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Cutting out the middleman

Published: Monday, March 19, 2012

Updated: Friday, May 17, 2013 13:05

Krystal

The Prospector

Store shelves are no longer lined with beer from just the three big brewers. Coors, Michelob and Anheuser-Busch once dominated the beer market until a recent trend had consumers calling for more variety. Micro-brewed beers, or craft beers, were not necessarily born, but reared its head from the depths of people’s basement, where they were mainly made for individual consumption.

Even though this sounds like the 1920s version of boot-legging beer, what made these brands special was their quality over quantity. The people making these beers wanted something better than what the big brewers were providing. Every bottle produced in their domestic factories had the quality and taste they were looking for.

Now there is an issue with the system of distribution. The three-tier system is made up of the producer, distributor and retailer. The system starts with the producer, who sends beer to a distributor, who then distributes the product to retailers (i.e. grocery stores and licensed alcohol sellers). Here is the basic run down of why the system is failing both small brewers and big business: with the amount of brewers rising in the United States, distributors cannot keep up.

Big business lobbies to keep the system intact in order to keep the chaos flowing between small producers. Big brewers are able to underhandedly own many of the distributors, who then put out more of their own products. However, by forcing the system to continue, regulating the amount of small products is becoming a daunting task. There are too many brewers in the country and that is not counting the import sellers. This is all according to reports from the Beer Industry Summit that occurred in 2010.

Question is, why should anyone care and why is there such a demand for craft beers?
Craft beers are normally made from pure ingredients in a small supply and are made locally or regionally. Many times these companies use little to no fillers in their product, which makes for a cleaner drink. With the push for organic food, many people are turning to these type of beers because they are more appealing when it comes to health benefits. Also, since they are localized, it gives them a friendlier face than the big three brands.

In the 2009 documentary “Beer Wars,” directed by former general manager for Mike’s Hard Lemonade Anat Baron, he shows how marketing and the three-tier system works to benefit the big brewers. The film depicts a corrupt system that inevitably hurts any type of creativity when it comes to new products.

Free trade would be the next step in this whirlwind of uncertainty. If the system were kicked out it would not just affect the selling of beer, but wine, whiskey and any kind of alcoholic beverage. Heavy legislation overhaul would be necessary to change the system and with lobbyists pushing to hold the system strong, it seems like it is here to stay.

For now, the distributor is the gatekeeper to product selling. Legislation on the state level in Illinois may give traction to Anheuser-Busch. Busch is attempting to go state level and cut the middleman (the distributors) out completely and sell straight to retailers in Illinois. This would only affect state level sales, but it leaves this market move open in other states. Such a change may alter the system drastically on a national level and cause a sudden need for even more legislation in order to regulate state control of alcohol distribution. If this happens, it would leave a huge question mark in the future of alcohol distribution. How will small retailers organize sales and how much power would mega-marts, such as Walmart  have in selling products?
There is a shadow, which existed long before prohibition, looming over what will happen in the case of alcohol distribution. Beer is diving head first in changing the way retailers sell and consumers buy beer.

Krystal Oblinger may be reached at prospector@utep.edu.

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