7.2 TTS - The Three-Tier System / other types of market

Question 1

How did the Three-Tier-System develop?

Give 2 key facts!

Answer 1

1.) Prohibition 1919-1933
= forbidden production, sale & consumption
2.) Introduced 1933 after repeal of prohibition

Question 2

1. ) What was the aim of the Three-Tier-System when it was introduced? Give 4 bullet points!
2. ) What’s happened in that time so called “saloon-days”?

Answer 2

1.)
- no return to pre-prohibition times
- prevent direct sales from producer/supplier to retailer
= no monopolies; no increased prices
- additional jobs (distributors)
- easier regulation & collection of taxes
- limiting/prohibiting cross ownerships

2.) = saloon days; gambling, prostitution, crime, drunkeness

Question 3

Name the three tiers in a meaningful row!

Answer 3

1. ) supplier (including producers, importers)
2. ) distributor (including wholesalers, brokers)
3. ) retailer (off- & on-premises)

Question 4

Can a producer be an 1.) importer or 2.) a wholesaler?

Answer 4

1. ) yes, importer

2. ) no wholesaler

Question 5

Can a wholesaler 1.) import or 2.) produce?

Answer 5

1. ) yes

2. ) nope

Question 6

In which 3 categories can the sates in the USA and the Three Tier system be categorized?

Answer 6

1. ) control states
2. ) open states
3. ) franchise states

Question 7

Give 3 examples of control states!

Answer 7

1. ) Idaho = monpoly off premises sales > 16% abv.
2. ) Michigan = monopoly on wholesale-sales & spirits
3. ) Pensilvania = strictest controls = own package shops

Question 8

Give 3 key facts about the category open states!

Answer 8

1. ) minimal regulation of TTS by state
2. ) suppliers/distributors are free to enter and exit agreements
3. ) suppliers/distributor can sell products freely

Question 9

Give 3 key facts about the term franchise state!

Answer 9

1. ) strict franchise laws
2. ) less freedom for changing distributor
3. ) lifetime appointment of distributor & supplier

Question 10

What is a main advantages for a distributor and main disadvantage supplier in a franchise state?

Answer 10

distributor

advantages:
- protection against massive changes
because lifetime contract

supplier

disadvantages:
- minimal chance to exit the contract if dissatisfied
= searching new distributors

Question 11

What are the advantages and disadvantages for a distributor in a open state?

Answer 11

disadvantages:

• suppliers can change distributors
• = immediate loss of revenue

Question 12

1. ) Which state is one of the strictest franchise states?
2. ) What exactly is restricted?

3.)
Name the positive and negative results of these strict laws!

Answer 12

1.) Connecticut

2.)
- restriction of off-premises, cities, towns
- prohibits quantity discounts
= limits advantage of large capitalized shops
- minimum bottle pricing
- prohibits alcohol sales off premises on Sunday

3.)

positive:

• prosper of small businesses
• warded consolidation

critics:
- border wars