Waiting For The Leaders in the Alcohol World to Lead

Leadership means acting on your knowledge, not ignoring it

There has never been a more accurate statement by a member of the alcohol community than this:

“When we allow innovation to lead, everyone wins: Brands get a shot, distributors fill trucks, retailers stock winners and consumers get the choices they’re already asking for.”

This is the conclusion drawn by brewing entrepreneur Joe Chura, writing in Rolling Stone. The headline on Joe’s article is “Outdated Alcohol Laws Are Choking Innovation”. Joe comes to his conclusion by recognizing the obvious that everyone who has ever even dabbled in the alcohol industry knows:

“The ‘three-tier system’ — created in the 1930s — forces products to pass from supplier to wholesaler to retailer before ever reaching your fridge. It’s an outdated framework that makes it illegal in many states for beer and spirits producers to sell directly to consumers, even when customers clearly want it.”

But then, after a long and insightful explanation of how DtC sales and shipping rights are beneficial for every tier of the industry and after definitely noting that the three-tier system is “hurting consumers, emerging brands and even the very distributors”, Joe falls back on this very disappointing conclusion:

“This isn’t a pitch to dismantle the three-tier system.”

Why isn’t it?

Why isn’t Joe Chura calling for the end of the mandate that requires a supplier to sell their product to a wholesaler before it can be stocked on the shelves of a retail outlet or featured on a drinks list at a restaurant?

For that matter, why don’t more alcohol industry players like Joe come right out and call for an end to the legal mandate requiring the use of a middleman, let alone the much more obvious need for more liberal direct shipping rules for brewers, distillers, importers, and retailers?

The answer to this question is not that a world without a middleman mandate or restrictions on direct-to-consumer shipments is dangerous or harmful. Everyone understands that these things would be beneficial from nearly every standpoint, whether you are considering sales or political matters.

Recently, the most ardent advocate for enforced use of a middleman wholesaler, Francis Creighton, CEO of the Wine & Spirits Wholesalers of America, attempted to gaslight the entire alcohol world with a “CEO Blog Post” in which he claimed the following:

“We’re all navigating a challenging marketplace marked by inflation, shifting consumer behavior, and evolving industry partnerships. Now more than ever, we need to recognize what’s working—and that’s our uniquely American three-tier system.”

No one believes this. No one has believed this for 20 years. But wait, there’s more:

“For over 90 years, this structure has delivered consumer safety, fair competition, and reliable market access.”

This claim is the exact opposite of the problematic system Joe Chura examines in his Rolling Stone piece. In fact, it’s notable that Francis Creighton has never had to actually navigate the three-tier system as a seller, while Joe has found himself mired in the system. I wonder who understands it better. Yet Joe can’t bring himself to go full monty and call for the end of the legal mandate that wholesalers must be used.

Joe and everyone else at every tier of the alcohol industry understand perfectly that the required use of a wholesaler does nothing to advance consumer safety. The notion that the required use of a wholesaler lives in any universe, even adjacent to “fair competition,” is the very gas in the light. And there is no world where “reliable market access” and the three-tier system occupy the same space.

Joe is obviously not the only person who knows the three-tier system is an “outdated framework” at best and a drag on innovation and sales at worst. Hell, my bet is that WSWA CEO Francis Creighton even knows this. The fact is, if you ask 10 people in the alcohol industry to rate the fairness or even the effectiveness of the requirement for suppliers and retailers to use a middleman on a scale of 1-10 (1 being “It is useless), you’d get an average score of 2.5.

It’s no coincidence that one important reason you don’t see a concerted effort to dismantle the three-tier system is that this system disconnects and keeps the three tiers separate, making it difficult for retailers to collaborate with suppliers. Meanwhile, the middleman tier, set as it is between these two other tiers, needn’t cooperate with anyone to achieve its goals. They need only use their unearned power as the legally enforced middleman who wet their beaks on nearly every transaction to gaslight the industry and lawmakers that their privileged status is required—if only to assure “consumer safety, fair competition, and reliable market access.”

At the very end of Joe Chura’s article, he provides a list of six things that producers can do to innovate and stay compliant. Number six is enlightening:

“6. Know the rules. Then push them. Stay compliant, but challenge what’s outdated. Innovation often lives in the grey.”

Yet, Joe isn’t really willing to “push”. He isn’t willing to come out and say, “The legal mandate that suppliers and retailers use a wholesaler that is at the heart of the three-tier system must end.” He’s willing to call for DtC shipping, but let’s be honest, he’s a little late to the party on that one. The real leaders will call to end the three-tier mandate at every turn.

I’m waiting for more leaders to emerge.