Understanding the three-tier distribution system

Those enrolled in cooking school online may be considering a variety of career paths. Regardless of which route you choose to take, chances are you’ll have to interact with wine experts. Head chefs and restaurateurs have to work closely with sommeliers and wine distributors in order to select the perfect pairings for their menus, and to fully understand the professionals with whom you’re working, you’ll want to fully comprehend the three-tier system of alcohol distribution.

What is the three-tier system?
After the repeal of Prohibition, American lawmakers set out to create a system of rules for the sale and distribution of alcoholic products. They came up with the three-tier system, which theoretically provides the “checks and balances” necessary for ensuring ethical sales practices. The three tiers involved in the system include the supplier (producer), the distributor (wholesaler) and the retailer.

Suppliers
The term “supplier” applies to the institutions that make alcoholic beverages – distilleries, breweries, wineries, etc. – but more commonly, it refers to brokers and large companies that deal directly with those organizations. For example, behemoth companies tend to create business relationships with small wineries and sell their products to distributors. This can be beneficial for very small wineries that otherwise wouldn’t have the opportunity to get their products into high-end restaurants and grocery markets.

Distributors
Distributorships bridge the gap between suppliers and individual retailers. Their portfolios tend to include products from a variety of companies. After they’ve secured business relationships with suppliers, sales representatives work with retailers to get the products into local establishments.

Retailers
Retailers sell alcoholic beverages directly to consumers. Most students enrolled in culinary school online will probably end up employed by a retailer. Retailers include restaurants, grocery stores, wine shops, etc.

Pros and cons of the three-tier system
Though the system may seem unnecessarily bureaucratic, there are some benefits to the three-tier method. In addition to connecting small distilleries, breweries and wineries with the greater beverage market, the system encourages competition and disallows distributorships from having monopolies on popular products. Chefs and consumers also benefit from the system by being able to enjoy a greater diversity of products.

On the flip side, many breweries, distilleries and wineries – especially small ones – have a difficult time creating business relationships with supplier groups and distributors. Additionally, having to fund a third business tier can drive up the cost of beverages. Liquor laws differ by state, so large suppliers that operate on a regional or national basis have to put time and money into staying within the legal boundaries of various states.