The Maddening Middle
The three-tier distribution system was established after Prohibition ended in 1933 and stands in significant contrast to the failed nationwide policy it followed. States were left to decide their own particulars in regulating things like brewpubs (in which a brewery serves as both producer and retailer), self-distribution, franchise laws (which govern contracting agreements between breweries and distributors), distributors’ abilities to incentivize retailers, etc. While messy, it ideally allows states to better serve and represent their local constituencies.
The Oxford Companion to Beer refers to it as “an incredibly complicated mosaic” (which is a much more professional-sounding way of saying messy).
In nearly all cases in which they play a role, distributors serve a significant number of functions in addition to simply moving beer from one place to another. The distribution tier collects taxes and serves as a highly regulated, accountable midpoint in preventing things like adulteration of alcohol and underage drinking. (Again, looking to the distribution systems of other countries that don’t have these same checks and balances in place can serve as a useful counterpoint.) Distributors also serve as liaisons between the breweries and the retail side of things, often offering detailed market knowledge while managing diverse brand portfolios. In ideal circumstances, they serve as vital points of communication between the other two tiers, ensuring that breweries are well represented and that retailers get the brands that best fit.
If there’s a clear narrative anywhere in that messy mosaic of things, particularly over the past ten or twenty years, it’s been the challenge for distributors and wholesalers to adapt to and accommodate the rapidly growing craft-beer industry. Transitioning a fourth- or fifth-generation, family-owned distribution business from representing the marketing approaches of nationally recognized brands to supporting up-and-coming craft breweries that most folks have never heard of… that’s not the sort of transition that happens overnight. But craft beer continues to gain market share, and with sustained success comes more open doors.
In the words of the outspoken distribution pundit John Conlin of Conlin Beverage Consulting, Inc., “right now, craft beer is the prettiest girl at the dance.”
Like getting into a really good argument about three-tier distribution politics, there’s a learning curve involved in distributors understanding craft beer and vice versa. There’s the reasonably warranted fear that distributors will overlook or fail to adequately represent small brewers, in much the same way that a small-time author or actor worries about their agent or publicist’s motives, especially when they’ve got bigger clients to worry about as well. There’s an issue of trust inherent to the process. On the flip side, many new craft brewers don’t fully understand how distributors work and the constraints they have to deal with internally. One of the major initiatives in recent years to attempt to bridge this gap, the Independent Council on 3-tier Dynamics (initiated by Tamarron Consulting around 2008), presented a list of roles and responsibilities at the Craft Brewers Conference in San Francisco last year. 54 points for distributors. 59 points for breweries. It represents plenty of work remaining to be done (that will, in a sense, probably always be true), but initiatives like the Independent Council and the Craft Beer Wholesalers Conference (see below) have served to help narrow these gaps.
That’s just one subsection of the larger state of things, however, and the reason one’s favorite brewery can often be found at one’s favorite retailer (along with, often, hundreds of other great brews) is because craft beer is getting distributed, on an increasingly large scale: by traditional distributors, by specialty distributors, and by the breweries themselves.
