Three-Tier System | The Beer Alliance of Texas

The Beer Alliance of Texas

Trade association representing beer distributors from the Texas coastal region to the panhandle.

Distribution Tier

In Texas, the Independent Distribution Tier was created by the legislature as a result of concerns regarding the regulation and monitoring of alcoholic beverages in the marketplace. Prior to Prohibition, lax regulatory oversight created an environment that limited the ability to monitor supply and quality control of alcoholic beverages. Additionally, the unregulated system made it difficult for new market participants.

In the Three-Tier Model, manufacturers contract with distributors in defined territories to pick-up, warehouse, market, and distribute their products. Distributors in turn are responsible for delivering the product to retail outlets (bars, restaurants and package stores) for sale to consumers. This system allows the State to monitor the movement of all alcoholic beverages which aides in tax collection and quality and safety control. In addition to tax collection, safety and quality control, and because of its independence, the Distribution Tier fosters consumer choice by ensuring equal access to products reaching the marketplace.

As we have seen with the recent boom in craft beers, access to the marketplace has been a key component to the success of this segment. Recent amendments to the Alcoholic Beverage Code, which were passed by the Legislature during the 83rd Session, allow limited exemptions for startup newcomers into the marketplace. These limited exemptions were identified as a compelling State interest for their potentially positive impact on the industry. In fact, there has been a direct correlation between the astronomical growth in the craft segment in Texas and the passage of exemption legislation, which parties of all three Tiers supported during the 2013 Legislative Session.

The Distribution Tier continues to serve a vital role in the alcoholic beverage market in Texas. Texas beer distributors employ more than 65,000 Texans and pay approximately$1 billion in state, local, and federal taxes. By ensuring products get to market safely and in a timely manner, distributors help maintain a safe, orderly, and vibrant alcoholic beverage industry in Texas. Beer Alliance members strictly adhere to today's state-based regulatory model, including maintaining the Three-Tier System, while exploring new technologies and marketing tools to better serve the interests of Texas retailers and consumers in the malt beverage industry.