The Impossibility of the Three Tier System

This absurd system is a solution for a problem that does not and can not exist

I want to request that my readers, and especially those who work in or around the wine industry, consider the following:

The primary concern and problem that the three-tier system addresses is one that was prominent in 1910 and is one that not only no longer exists, but cannot exist today. And yet, lawmakers, regulators, and members of the industry are consistently told that without the state-mandated middleman inserted between producers and retailers, a centuries-old problem that was a primary motivation for enacting Prohibition, will re-emerge.

The problem that the state-mandated use of a middleman wholesaler (the key component of the three-tier system) was the Saloon Culture that emerged in the late 19th century and early 20th century, primarily in large cities. That culture saw primarily working-class, immigrant men using saloons as social clubs. These primarily male-only institutions proliferated across the cities and served as social clubs, political clubs, dining halls, and the source of a tremendous amount of immoderate alcohol consumption.

The Saloons that dotted the streets of New York, Chicago, Trenton, Boston, and every other major city were supported by something called “The Tied House System”. Under this system, independent Saloon operators saw their operations financed and often completely equipped by a single brewer who, in return for supplying the cash or material for opening a saloon, required the operator to only sell their booze. It meant only selling their booze at specific prices. Eventually, in many cities, the independent saloon operator was abandoned and brewers simply operated their own establishments—often many multiple establishments in a given city.

The insidious element of the saloon culture was the nefarious ways by which the Saloon marketed and sold booze. Often the beer and other products were sold at extremely low prices. Often times consumption was encouraged by offering free meals with the five-cent beer. Eventually, all manner of vice infected the saloon.

The results were degradation and visible degradation at that. Alcoholism was rampant. Weekly wages were wasted. Families were destroyed. Men, women, wives, brothers, sisters, and others were left destitute.

Wholesalers Will Rid Us Of The Saloon
When it was finally determined that Prohibition, the response to the Saloon Problem, should end, the primary question was how to prevent a return to saloons and the degrading culture they represented.

“Toward Liquor Control” was a little book published just as Prohibition was ending. It provided recommendations on how states ought to regulate alcohol and how they ought to design their alcohol regulatory systems. Among the six principles that guided the authors’ recommendations was this:

“The saloon, as it existed in pre-prohibition days, was a menace to society and must never be allowed to return. Behind its blinds, degradation and crime were fostered, and under its principle of stimulated sales poverty and drunkenness, big profits and political graft, found a secure foothold. Public opinion has not forgotten the evils symbolized by this disreputable institution and it does not intend that it shall worm its way back into our social life.

“Before national prohibition, the saloon achieved an evil notoriety. Politics were often bought by the liquor interests; vice and gambling came to be regarded as normal accompaniments of the liquor trade; and the abuse of drink, fostered by the drive for profits, produced its share of poverty and misery. All these evils were bred under the licensing system, and it was the complete breakdown of this system that gave momentum to the national prohibition movement.”

The primary method by which states, in redesigning the alcohol regulatory system when Prohibition ended, prevented a return to saloon culture was with the creation of the licensed wholesaler who would serve as a state-mandated middleman between the producers (winery, brewer, distiller) and the retailer (stores and restaurants). This is the primary and inherent element of what today we call the “Three Tier System”.

And the system worked.

The saloon culture, restricted particularly by the inability of producers to enjoy influence over retailers and the institution of “tied house” laws that prohibited any investment in or delivery of things of value to retailers and bars by producers, resulted in less predatory systems of sales and marketing.

The Impossibility of the Saloon Today
And that predatory Saloon culture will not return to America. It can’t. But not because the three-tier system with its mandatory use of wholesalers is the key feature keeping degradation at bay. The reason a Saloon Culture will not return to America is that America has evolved since 1910. It is a different kind of country, a different kind of economy, and a different kind of culture.

It is critical to recall the turn of the century American city. They teamed with European immigrants that made up the majority of the working class and menial labor force. Travel between cities was expensive and took a good long time. There was little in the way of entertainment and distraction in the cities that were accessible to this immigrant, working-class culture. The saloon played a critical socializing role in cities. It was where working-class folks made friends, discussed and planned politics, found jobs, got the news, ate meals, and found entertainment.

Now consider America in 2022. We have cars. We have airplanes that cross the country in four hours. We have the radio. We have television. We have the Internet. We have streaming entertainment services in multiple languages. We have social media that acts as a meeting places for every type of culture. We have major sporting events in every city. Entertainment venues of every kind proliferate.

The fact is that Saloon culture could not return today because there is no call or a social need for the saloon as it functioned 120 years ago. The idea that people of any class would use a bar to get their news, their entertainment, their job leads and their meals simply doesn’t match the current socio-economic system and technology-driven imperatives of the early 21st century.

And yet, here we are with most states requiring distillers, brewers, and wineries to sell their products to a wholesale tier created in the early 1930s in order to combat a problem encountered in the 1910s. It is a ludicrous situation. And it is an indefensible alcohol regulatory structure in the 21st century.

It might be time to declare victory over the past and turn our attention to the needs of the present and future. It might be time to stop pretending that the state-mandated use of middlemen wholesalers provides any value at all to society. It might be time to take into account current socio-economic imperatives and create an alcohol regulatory system that works for the 21st century instead of the 19th century.