Three-tier evolves to the three-channel system

The nation progresses, laws evolve—let's unify for widespread adoption.

The beverage alcohol industry (wine, spirits, beer, cider, mead, sake), needs a more concerted and transparent education process for our legislators about what is really happening to beverage alcohol producers in the United States.  

It is disheartening to see the reduction of planted acreage and softening of US wine sales, when we see from multiple reports that imported alcohol products, specifically wine and spirits, (wholly helped by the three-tier system) are increasing their threshold of US customer demand. These international companies continue to invest in the US market at the expense of domestic producers because the market is stacked in their favor. We should not block international products, just allow the domestic ones the opportunity to compete. 

In talking with government officials about direct selling, some are amazed to learn about the restrictions placed on sellers and shippers of beverage alcohol products, except for the obvious and important need to restrict sales to minors and ensure all sellers are licensed. They are often unaware of the reasons why these legacy laws still exist. It makes you wonder who they are getting their information from about the beverage alcohol industry.  

We sadly continue to see state agencies moving away from supporting US producers based on the introduction of bad and anti-competitive legislation (not by the agencies, they just have to follow the rules). States are either unknowingly, or worse, knowingly enacting legislation backed by the three tier gate keepers, who are continuing to do everything they can to maintain their competitive monopoly at the expense of American consumers getting the choice that they want and demand.  

When we reach out for a reason why they are enacting this legislation, we are often met with vague responses. Gone are the commonsense areas of focus that these state departments were created for: tax collection, ensuring minors are not buying, and ensuring retail establishments are behaving. They now appear focused on building walls around their states to help protect the interest of the largest donors or in the case of control states, protecting a business that it is questionable as to whether they should be in the alcohol business at all.  

What can we do about this?  

The Craft Wine Association (CWA) is taking a leading role in this discussion. We have widespread support from industry associations and individual producers alike, who understand the core challenges and risks facing our industry. The CWA has developed the National Direct Shipping Bill of Rights, a commonsense framework for direct sales designed to protect the interests of all stakeholders involved, including consumers, producers, wholesalers, and states. 

The three-channel system doesn't eliminate the traditional three-tier system, recognizing its significance as a vital sales channel. Instead, it broadens the scope by incorporating two additional channels: Direct to Consumer (DTC) and Self-Distribution (direct to trade), enabling all three to work together. California has shown this to be the case for many years. However, the failing of California and a few other states, is that they treat each alcohol type differently, have production size limits (unlike the wineries), and don’t allow direct to trade from out of state producers. So even the most “advanced” states in beverage alcohol distribution still have some leveling up to do.  

It is time for the industry to come together in an open and transparent manner. It is time for small producers —who make up 97% of American producers—to inform legislators about the successful collaboration of all three sales channels. The Three Channels System is already a reality, so it's time to shift our conversation towards embracing these three channels, moving beyond the outdated notion that the three-tier system is the only option. And let’s get to work educating those in charge of regulating and setting laws on how they are currently harming the very constituents they were sworn in to represent.