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The Present Regulatory System

At the turn of the 20th century, the beer industry was booming. Local brewers often had ownership ties to the taverns - selling to them on extended credit terms, furnishing them with equipment and supplies, charging low or no interest, and paying rebates for pushing their brand or carrying it exclusively. This relationship became known as "tied-houses". Competition for control of the retail outlets was fierce and tremendous pressure was exerted on retailers to maximize sales without regard to the well being of customers or the general public. These abusive practices led to a campaign for laws prohibiting all drinking. In 1919, the 18th Amendment to the United States Constitution was passed beginning a 14-year dry spell known as Prohibition. 


In 1933, the 21st Amendment to the United States Constitution repealed Prohibition and also gave states the authority to regulate the production, importation, distribution, sale and consumption of alcohol beverages within their own borders. A new regulatory system known as the Three-Tier System was created. This system was established to eliminate tied-house abuses. "Tied-houses" would no longer exist - instead beer would be sold through independent distributors. 


The Three-Tier System

The three tiers (brewer, distributor, retailer) are further separated by other laws and regulations prohibiting suppliers and distributors from having any financial interest or influence with retailers - for example, beer sales on credit are not allowed and consignment sales are banned. 


This system has four primary goals:

-To avoid the overly aggressive marketing and sales practices of the pre-Prohibition era

-To generate tax revenues that can be collected efficiently from the beer distribution industry

-To facilitate state and local control of alcoholic beverages

-To encourage moderate consumption (temperance)


Today's Beer Industry

Together, the three tiers make a major contribution to the United States' economy. The industry, as a whole, directly and indirectly, employs 2.5 million Americans, provide wages and benefits of $60 billion dollars, and pays $14 billion dollars in federal, state and local taxes. The United States is the world's largest producer of beer. More than 90 million Americans enjoy a glass of beer responsibly and moderately. 

Hohenstein's Inc.

A Wholsale distributor specializing in domestic, imported and distinctive craft beers

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