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Talkin Tech Blurry Lines Between Tiers

Posted on  | March 10, 2014   Bookmark and Share
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At the creation of the modern liquor industry in this country the 21st Amendment handed control of all things alcohol to the states. The consensus among the states was that a three-tier system was the best approach to prevent the excesses of pre-Prohibition America, and as a method to levy and collect taxes. Eighty years later there is little concern that tied-houses and their problems will return to the U.S. drinks industry, but there are signs that members of the tiers have been reaching beyond their prescribed roles.

Some of the most vocal advocates for reaching beyond the traditional three-tier model have been the California wineries. Small wineries in particular hope to replace the lower-margin sales to a distributor with direct sales to consumers including shipping across state lines. (Efforts at “direct to trade” sales in states where wineries don’t have distribution have been less successful.)

At the other end of the tiers, some of the larger retailers have made a healthy profit by working with private label wines, and in some cases working directly with suppliers to source wine and spirits offered exclusively at their stores. Also, restaurants have been able in recent years to purchase at auction, and now some of the top wine programs in New York are selling on consignment from private collections.

Promoting From The Warehouse

Less obvious in this industry tier skipping is the effort by distributors to reach beyond their typical retail customers to influence their customers’ customer. In most states the gifting of promotional items or services to a retailer is considered a violation of alcoholic beverage law. This leaves the distributor with limited opportunities to help with a retailer’s sales. However we see increasing examples of distributors who work with unlicensed marketers to reach an audience.

As the internet becomes increasingly local and mobile, a marketer can provide access to shoppers who are searching for products and looking for delivery. While the distributor can’t satisfy either of these goals for the consumer he can promote products that originated from his warehouse. With targeted local advertising, especially on mobile devices, the distributor is promoting a portfolio that they want to sell even though it is fulfilled by a retailer.

Certainly wholesalers interact with consumers at retailer tastings, and at larger events like the Boston Wine Expo or Wine Riot. It gets trickier when wholesalers start to sponsor online advertising of their products without using a third party to direct consumers to the retail tier. Helping a few restaurants with their Facebook marketing or buying Google Shopping ads probably needs to be done at arm’s length from the licensed business.

As usual the internet is providing new opportunities for this industry to be more efficient and effective at selling alcoholic beverages. Some see the three-tier system as a solution to an old problem but it is hard to argue with such a firmly embedded structure. Reaching beyond their tiers is one way members of the trade are finding opportunity in this system.


To comment on this column or to learn more about how Beverage Media can help with a website for your store visit BevSites.com, or contact James Laurenti at 617-864-1677. Follow us on twitter at twitter.com/bevsites.

To comment on this column or to learn more about how Beverage Media can help with
a website for your store, visit BevSites.com or contact Ian Griffith at 617-864-1677.
Follow us on Twitter at twitter.com/bevsites

For a complete listing of all the Talkin' Tech articles, please visit Talkin' Tech on BevSites.com.


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