Threat to the middle tier from the perspective of a beer wholesaler

With a few exceptions, alcoholic beverages reach consumers by way of a legally-mandated three-tier system composed of manufacturer or importer, state-based wholesaler, and local retailer. In all states, the wholesale function is required to be separated from the manufacturing or importing function. In most states, the identity must also be separate, meaning that the producer or importer is prohibited from having any financial interest in the wholesaler entity.

Separation is required as an aid to regulation by, among other things, providing a transparent port-of-entry for alcohol, simplifying the collection of excise taxes, and most importantly from a public health perspective, insulating local alcohol wholesalers and retailers from supplier-generated pressures to lower prices and over-stimulate sales.

Wholesalers are mainly community-based, family businesses. None are publicly traded and all are financially independent of their suppliers, both of which benefit the public interest. As a practical matter, however, wholesaler independence is compromised by the increasingly consolidated producer tier and the significant value of mega-brands and their marketing power.

Deregulation further threatens the independence of the middle tier. This presentation will explain the economic pressures brought to bear on wholesalers, the impact of deregulation, and how public health advocates can work in parallel with the middle tier on their overlapping interests.