Sign Up

Navigating the US distribution system

Market bulletin | Issue 63

14 Jun 2017
Previous  | Next   News

The United States is said to be the land of the free but its alcoholic beverage sector is anything but; it is very complex and highly regulated. This week we delve into the United States (US) three-tier system and examine the differences in regulations across states.

Download the full US Distribution System profile for further details about the different state regulations. 

Prohibition’s influence on the US distribution system

The laws regulating the US alcoholic beverages sector have their roots in the time of Prohibition and its repeal. Prohibition was a nationwide constitutional ban on the production, importation, transportation, and sale of alcoholic beverages that remained in place from 1920 to 1933.

When Prohibition was repealed, the Federal Government created a complex three-tier system for the distribution of alcohol.

Tier one: manufacturer, supplier or producer

The first tier is the manufacturer, supplier or producer of the product. They sell to licensed importers, distributors and control boards (tier two).

This first tier is responsible for making sure the liquid is safe for consumption and follows all relevant laws and regulations. Brand owners could be manufacturers or entities that contracted with a manufacturer. Federal Excise Taxes are collected when goods leave the premises of the manufacturer or the bonded facilities of an importer.

What are the implications for Australian wine producers?

Wine can only be imported into the US by a licensed importer holding a basic permit. There are no exceptions to this requirement.

Individual states, counties and cities may have specific taxes, compliance and licensing requirements that must be met. Refer to Wine Australia’s Export Market Guide for more information.

Tier two: importer, distributor or wholesaler

The second tier is the importer, distributor or wholesaler who purchases the product from the supplier (tier one). They then in turn sell it to retailers (tier three).

Licensed importers and distributors act in cooperation with the federal and state governments to help ensure that alcohol beverage taxes are reliably collected. Importers, distributors and control boards are only allowed to sell to licensed retailers. State Excise Taxes are collected at tier two.

Tier three: retail and on-premise

The third tier is the retailers. In other words, licensed outlets like liquor stores, bars or restaurants. They ensure that alcohol is sold to those who are of legal age to purchase it. State Sales Tax is collected at tier three.

No individual or entity except the state regulator itself is allowed to own and operate more than one tier of the system.

Monopoly vs licence states

Regulations regarding sales and distribution of alcohol vary from state to state and individual municipalities may also have their own set of rules. 

Most states in the US leave liquor sales and distribution to private businesses, while other states get more directly involved in the sales process. These are the monopoly or Alcoholic Beverage Control states.

About one-quarter of the United States population lives in monopoly states and the share of total US wine consumption is similar (23 per cent).

By far the biggest wine consuming monopoly states are Washington (11.1 million cases), Pennsylvania (10.2 million cases) and Virginia (9.2 million cases).

However, the biggest consuming states overall are non-monopoly states with California consuming 49.8 million cases, Florida 27.7 million cases and New York 23.7 million cases.

Independent vs chain markets

Some states allow for alcohol to be sold in chain retail outlets, while other states restrict multi-unit ownership and restrict owners to one or a small number of licences. Chain markets like Texas and Florida have fewer fine wine stores than independent states like New York and New Jersey.

Some states, such as Massachusetts and Colorado, have recently relaxed laws to allow for increased chain activity, which threatens their traditional base of independent fine wine stores.

For more information on the US market contact

This content is restricted to wine exporters and levy-payers. Some reports are available for purchase to non-levy payers/exporters.

Levy payers/exporters
Non-levy payers/exporters
Find out more

This content is restricted to wine exporters and levy-payers. Some reports are available for purchase to non-levy payers/exporters.