At the second day of the National Beer Wholesalers Association meeting, the recurring theme was the preservation of the coveted three-tier system.
In his address during the general session, Phillip Short, the 2006 chairman of the NBWA, issued a battle cry to rally the troops to action.
“The middle tier is the window that allows the alcohol distribution system in this country to be transparent,” he evoked.
It’s time for a quick history lesson.
In its infinite wisdom, Congress amended the Constitution in the early 20th century in an attempt to rid its citizens of the so-called scourge of alcohol consumption. Prohibition, as it was dubbed, stopped the sale of all alcoholic beverages within the United States.
Guess what? It didn’t work. After a 15 year experiment, Congress passed the 18th Amendment in 1933 to rectify its previous mistake. Contained within this legislature were key elements designed to monitor alcohol distribution. One was to give each state the power to regulate alcohol within its borders; another created the three-tier system which placed distributors firmly between the supplier and retailer as an insulator.
This seemed to work. For the past 73 years the three factions marched along blissfully and the government was satisfied. On the whole, the three-tier system was considered a good solution to total chaos.
NBWA members, as well as its industry partners, maintain that distributors play an important role. State regulators know where the alcohol is coming from; they know where it is sold, and to whom; and probably most important in their eyes, appropriate taxes are being collected.
Over the years, a few retailers challanged the system. They wanted direct access to the supplier. With the appearance of “big box” retailers (you know who you are) on the scene, their efforts were increased as they tend to purchase products in massive quantities. In January, 2006, the heat was turned up a notch when they involved their respective state, and federal judicial systems. Judgments were declared that potentially pre-empted the provisions of the 18th Amendment and jeopardized the three-tier system.
Now you know why distributors are hopping mad.
A panel moderated by Mark Brown of Buffalo Trace Distillery and comprised of Pat Gagliardi, Michigan Liquor Control Commission, Tom Haynes of the Coca Cola Bottlers Association, and Harry Schuhmacher, editor of Beer Business Daily, discussed the competition and regulation of the industry. Haynes of Coca Cola Bottlers stepped out on a limb and declared publicly that U.S. District Judge Marsha Pechman (who ruled in the Costco v. Washington State case last April against the state’s three-tier system rules) not only didn’t understand the 18th Amendment, but probably didn’t have a good grasp on the Constitution as a whole.
NBWA’s political activist committee entered the battle in full force by lobbying legislators to protect their interests. In 2006, this powerful group raised $1.4 million toward its efforts, according to Steve Lytle NBWA PAC chair.
Craig Purser, NBWA president. challenged the membership to switch their attitude of complacency to one of action. “We must be willing to stand up for this system of distribution and advocate an agenda that demonstrates the value that we have for our suppliers, licensed retail customers, and the millions of beer consumers,” he said.
Understanding the stakes involved and how it would affect their bottom line, the suppliers were aligning with the distributors in the cause.
The president and chief executive officer of Heineken USA, Andy Thomas, in his address at the general session pronounced that it was time the supplier and distributor become close allies
Other issues were discussed during the session. Purser talked about the association’s efforts to educate the public on recent findings that moderate alcohol consumption can produce health benefits. Also, he explained the industry’s commitment to curb underage drinking, and stop the importation of products by start-up European companies that are not regulated and ship potentially harmful products to the United States.
Mention was made of the revised dues system that will increases the maximum dues to $50,000 per year – a change from the current $25,000 cap – more about that tomorrow.
You can’t have a convention without awards. A number of distributors were honored for their involvement to further the well-being of the association and the beverage industry. (See our other post today on the NBWA.)
All in all, the beer industry has enjoyed a good sales record in the past year. Some headlines proclaim: Beer is Back. But the leaders of the NBWA and its general membership contend it never left.
(Toni Daylor is a reporter based in Orlando, FL.)