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.

Three-Tier System
from Prohibition to the 21st Century

The 18th Amendment of the U.S. Constitution, which became effective in 1920, was focused on then societal desires to curb alcohol consumption, led largely by the Temperance movement. The amendment prohibited the manufacture, sale, or transportation of alcoholic beverages as the U.S. entered a period known as "Prohibition."A decade later, American society's view of alcohol had moderated and following the difficult days of the Depression, and with a rebounding national spirit in the early 1930s, voters repealed the 18th Amendment, which ended prohibition.

Prohibition had a number of unintended consequences, including the illegal manufacture of alcohol and the creation of a criminal element in the trade and sale of alcohol. Prior to Prohibition, it was common practice for manufacturers to have product specific saloons where only their products were made available (tied-houses). This encouraged the proliferation of neighborhood bars and saloons, as manufacturers (brewers) rushed to set up shop to ensure their corner of the market. In addition to oversaturation and increased consumption of alcohol, this led to limited consumer choice and in modern times would have had a chilling effect on new market entrants.

The 21st Amendment, ratified in 1933 empowered states with the ability to regulate on a state by state basis who can make, transport, sell and consume alcohol.

Post-Prohibition models looked to address issues of safety, access to market, and an orderly process to ensure proper tax collection and recordkeeping. The 21st Amendment gave broad discretion to the States to formulate laws that worked best for their constituencies.

In Texas, the development of a regulatory structure to separate the manufacturing, distribution and retail tiers of the industries was adopted. The Three-Tier System, as it became known, permits the State to track alcoholic beverages (during production, transport and consumption) while making it easier to collect and manage taxes and ensure the quality and safety of the product.

The Three-Tier structure was formed to create a safe, fair, and transparent regulatory model that encourages responsible consumption. It has continued to evolve to keep up with technology and safety innovations as well as market expansions. As recently as 2013, the Three-Tier System saw a number of legislative actions that have added to the recent boom in the Craft Beer market. These and other changes over time have created a regulatory structure that is often cited as a model across the country.