars, introduced private distributors, and made regulation easier by tracking trade between tiers. Opposition arose because some major distributors gained power over small breweries, forcing price negotiations and potentially cutting off supply to retailers. The European Union complained that the three-tier system made it difficult for European breweries to enter the American market, while large American breweries could easily infiltrate European markets by selling directly to bars or retailers.

Reader's Guide

The three-tier system's significance lies in its attempt to increase tax revenue, regulate beer sales, and create a safer consumer environment after Prohibition. It introduced a middleman that diversified beer selection in bars and helped spread brewery brands beyond local markets. However, it also led to higher beer prices in the United States, as more parties were involved. The system faced backlash from small breweries that relied solely on independent distributors and had no alternative, as well as from international trade partners like the European Union. Worldwide, most countries use a two-tiered system where breweries supply directly to bars or retailers. Self-distribution offers breweries control over advertising and costs but requires more capital for warehouse space, equipment, transportation, and workers, making it difficult for small and micro-breweries to expand beyond local reach.

Did You Know?

• Beer sales are most common in areas throughout Europe and America.
• Prohibition in the United States lasted from 1919 to 1933.
• The three-tier system was required in every American state except Washington after Prohibition.
• In 2017, federal tax revenue from alcohol sales was $9.9 billion, or 12% of total excise receipts.