Alcoholic Beverage Distributors & Local Marketing

by Scott Thompson

The 21st amendment to the U.S. Constitution is best known for ending Prohibition, but it also put the regulation of alcoholic beverages under the control of the states. By requiring the many companies that make alcoholic beverages to go through a smaller number of distributors to get their products to the customer, state governments can more effectively regulate the marketing of alcohol.

The Three-Tier System

To prevent the problems caused by the aggressive marketing of alcoholic products before Prohibition, state governments developed the three-tier system for alcohol distribution. Companies that make alcoholic beverages don't usually deal with retailers directly. Instead they distribute their products through distribution houses, which work closely with state regulatory officials. This makes it much easier for the state to regulate the marketing of alcohol based on local conditions. Even though the three-tier system is found all over the country, the specific regulations enforced through the system vary greatly from state to state. For instance, the laws governing alcohol are very different in Salt Lake City than in New York City.

Finding Distribution

Some states require all manufacturers of alcoholic beverages to market their products through distribution houses. Others allow self-distribution on a local basis only. Companies that distribute their own products usually end up signing with a distribution house as they start to get bigger. Brewers can choose between distribution houses aligned with the major beer companies such as Coors, or houses focused on microbrews and imports. The major brand distribution houses have access to more retail outlets, but may not devote much attention to selling microbrews. Independent distribution houses offer more personalized attention, but usually have fewer outlets. There are also distribution houses focused on wine and hard alcohol products such as vodka.

Local Marketing

In states that allow self-distribution, the local character of a craft beer or a wine can be enough of a selling point to get in the door of many retail outlets that would normally buy primarily from a distributor. However, the manufacturer would have to hire one or more sales people to call on all retail accounts personally in a radius of up to 100 miles around the brewery or vineyard. A distributor can take over the delivery aspect of local marketing, but is unlikely to put much focus on convincing retailers to carry the product unless the manufacturer gives it a good reason to do so. Even with a distributor, marketing the product is primarily the responsibility of the manufacturer.

Marketing Practices

The legal restrictions on marketing alcohol vary from one state to another but are always much more restrictive than the marketing of most other products. For example it might seem like a good idea to give away a T-shirt with the brewer's logo on it with every case of beer, but that would actually be a prohibited practice in most states. Because the manufacturer doesn't usually deal with the retailer directly, one of the most effective local marketing strategies is to get the distributor excited about the product. If the distributor's sales people are aware that a particular beer is made with water from a local source and has a flavor that could never be duplicated in any other location, they can use that as a selling point. Anything local or unique about the product can increase the distributor's interest and willingness to actively sell it rather than just making it available.

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