As has happened several times before, this piece is going to be an attempted response to some comments I have received. Every couple of weeks, someone who likes my beer asks me something along the lines of, “When are you going to start selling your beer to [insert name of favorite local bar or bottleshop]?” or perhaps, “Don’t you like [my favorite beer spot]? Then why don’t you sell them your beer?” There are an awful lot of factors involved in the answers to these questions, but a common thread I have found across most of these well-intentioned inquirers is a complete lack of understanding of Kentucky’s three-tier alcohol distribution system. This seemed worthy of some attention.
First, some caveats. Many of you know that I have an opinion about the status of the three-tier operations here in our great Commonwealth, but I’m going to try to refrain from letting this devolve to an opinion piece. Also, I am a brewer. This is going to be mostly from the point of view of a brewer. I will undoubtedly miss out on some of the nuance and subtlety of the process as it applies to distributors and retailers.
Next, let’s discuss the basics of three-tier systems in general. In 1933 when Congress passed the 21st Amendment repealing the Prohibition of the 18th Amendment, each state was left to its own devices in alcohol regulation. At least nominally to make sure taxes got collected, states forbade anyone from owning alcohol manufacturing, distribution, and retail all at once. A brewery must produce its beer and sell it to a distributor. The distributor then sells the beer to retailers, and the retailers can then sell the beer to end consumers. The details of the system can be quite different in each state. Some states actually control one tier of the system, in others there are numerous exceptions to the system. Some states allow ownership of two tiers but not all three, and others only allow ownership of one tier but carve out some operational exceptions that are similar to other tiers.
The laws that govern the rights of a microbrewer in Kentucky can be found in Kentucky Revised Statute 243.157. That is the microbrewery licensing statute that details the rights of a brewer making fewer than 25,000 barrels per year, which covers all but one brewery in Kentucky as of the date of this writing. A microbrewery can produce beer, give patrons small complimentary samples, sell beer to a licensed distributor, and sell beer in-house in accordance with another set of governing rules. This is technically a carve-out from the strict format of the three tier system. As I discussed in one of the first Beer Wizard articles, this carve out was threatened recently, but we were able to obtain this structure that is not quite so damaging to brewery operations.
There are also a handful of other sections in KRS 243 that lay out rules for the activities of distributors and the relationships between and among distributors, brewers, and retailers. You’ll notice that the laws discussed in the previous paragraph do not include a brewery being able to sell to retailers. If we do not sell our beer in house according to KRS 243.157(3)(b) or (c), we have to sell it to a distributor. That distributor then must take the beer to a warehouse, hold it for 24 hours, and may then sell to a licensed retailer. Furthermore, each brewer can only have a single distributor for a given geographic territory, and breaking a brewer/distributor relationship is much like a divorce. It is messy and usually costly for at least one party. Once a distributor obtains beer from a brewer, the brewer no longer has any control over it. We can make requests, and suggestions, but ultimately the distributor has the final say over what retailers have access to what beer. So, you see, when your favorite retailer doesn’t have my beer, it actually has very little to do with me. They have to ask for it, and our distributor for their area has to provide access to it. If you want to see AtG beer at your local place, tell them to ask our distributor for it. Clear as mud?
Until next time, faithful readers, thanks for reading, and happy drinks!
P.S. Remember to let me know if you have some specific topic you would like me to babble about next time. You can tell me in person, by e-mail, or in the comments right down below.
