What is the three-tier system?

The three tiers

• Tier 1, the producer: you make the product and sell it to a distributor. That sale is a shipment.
• Tier 2, the distributor: they warehouse it, sell it to stores, bars and restaurants, deliver it and handle state paperwork. Their sale to an account is a depletion.
• Tier 3, the retailer or bar: they sell it to the consumer, by the bottle or by the glass.

Why it exists

When Prohibition ended in 1933, the 21st Amendment let each state regulate alcohol on its own. Most states separated makers, wholesalers and sellers so no producer could control local bars and stores, and so the state had a clear place to collect taxes. Every state wrote its own version, so the details change at each state line.

The exceptions

• Control states: in 18 jurisdictions, the state is the wholesaler for spirits, and often runs the liquor stores too.
• Self-distribution: some states let small producers sell straight to stores and bars, usually with volume limits.
• On-site sales: most states let distilleries and wineries sell at their own tasting room.
• Shipping to consumers: wineries can ship in most states. Distilleries can ship in only about a dozen states plus D.C.

What it means for your data

You see every case you ship. After that you see what your distributor reports in their depletion reports, very little of what stores and bars sell, and almost nothing about who drinks it. That's why depletion reports matter so much to a craft brand.

For the full walkthrough, read The Three-Tier System, From the Producer's Side in Field Notes.