Peter Schorsch
At first blush, it sounds good. Legislation is moving this year ostensibly to help the state’s growing number of craft distillers.
But upon closer look, there’s a flaw. The benefits come at the expense of the state’s alcoholic-beverage distributors, which pay taxes and produce jobs and have done so for decades.
Here’s how: By easing regulation of shipping and selling spirits, which will almost surely blow a hole the size of a Mack truck in Florida’s “three-tier system.”
If it sounds confusing, it’s not.
The system was created after Prohibition and requires the business separation of alcoholic beverage manufacturers, distributors and retailers — the three ‘tiers’ — to avoid a situation where one sector of the marketplace has an unfair advantage over the other.
The system “prevents the marketplace from being dominated by major companies who can use tactics to increase alcohol sales,” according to the National Alcohol Beverage Control Association.
“For example, a major reason for national prohibition in America was the behavior of saloon owners who used influence to solicit customers to over-drink and over-spend on alcohol, causing a negative impact on families and creating numerous public health issues.”
Moreover, “tax money provided by the system goes to education, infrastructure improvements, and other areas that benefit all citizens … manufacturers are given equal access to the marketplace that they would not receive under other systems. This allows for large corporations as well as craft distillers and brewers to reach consumers.”
The craft distillers, however, want to be able to sell more of their own spirits, they say, just like craft brewers and in-state wineries already do.
Bills this year would allow distillers to ship liquor out of state, even sell their bottles direct to consumers in airport stores or kiosks.
One in particular would allow craft distillers to have up to three vendor’s licenses and be able to “transfer” their own product. That’s a bridge too far.
As Scott Ashley, president of Wine and Spirits Distributors of Florida, told lawmakers recently: “The issue of shipping is going to create problems with fairness” when distributors themselves will remain barred from doing out-of-state shipments.
The unfairness extends to nationwide concerns with major business in Florida, such as Southern Wine & Spirits.
As one distributor group’s political action committee put it: “The three-tier system also protects the economy because licensed distributors act in cooperation with federal and state governments to help ensure that alcoholic beverages are reliably collected, allowing large and small retailers alike can profit and thrive.”
The bottom line here is clear. Let’s not help the distillers at the cost of — to put it bluntly — screwing over the hard-working people working for distributors.
To borrow from the great Dolly Parton: Anything else “ain’t fair” and “ain’t right.”
7 comments
Ben Etheridge
March 11, 2019 at 10:41 pm
Well, it’s a grabbing headline for sure, but sad to say, it doesn’t check out. Aside from the facts of who actually holds the advantage here, surprise, it’s the distributors, it doesn’t take into account a voice of a true craft distiller, nor the fact that out of the hundreds of brands, most do not have distributors, as they are not known enough to demand attention. I will take my best shot, and say that this agreement to relieve the burden of a craft distillery, being massive companies that they are, from possibly having the opportunity to take advantage of the system to gain leverage, (purpose of tide-house laws) was lifted because the past has shown them incapable of acting within the laws in the last 10 years, or?
You are citing the reason for a 3 tier system that stemmed from bootleg liquor being made from improperly made alcohol that caused illness and sometimes death, agreed. But keep in mind, these distilleries currently make and sell their alcohol, and to say that distilleries must pay someone to sell their goods, just for the sake of public health is actually quite funny. And honestly, wouldn’t a saloon owner buying you a shot or putting on your favorite sports game, qualify as influencing you to stay longer and spend more money on drinks, god forbid you give him pretzels as well, you will never get rid of him.
So lets say, that you, yes you, anyone reading this, spent 7 years and every penny you ever made to create a family company that makes an award winning spirit. Great right? Lets keep in mind that the average craft distillery spends hundreds of thousands of dollars to buy equipment, and in rare instances, builds it themselves. So now you have a building, full of debt, great!
Now your real job begins, and it takes years, and every second of your day and night to build, and test, and alter, and create something from absolutely nothing. You lose friends, money, and most importantly time with family, for this dream you have, you know, it’s referred to as “The American Dream”, where hard work and dedication pay off in the end.
So here you are, in your distillery, you spend money on marketing, promotions, hand out flyers, beg friends for help, and are beginning to get people on vacation to come in to your distillery! That’s amazing, good job killer, its rare that someone actually makes it in this business, you know, because of the difficulties that come with the industry. (That is another, extremely long story, that I would be thrilled to tell along side of every distiller in the country). So Mr. and Mrs. Smith, nice people, from Wisconsin actually, cheese heads they say, come in for a tour. They love it, you are fun, they love the spirits, they love the culture of true craftsmen creating delicious spirits from scratch, and want to buy a few bottles.
BUT, as often happens, they have flown in and cannot pack bottles of alcohol in their bags. They are unable to bring a bottle home, we cannot ship it, so who actually loses here? The consumer, the city that this distillery lies in, as well as the state, as that would have generated, you guessed it, FET, State tax, and local sales tax (we pay the same amount in tax as a distributor does). Lets clear that up right now. THERE IS $0 LOST AS TAXABLE REVENUE for education, infrastructure improvements, and other areas that benefit all citizens, since that seems to be the major concern, lol. Yeah.
I’m sure as a business owner you are frustrated, don’t worry, there are representatives and senators that are as well. There is no short solution to fixing oppressive laws from the age of segregation, but we have somehow managed to change most of them for the better. Research, (both sides), compromise, adapt, and move forward. Antiquated laws should be changed for good reason, and the reason here is equality.
When we talk about fairness, I do have to laugh. Do we really think that Jim and Tammy, owners of a craft distillery, are going to overturn the monster that is a National Distributor by shipping 6 bottles to Green Bay Wisconsin? No conversation on limits? The only answer is no? Your not allowed to do that. That is not how our system works.
So breweries and wineries can sell their goods, but distilleries are held to another standard, why? And there has got to be a better answer than citing the reason the Temperance League was founded: “causing a negative impact on families and creating numerous public health issues.”
Just my 2 cents.
Ben Etheridge
Owner/ Operator
Black Coral Rum Family distillery
Neither a writer, nor a lobbyist
Jeremy Craig
March 11, 2019 at 10:46 pm
1) There is no flaw in this because it benefits the distributors and retailers and actually strengthens 3-tier (nobody is saying end 3-tier, but we could have that converastion separately). By allowing more sales and tastings at the craft distillery, we are creating more customers for retailers (away from the distillery) and that creates demand (and sales) for the distributor too. People today want a local story with real products made by real people. That is what craft is – we sell the first bottles and create customers for life for our retail and distributor partners. It’s our best form of marketing and it’s working. (By the way, the only flaw is your argument on paying taxes. Craft Distillers pay the exact same state excise taxes to the state for sales from our tasting rooms as distributors pay for state excise taxes when they sell to ABC, Publix, Total Wine and other retailers. Craft distillers also may the federal excise taxes to Washington AND an additional 6.5% state sales taxes for any bottles we sell from our tastings rooms, so please get your facts right before you publish them to your readers.
2) Honk Honk. This bill will no sooner impact 3-tier than the man in the moon will. All products that a craft distillery ships out of state will, as with all products shipped to every other bar, restaurant and retail store will be shipped through a licensed distribution, thus complying with both in state and our of state 3-tier rules. A few bottles may end up being sold to consumers, but these are generally sales that would never have taken place in a retail store since the sales are in FACE TO FACE transactions at the distillery. These are tourists and visitors who want to take a piece of Florida with a great story back with them. Park your Mack truck and fantasy of “Blowing a hole” in 3-tier. It’s ain’t happening with this bill.
3) You are correct on one point – equality. Florida Craft brewers and Wineries have enjoyed many privileges not allowed to craft distillers including shipping, self-distribution, unlimited bottle sales, ability to hold a second license… for decades. And you know what? Florida’s beer distributors and retailers are doing just fine. In fact, a walk down the local supermarket will confirm the craft beer categories are growing at an exponential rate. So in fact relaxing these laws has been a good thing for all three tiers of the distribution channel: Supplier, Distributor and Retailer. The same thing will happen with Craft Spirits. Everyone will win and grow. So why discriminate against craft spirits? It makes no sense other than fear based thinking of a couple of very large distributors who are uncomfortably with change in the near-monopoly access to market they have enjoyed since 1933.
4) And perhaps the most offensive (laughable, actually) line in the article was who was getting screwed over. Seriously? It’s the consumer my friend. UPS and FedEx would move our product to stores for less than 10% and be happy to do so, but because the federally mandated almighty 3-tier, the large distributors have a monopoly on access to markets and they all overcharge by 10-20% which ultimately drives up the cost to the consumer.
5) Any please don’t try to tell use that distributors work any harder than the rest of the industry. We all bust our butts every day to make the best spirits we can. Perhaps that was the most offensive line in the piece.
Jeremy Craig
Head Distiller/Co-Founder
Copper Bottom Craft Distillery – Family owned and operated
David Creighton
March 12, 2019 at 11:35 am
the 3 tier system is worse than useless. in the days when ‘mobs’ of gangsters controlled alcohol distribution, it too guns to keep other ‘mobs’ out of the territory those ‘distributors’ wanted to control. today, the mobs are renamed wholesalers – originally owned by family members of the original gangsters. today, instead of guns, legislators are convinced to protect the territories by law. sound good? not for the consumer.
survey after survey has shown that citizens want a ‘well controlled’ alcohol industry. that is as specific as the survey gets. do they want exclusive territories, ‘come to rest’ laws, protecting businesses in ways that would be considered insane in the furniture or produce business? What they think of is one thing – no sales to minors. that is the only thing ‘well controlled’ means to anyone. do they care that one store has a lower price – no, they would love it.
hard working, tax paying, job creating distributors? wineries, breweries and distillers all qualify.
NUTS! to that guys entire ‘argument’ such as it is. I’ve worked in every aspect of the alcohol industry – so this isn’t just smoke.
Derrick Mancini
March 12, 2019 at 11:47 am
Three tier system is ONE way to enforce a no-tied-house provision of the federal government. There are other ways. But the three tier system was specifically meant to counteract the power of large manufacturers. Unfortunately, large distributors have, over time, evolved to have as much or more power than large manufacturers, and have to be very cosy with large manufacturers, meaning they often effectively act as their surrogates. The amount of business the big distributors lose from direct craft sales is minuscule: any craft distillery that gets to be of any size, needs to distribute product through a distributor by either law or need. But the big distributors can put the brake directly and indirectly on the growth of the craft distilling industry, and that is of major concern to the big distillers, that don’t want to see happen to spirits what has happened to beer, with significant growth in craft market share. In other words, essentially a form of tied house!
John Moore
March 12, 2019 at 1:28 pm
Here’s where this article fails: It takes up the position that the middle tier in the system – that of the distributor – would be utterly damaged to the point of sinking the entire system. That claim is simply indefensible.
It’s written in the 18th Amendment to the US Constitution, and is therefore the accepted law of the land. The proposed change to Florida law wouldn’t even approach a hole in the wall of that middle tier; more to the point of fact, it would serve to level the playing field… if only a little bit.
Our esteemed author makes this point for me by citing a quote from “one distributor’s Political Action Committee.” This illustrates the fact that the distributors EACH HAVE THEIR OWN LOBBYISTS IN TALLAHASSEE. Craft distilleries in Florida don’t enjoy near enough profitability under the current system to be able to each afford our own our own lobbying group; we barely have enough money to hire from within our community and create jobs. The role of profits in business includes reinvestment in growth of the brand, but the existing system is oppressive to the point of PREVENTING small business growth.
Since Repeal Day, the distributors in Florida have had a strangle hold on the local craft distillery. When St. Augustine Distilling opened its doors 5 years ago, Florida State Law limited them to sell just 1 bottle to any given person in any given year. This created a requirement that the distillery come up with a system to track sales to every individual customer, which was a natural distraction from their true business focus of distilling, bottling and shipping. The founders of St. Augustine Distilling assembled and funded the Florida Craft Distiller’s Guild in order to do some lobbying in their own interests (which, of course, flies in the face of the large distributors’ PACs) and in five years these lobbyists have moved the needle all the way up to where craft distillers can now sell 6 whole bottles per person per year. This could scarcely be called progress, as it keeps over 99% of package liquor sales in the hands of the Distributor and the Retailer. And again, the distiller is legally bound to keep track of what a given customer purchases in a given year. Costco doesn’t have to do that; why should a family-owned distillery be forced to comply with this? If you go to the Bacardi distillery (the single largest supplier under the Souther Glasers Wine & Spirits portfolio) there is no such tracking requirement, and no such limit on sales. How is this possible? And how is this fair?
While we’re on the topic of inequality, let’s compare Craft Distilling in Florida to local Craft Brewing: A Florida craft brewery is never required to keep track of how many growlers they fill up for their local regulars; no count on how many bottles sold nor pints served. They don’t need to keep a count of anything they do at retail. The fact that they can sell a pint of their in-house-brewed beer to anyone of legal age is the envy of every craft distillery in Florida! We would love nothing more than to have a cocktail bar inside our distillery, but under current Florida law this is forbidden. I can’t sell a cocktail in my distillery, but my craft brewing friends across the parking lot can sell me all the single-serving beers I want (assuming responsible vending practices are in place). Again, where’s the equality here? It’s not like a cocktail is somehow more dangerous to public health than an imperial IPA. And in the hands of a trained and talented craft cocktail bar staff, distilleries can create jobs and tax revenue in the same way craft breweries do.
Since distilling was decriminalized in 1933, the craft distiller has been stuck at the bottom of the market barrel. All we are asking for is to the laws to create the equality that’s been lacking, and allow our brands to float to the top where they belong. We’re good people. We do a lot of charity work. We support local Florida farmers, and we support our community in any number of ways. The big distributors can afford a PAC, and we can barely afford our own health insurance. Oh, did I mention we make great products with our own local hands? No reason in the world to leave these laws in favor of the distributor when it does clear and verifiable damage to these small businesses.
John Moore
Brand Manager/Distillery GM
Steel Tie Spirits Co.
West Palm Beach, FL
Chris
March 12, 2019 at 3:31 pm
Let’s be honest:
The ones getting the shaft in the 3-Tier-System are the distillers and the consumer.
Let’s have a quick look into history: Before the dark period of prohibition, organized crime was small peanuts. But then, prohibition offered the opportunity to make never-before-seen amounts of money for criminal gangs.
When prohibition was abolished in 1933, these now highly organized, sophisticated criminal enterprises didn’t want to give up their piece of the cake. You could compare these organizations with the cartels that nowadays running the drug-trade.
The 3-Tier-System, the fact that a distributor middle man is MANDATORY for the sale of beverage alcohol, was essentially established so that the local Al Capones could legalize their distribution networks.
It even made it to an Amendment in the Constitution, regulated on state level, so that it was always the locally established cartels benefiting.
The principle behind the 3-Tier-System is contradicting the principle of free markets and ideologically better suited to a country like North Korea. It is plain and simple un-American.
The result is that the American consumer “gets the shaft” and pays more than anyone else on the planet.
If legislation would be “fair & right”, the entire 3-Tier-System would be abolished and distributors would suddenly need to prove their capacities. Everyone will always need logistics. Prove your value instead of getting the free lunch.
Paul Menta
March 16, 2019 at 3:19 pm
I have to agree with a lot of the Gentlemen above, Craft Distillers work just as hard for less $ than distributors. I know this comes from a craft Distiller, so of course I feel that way. Do you know how hard it is to get a main distributor for a small distillery? Then who would you listen to and give your attention to myself at smaller amount of sales or Bacardi with huge sales? The answer is obvious and most craft places set up sales for the distributor. Now as far as shipping let’s say I have 80 people a month who want another bottle in Florida . To get in the main shippers total & wine abc you need to be connected. It’s hard to find smaller places even though you send them direct business from your web. I know as I have done that for 5 years and many frustrated customers. We sell retail and lots of bars want product so they ask there distributor. We sell to distributor with a very low margin as price runs the market and when you make from scratch and not blend and sell you are a premium. I hope we can think of this as Agriculture and Tourism are the biggest revenues in Florida. Craft assists with this by being local, using local product and speaking to visitors and locals which then helps everyone in the market including distributors as they work on volume and all this makes everyone busy. If beer and wine couldn’t sell or ship then I would understand, but they can. Spirits need a fair place in the market to grow and expand brands and when they get above those limits they are not craft and can’t have the privilege. We want to be entrepreneurs, but we are held back in many cases and limited. Want to own a restaurant as well, no problem but you can’t sell beer and wine and have a distillery. Ok, that’s fine and we have to play by the rules, but give us a chance to grow, pay more tax locally and statewide, employed more people and work in harmony with all the tiers at the same time having some benefits of being so small.
Paul Menta
Chef Distilled
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