Francis Creighton, the CEO of the Wine and Spirits Wholesalers of America (WSWA), wrote a piece celebrating the three-tier system called A Stronger Industry Through the Three-Tier System. Ironically, the fruits of the liquor industry he celebrates come in spite of the three-tier system and not because of it. As his blog post goes on, it gets further away from reality.

Let’s start with his assertion that the marketplace has a diverse portfolio of products because of the wholesaler tier.

If we look at the two biggest movements resulting in expanding the marketplace for suppliers, history shows that the wholesaler tier fought these movements tooth and nail.

Preventing vertical integration is the modus operandi for the wholesaler tier. And nothing stunted diversity of growth more in the marketplace than strict limits on vertical integration. If you look at the beer industry, in 1980 there were 101 brewers in America. In 1934 the year after Prohibition there were 756 brewers in America, in 1990 the number of breweries increased to 286, in 2000 the number exploded to 1,566 and in 2020 the number climb to 8,884.

So why the absurdly large increase in the number of breweries? Craft brewers came online and expanded the number of breweries. The craft brewers were able to manufacturer and retail their product and in many states distribute the product.

The ability to vertically integrate grew the number of brewers and hence grew the diverse portfolio of beers available in America. Wine and spirits also benefited from the movement towards permitting vertical integration.

The second big movement in the liquor world comes from the wine industry, where the U.S. Supreme Court in Granholm legalized interstate winery shipping. Pre-Granholm the number of wineries was estimated at 4,700, twenty years of DTC winery shipping later that number stands at around 11,500. Small wineries could obtain national access through the DTC market, something the traditional three-tier system could not achieve for them. This resulted in rapidly developing the variety of wine brands in America and lowered the barriers to entry for small producers, which produced a more diverse portfolio of wines.

WSWA was at the forefront of fighting Granholm, spending lots of money and resources in the fight. Since Granholm it has attempted numerous times to limit its reach.

It is ironic that the industry tier who has resisted growth and diversity of products the most is making itself the champion of this cause.

Safety sirens

Mr. Creighton’s piece next discusses the role of the wholesaler in public safety and that the wholesaler guarantees that the same product that leaves the distillery is the same one that gets into the consumer’s hands. He alludes to counterfeits and black markets causing death in other countries. At the same time failing to mention that many other countries lack a TTB where product formulas and labels must be approved before selling to the public, hence eliminating many of these issues.

Also, if the safety standard is going to be the guarantee the product that leaves the distiller is unadulterated, it begs the question why WSWA would object to distillery DTC shipping? What is safer than receiving a product directly from the source to guarantee safety?

The article lacks specifics on what steps the wholesaler tier takes to guarantee safety of product coming from a distillery, as they never test the product or maintain safety protocols in place for the product.

Additionally, there is the typical comments that the wholesalers do more than move boxes and they build brands. Obviously, the word out on the street is the wholesaler in many places are the box mover and the brand must develop itself and invest their funds to build the marketing budget.

In the end we get the same old rallying piece with the same tired lines we heard for years. I imagine WSWA hopes we sleep through this piece without thinking critically.  I was hoping for better, I just request that they wake us up when some new revelation comes calling.