This blog was last updated on May 15, 2025
The U.S. beverage alcohol industry has long operated under the three-tier system, a structure born out of Prohibition’s repeal in the 1930s. Designed to prevent monopolies and encourage market access, the system initially resembled a pyramid: a few dominant suppliers sold to many mid-sized distributors, who then sold to a wide base of retailers.
Fast-forward to today, and the pyramid has warped into something closer to an hourglass: the number of producers and retailers has exploded, but the number of distributors—the “middle tier”—has steadily shrunk. That shrinking middle tier is creating market access challenges that have reignited conversations about alternatives, like direct-to-consumer (DtC) shipping, that can help producers reach their customers in new, compliant ways.
The Numbers Tell the Story
Since 1995, the number of distributors in the U.S. has plummeted from around 3,000 to just over 1,100—a decrease of more than 60%, according to WineBusiness Analytics. Additionally:
- During the same period, the number of wineries grew from 2,674 to 11,620.
- Craft breweries jumped from 2,002 in 2011 to 9,358 in 2024.
- Craft distillers multiplied from 280 to 2,753 in that same timeframe.
So, while the top and bottom tiers are continuing to grow, the middle is consolidating—and fast.
What Wholesaler Consolidation Really Means
Today, the top 10 wholesalers control 80% of the market, with the top two accounting for over 50% of total revenue. That’s a dramatic shift from a system originally designed to create balance. And while many of these wholesalers operate nationally, smaller producers and retailers are increasingly finding it hard to gain access to the market.
Distributors, now faced with managing immense product volume, often prioritize high-volume accounts like large grocery chains. This isn’t necessarily a judgment call, it’s a business reality. Larger accounts mean streamlined logistics and predictable sales. But for smaller, independent retailers, this shift can make it difficult (if not impossible) to access a diverse range of craft brands from smaller producers.
Alcohol Distribution: A Bottleneck by Design
Because alcohol distribution is state-mandated and regulated, producers and retailers are often locked into specific pathways to market. If those pathways become too narrow, it creates a bottleneck that limits consumer choice and stifles innovation from small and emerging producers.
This narrowing middle tier highlights an important question: What does protection of the three-tier system look like today? Initially, distributors were seen as needing protection from supplier or retailer dominance. Now, it’s the distributors who hold the market power. Laws like franchise protections, once designed to create fair terms for wholesalers, are now often viewed as barriers that disproportionately impact small producers trying to grow.
For some producers, especially those unable to secure broad distribution, direct-to-consumer shipping offers a compliant alternative route to market. DtC shipping won’t solve the bottleneck on its own, but it can be a pressure release valve by helping producers reach customers directly in states where it’s allowed and offering consumers more choice in what they drink and where they buy it.
The Three-Tier System Can Coexist with Alternatives
The conversation around three-tier reform isn’t new, but this moment of extreme consolidation invites fresh scrutiny. As the market continues to evolve, with more producers entering the space and consumer demand growing for niche, premium and craft offerings, it’s worth asking: Should alternatives be available?
This isn’t a call to dismantle the three-tier system. It continues to serve a critical role in promoting accountability and regulatory compliance. At the same time, evolving market conditions and a significantly more crowded supplier landscape have introduced new challenges the original system was never designed to address.
There’s no reason the industry can’t have it all: a strong, compliant three-tier system and thoughtfully structured options like direct-to-consumer, direct-to-retail and self-distribution pathways for qualified producers. With the right regulatory guardrails, it’s possible to support small businesses, increase consumer choice and maintain the integrity of the market—all at the same time.
A Market for All: Empowering Producers at Every Level
For producers and retailers navigating this landscape, awareness is critical. Understanding how consolidation affects market access can inform business strategy and advocacy efforts alike. While large wholesalers will continue to be a vital part of the system, the industry must consider how to ensure the health of the full ecosystem: top, middle and bottom.
Because in the end, a thriving market isn’t shaped by just the biggest players. It’s built on diversity, access and the ability for qualified producers, no matter their size, to find a place on the shelf or a path to the consumer.
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