6. Other Types Of Markets Flashcards
What are the two most significant other markets?
Monopoly
American three tier
What is a monopoly market?
In the wine world it is a government run monopoly for the retail sale of alcohol. Bars and restaurants can buy from the monopoly or from a specialist independent distributor - however countries that have this system usually impose high levels of tax on alcoholic drinks.
Where are monopoly markets particularly found?
Scandinavian countries - Systembolaget in Sweden
Canada
What is the main aim of the monopoly system?
To limit alcohol consumption. Research has shown that the privatisation of the market leads to greater accessibility of alcoholic beverages. Greater competition means pice pressure and lower prices.
When was the USA’s Three Tier System introduced?
1933
What is the aim of the USA three tier system?
Introduced in 1933 when Prohibition (Volstead Act 1919-1933) ended with the aim of preventing a return to the pre-prohibition saloon days of gambling, prostitution, crime and drunkenness.
To prevent direct sales from the producer to the retailer (preventing tied houses) to avoid producer monopolies and increase the price.
What are the three tiers in USA System?
Supplier - including producers, importers
Distributor - including wholesalers, brokers
Retailer - including off-premises licensees & on-premises restaurants
What is a control State?
In States where the State itself holds monopoly over one or more of the tiers. Generally the only licensed off-premises retailer of alcohol is the State itself, though in some states might might be only for spirits and not wine. Etc.
How many control states are there in the USA?
17
What are some examples of control States and their regulations?
- Idaho - monopoly of off-premises sales of beverage with above 16% abv
- Michigan - monopoly only on wholesale sales and only of spirits
- New Hampshire- allows beer and wine to be sold in grocery and convenience stores only. Allows a small number of private off-premises permits (these tend to be specialist brands that the state doesn’t carry)
- Pennsylvania - one of the strictest controls, all spirits sold in state package stores and where bars/restaurants are allowed to sell on-premises they must buy from the state package stores
What is an open State?
State involvement in the regulation of the three-tier system is relatively minimal. Suppliers and distributors are free to enter into and exit out of agreements to see and distribute brands freely.
What is a franchise State?
Have strong franchise laws that severely restrict the freedom of suppliers to change distributor arrangements. An appointment if a distributor by a supplier is almost tantamount to a lifetime appointment due to the strength of the laws.
Why do the franchise laws exist?
To protect distributors against sudden and massive changes to their business. It provides a strong benefit for the distributor but for the supplier, even if there is a legitimate reason for the producer to be dissatisfied with the performance of the distributor, there is little to be done if the distributor does not release the producer.
