Myths about the Three-Tier System

#1: The Three-Tier System Restricts Competition in the Alcohol Marketplace

The Three-Tier System offers consumers the choice between large national manufacturers and smaller boutique distilleries, wineries, and breweries, giving all producers the ability to compete and operate as they like.   

The rapid growth in distillery production, number of craft distillers, and stable, affordable prices make it clear that the current system fosters competition instead of stifling it. 

#2: The Three-Tier System Creates Barriers to Access in the Alcohol Marketplace

By connecting small producers with local retail outlets, the Three-Tier System benefits restaurants, grocery stores, beverage alcohol stores, and other small businesses vital to local communities and economies that sell alcohol products to consumers. 

Since suppliers, distributors, and retailers are completely independent from one another, large distributors are unable to dominate shelf space in stores, bars, and restaurants, offering consumers greater choice of products from a range of producers.

#3: Changing the Three-Tier System Would Benefit Small Businesses

Before the Three-Tier System, large companies were able to monopolize the beverage alcohol market and shut smaller market entrants out. 

Moving from the Three-Tier System would make it more costly for small businesses and boutique distillers and wineries to distribute their products to consumers.  

Changes to the Three-Tier System would unduly affect consumers’ purchasing habits, which could hurt small businesses like bars, restaurants, and entertainment venues.  

#4: Direct-to-consumer (DTC) shipping of alcohol is a realistic alternative to the Three-Tier System

DTC creates an unsafe and unfair environment for all stakeholders active in the beverage alcohol industry. DTC shipping of alcohol increases underage access to products by removing the checks and balances of the three-tier system, in which licensed businesses with trained staff are accountable for ensuring products are sold to consumers of age.

DTC shipping puts the burden on states to go after criminal activity like selling alcohol to minors, evading taxes, and selling counterfeit products that the three-tier system otherwise mitigates. 

#5: The beverage alcohol industry has seen consolidation in the production, distribution, and retail markets.

The beverage alcohol industry is thriving. From the production side, the number of craft breweries, craft distilleries, and wineries are all growing. The TTB regulates 48,000 permitted alcohol beverage operations in the U.S., including more than 20,000 permitted wholesalers. Additionally, the number of beer, wine, and liquor stores in the US has grown 4.5% annually on average between 2017 and 2022. This growth has led to benefits for consumers: between May 2021 and May 2022, the consumer price index for all items increased 8.6%. However, Americans were only paying 2.7% more for alcoholic beverages at home in May 2022 compared to May 2021.