Many people complain when they go into a liquor store or a bar and they are out of their favorite brand and have been for some time. “Why don’t you order it?” is the most common response from the consumer and the answer is usually that we have but it is out of stock. That sometimes is the case but more often than not it is because the distributor is not letting them have it because they won’t purchase ten cases of some unknown wine or vodka the distributor is trying to get rid of from their own inventory. The log jam is usually the distributor playing games with the bar or independent liquor store owner forcing them to purchase something they don’t want to get something they do want. It is called the three tier system and it exists because of taxes.
Each tier involves another tax that has to be paid. The problem is it often means that the product does not get from the distiller to the consumer in a fair manner and drives the cost up as each tier has its mark-up. It also means the poor bar owner or liquor store owner is blackmailed into getting a product they don’t want and often can’t give away and has to charge more for their additional cost. So how did we get a three tier system?
In the 19th century the primary package for whiskey was not the bottle, but the barrel. Distilleries would sell the majority of their barrels to a “grocer” who would distribute the barrels to individual bars and liquor stores. When the tax came back with the Civil War, the distillery would pay their taxes when the bonding period was up or when they sold the barrel to the distributor or other customer, whichever came first. The government then would tax the barrel again when the barrel was sold by the distributor to their customers. If the distillery sold directly to a bar or liquor store they were required to pay the distribution tax as well and that was a “two stamp” barrel in their records.
After Prohibition the distilleries had to sell everything in bottles and they could not sell directly to bars or liquor stores in most states, but had to sell to distributors which were often a State-controlled ABC. This was to control the taxes being paid on the liquor as much as any other reason. What it did was give the distributors a lot of power over the availability of spirits. The distributor decides who gets what allocation.
Of course, they take care of their biggest customers first. The big box stores with lots of volume in sales have no problem getting product and often, but not always, don’t have to take products they don’t want to get what they want. Even if they do get stuck with some product they don’t want, they have the profit margin that allows them to take a loss and get rid of the rot gut bottles. Small store owners and bars are the ones who get screwed. They are forced to either take the rot gut or do without what they want and lose their customers to the big box stores or the bars playing the games with the distributor. It is one of the facts of a capitalist society that these games happen, but unfortunately it causes the problems.
If your local bar or liquor store is out of your favorite brand don’t just blame them for not having it. More than likely it is because the distributor is playing a supply game with them that they can’t afford to play.
Photos Courtesy of Maggie Kimberl