Author: Sam

Your Complete Guide to Liquor Distributors and the Right Questions to Ask

Samuel Anderson

May 12, 2025

In today’s competitive alcoholic beverage market, understanding distribution channels and building strong relationships with the right distributors can make or break your success. Whether you’re a craft brewery, a distillery, or a winery looking to expand your reach, navigating the complex world of liquor distribution requires strategic planning and careful partner selection. This guide outlines everything you need to know about working with distributors, including the essential questions to ask when evaluating potential partners.

Understanding the Three-Tier System

The backbone of alcohol distribution in the United States is the three-tier system, established after the repeal of Prohibition in 1933. This system continues to govern how alcoholic beverages move from producers to consumers.

What Is the Three-Tier System?

The three-tier system consists of:

1. Tier 1: Producers/Manufacturers – Includes brewers, distillers, vintners, and importers who create or import alcoholic beverages

2. Tier 2: Distributors/Wholesalers – Independent intermediaries who purchase from producers and sell to retailers

3. Tier 3: Retailers – Businesses that sell directly to consumers, including liquor stores, restaurants, and bars

This system was designed to prevent any single entity from controlling the entire supply chain and to facilitate tax collection and regulatory oversight. Under this framework, producers can only sell to wholesalers, who then sell to retailers, creating a mandatory middleman in most states.

State-by-State Variations

It’s important to note that regulations vary significantly from state to state:

• Some states operate as “control states” where the government manages part or all of the distribution tier

• Washington State is unique in allowing retailers to purchase directly from producers

• Many states now permit limited self-distribution for small producers

• Each state has its own “fence” of liquor regulations that enforces the system differently

Developing Your Distribution Strategy

Before approaching distributors, you need a clear strategy that aligns with your business goals. Here are five key questions to address:

1. Define Your Long-Term Vision

Ask yourself:

• What are your growth objectives?

• Do you aim to become a national brand or focus on regional success?

• Are you targeting high-end restaurants, retail chains, or local markets?

2. Identify Target Markets

Consider these factors when selecting markets:

3. Determine Your Ideal Segment

Decide where your products fit best:

4. Assess Production Capabilities

Before scaling distribution, ensure:

5. Evaluate Distribution Models

Modern distribution options include:

• Traditional three-tier wholesale distribution

• Self-distribution (where permitted by state law)

• Hybrid approaches combining multiple channels

• E-commerce and subscription models (subject to state regulations)

Essential Questions to Ask When Evaluating Distributors

Choosing the right distributor is crucial as these relationships often last for years. Here are the key questions to ask potential distribution partners:

1. Company Values and Market Position

• What are your company’s core values?

• How has your market share changed over the past five years relative to other distributors?

• What sets you apart from other distributors in this market?

• Who are your current top suppliers and why are they successful?

2. Geographic Coverage and Sales Strategy

• Do you have multiple locations or representatives that cover all necessary areas?

• What Off-Premise and On-Premise accounts do you see my brand fitting into?

• What kind of structure do you prefer for planning and accountability throughout the year?

• How do you approach marketing support-especially financially?

3. Operational Capabilities

Warehouse Network:

• What temperature control systems do you use?

• How do you manage inventory and quality control?

Delivery Operations:

• What are your delivery frequencies?

• What are your minimum order requirements?

• Can you handle special requests or rush orders?

Sales Force:

• What training programs do you provide to your sales team?

• How do you incentivize sales of new brands?

• What is your account coverage strategy?

4. Technology and Integration

• What technology infrastructure do you use for inventory management?

• How do your systems integrate with supplier systems?

• What analytics and performance tracking do you provide to your partners?

5. After-Sales Support

• Can you describe your after-sales process when a client needs support or repairs?

• How do you handle product issues or customer complaints?

• What kind of merchandising capabilities do you have?

Modern Distribution Challenges and Opportunities

Digital Distribution Revolution

E-commerce and direct-to-consumer models have transformed traditional distribution channels:

• Online sales platforms provide new routes to market

• Club memberships and subscription services build direct consumer relationships

• Digital distribution often offers higher profit margins but requires different strategies

• Mobile apps and online ordering systems create convenience for consumers

Market Trends Affecting Distribution

Stay aware of these evolving trends:

1. Growth of craft producers changing distributor expectations

2. Increasing consumer demand for local products

3. Rise of non-alcoholic and low-alcohol beverage alternatives

4. Direct-to-consumer shipping laws evolving in many states

5. Technology integration between producers and distributors

Where to Go for Additional Research

To further develop your distribution strategy, consider these resources:

• Industry Associations: The Distilled Spirits Council, Wine & Spirits Wholesalers of America, and Brewers Association offer research and guidance

• Legal Resources: Connect with attorneys specializing in beverage alcohol law

• Books and Publications: “An Insider’s Guide to Wholesale Alcohol Distribution in the USA” by Ian Pfeffer

• State Alcohol Beverage Control Boards: Each state’s ABC website for specific regulatory information

• Distribution Management Software: Platforms like Ekos offer tools to manage distributor relationships

Summary

Finding the right distribution partner is critical to your brand’s success in the complex alcoholic beverage market. By understanding the three-tier system, developing a clear distribution strategy, and asking potential distributors the right questions, you’ll be well-positioned to build beneficial relationships that drive growth.

Remember that distribution is ultimately about relationships. The best partnerships are built on alignment between your brand values and your distributor’s capabilities. Take the time to thoroughly evaluate potential partners, understand their market position, and ensure they have both the passion and infrastructure to represent your products effectively.

Source:

1. National Alcohol Beverage Control Association (NABCA) – Overview of the Three-Tier System

https://www.nabca.org/three-tier-system

2. Overproof – Understanding the Three-Tier System in Alcohol Distribution

https://overproof.com/2023/04/13/understanding-the-three-tier-system-in-alcohol-distribution/

3. National Beer Wholesalers Association (NBWA) – The Three-Tier System Explained

https://nbwa.org/three-tier-system/

4. NABCA – The Three-Tier System: A Modern View

https://www.nabca.org/three-tier-system-modern-view-0

5. Wikipedia – Three-tier system (alcohol distribution)

https://en.wikipedia.org/wiki/Three-tier_system_(alcohol_distribution)

6. EasyCheck – What is the Three-Tier System and Why Does it Exist?

https://www.easycheck.io/blog/what-is-the-three-tier-system-and-why-does-it-exist

7. Ohio Department of Commerce – Three Tiers and a Tied House

https://com.ohio.gov/wps/portal/gov/com/divisions-and-programs/liquor-control/new-permit-info/guides-and-resources/three-tiers-and-a-tied-house

8. Avalara – Beverage Alcohol Compliance Basics: The Three-Tier System, Product Registration, and Taxes

https://www.avalara.com/us/en/learn/whitepapers/beverage-alcohol-compliance-basics-the-three-tier-system-product-registration-and-taxes.html

9. New York Craft Beer – Understanding the Three Tier System

https://newyorkcraftbeer.com/2015/07/understanding-the-three-tier-system/

Need Help with Distribution Click Here

Calendly

calendly.com/d/cn2n-r3x-hfx