Three Tier System: Promoting Growth, Choice and Safety

Michigan’s three-tier system for alcohol distribution has long been acknowledged as the gold standard of alcohol distribution due to its unique balance of business needs and market growth; competition and consumer choice; and public health and safety.

The three-tier system was designed to separate the manufacturers of alcoholic products from the distributors and retailers of those products. By creating a manufacturing tier, a distributor tier and a retailer tier, policymakers prevented the pre-Prohibition norm of “tied houses” – a dangerous system where manufacturers produced alcoholic beverages, distributed the beverages and owned the retail establishments where they sold their alcoholic products. By eliminating tied-houses, distributors and retailers enjoy the necessary independence to freely choose the brands they sell based on consumer preferences. Plus, they can run their businesses in accordance with the laws and regulations of Michigan and our local communities rather than directives from manufacturers who often have no ties to Michigan or local communities.

The three-tier system continues to benefit today’s alcohol market as well. 

Prior to the adoption of the three-tier system, large manufacturers that operated through tied houses routinely prevented small brewers from getting access to retailers.  By eliminating the manufacturer’s ownership interest, distributors and retailers are free to take on additional brands, which has created a market for and spurred the growth of craft brewers and vintners.

Public safety also benefits from the three-tier system as alcoholic beverages are distributed through an easily identifiable distribution chain. This ensures that the location of every ounce of product – from the manufacturer to retailer shelves – is known, traceable and accounted for.  Unlike other food products, this easily identifiable and traceable distribution chain allows manufacturers and distributors to quickly, efficiently and effectively recall products in a matter of hours rather than months.

This transparent and accountable system also prevents problems with counterfeit alcohol, a problem which has killed thousands in many other countries without proper safeguards.