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America's Alcohol Distribution System Means You Can't Always Find the Whisky You Want

There's a reason why that whisky isn't showing up at your local liquor store and it has everything to do with the three-tier system.

America's Alcohol Distribution System Means You Can't Always Find the Whisky You Want

June 29, 2020 –––––– Susannah Skiver Barton, , , ,

If you've ever looked with envy at a photo of a faraway liquor store, packed with shelves full of coveted whiskeys like Blanton's, Four Roses Limited Edition, or Weller 12 year old, and wondered why your local selection appears so bleak in comparison, the answer may simply be that you're in the wrong place. Each state determines how to handle its own alcohol sales, often creating huge disparities in whiskey selection, availability, and prices.

The United States has one of the most complicated systems of alcohol sale in the world, and it all goes back to Prohibition. Before the Noble Experiment that outlawed the manufacturing, transportation, and sale of “intoxicating liquors,” producers of alcohol, usually brewers, often owned the places where alcohol was sold, such as saloons. This arrangement, known as a “tied house,” often led to unfair competition and harmful promotion and consumption of alcohol.

When Prohibition was repealed in 1933, the federal government reverted to allowing states to regulate alcohol within their borders. Most states sought to eliminate tied houses, increase public safety, and collect tax revenue by introducing a compulsory separation of the three tiers: alcohol production, distribution, and retail. No entity may occupy more than one tier, meaning a brewery can't own a bar, and a distillery isn't allowed to sell directly to a liquor store. The federal government licenses producers and importers (the top tier), as well as distributors and wholesalers (the middle tier), but leaves licensing of retailers (the bottom tier) up to the states. States may also decide exactly how they want to regulate distribution (most impose additional licensing on distributors and wholesalers), local taxation, and sales of alcohol—for example, restricting sales on Sundays or banning happy hour discounts.




Some states take a light touch, allowing distributors and retailers to operate in a mostly free market, but others maintain a monopoly over distribution and/or retail of some or all types of alcohol. These “control states” can often be identified by their Alcoholic Beverage Control (ABC) stores which are the only retail outlets offering spirits and, in some cases, wine and/or beer. There are seventeen control states in the U.S., encompassing about one-quarter of the nation's population.




What does all this have to do with your hunt for a bottle of whiskey? It means that instead of a single marketplace, the United States functions as 50 different markets. Distillers have to work with each state on an individual basis in order to sell their whiskey there. Getting set up to sell in 50 markets takes a lot of time and money; for smaller distillers or those with limited amounts of whiskey, it's often not worth it to go through the process in every single state, especially in states where the system is onerous or product demand is not promising. New brands typically choose to establish themselves in their home state, or begin by focusing on the largest markets, like New York and California.




When it comes to limited-edition whiskeys, distillers may decide how to allocate them to various states—for example, New York might get more bottles than Illinois because the distiller anticipates higher demand there. But the distiller loses control once the bottles are in the hands of the distributor, who makes the call about which stores and bars get bottles, and how many they receive.

Allocation decisions are rarely discussed publicly, leaving whiskey lovers in the dark as to exactly how or where these bottles might appear. The decision might factor in demographics, location, or a store's sales record; distributors may elect to reward stores that have sold large volumes of completely unrelated products by allocating coveted whiskeys to them.

And if you think you can simply order the whiskey you desire online, you're in for more disappointment. Because of the separation of the tiers, most states don't allow distillers—in-state or out—to sell and ship you a bottle. And because each state has its own system, few allow out-of-state retailers to ship spirits across state lines. You might be able to order whiskey from an in-state store, however, and have it brought to you via their delivery service.

Exception to the Rule


Although the separation of the three tiers is fairly standard across the country, some states make exceptions for small craft producers. For example, many states allow craft breweries to operate brewpubs and taprooms where they can sell their beer without going through a distributor. This type of concession has increasingly been extended to craft distilleries as well. In some states, craft producers are allowed to self-distribute their products up to a capped number of cases.

On the other end of the size spectrum, large producers and retailers are often able to establish distributorships under a linked or subsidiary enterprise. These partner businesses—which can improve efficiencies and save money—are technically following the letter, if not the spirit, of the law.

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