Monopoly & 3 tier system

Question 1

Name 3 countries with a monopoly market

Answer 1

Canada
Sweden
Finland

Question 2

What is the name of the government owned chain in Sweden that can sell booze?

Answer 2

Systembolaget

Question 3

Is Systembolaget the only outlet in the country?

Answer 3

No. Some special independent distributors also exist. They can sell to on trade.
They tend to quirkier, lees common wines than systembolaget.

Question 4

What is the rationale for a monopoly? What 2 factors of privatisation does it inhibit?

Answer 4

It keeps alcohol consumption down.
This happens because fewer outlets mean fewer opportunities to buy, and also lees price competition, so prices stay high.
Also the tax is high keeping prices elevated

Question 5

What are the rules around promotion in monopolies?

Answer 5

It isn’t allowed. No individual products can be discounted.

Question 6

How does systembolaget chnage / increase its range?

Answer 6

Tenders are put out 4x a year to the approved suppliers for a style of wine they’re looking for.
The supplier will submit wines it thinks are an appropriate match. The wines are then tasted blind. Once selected , they are tasted again later to ensure the final wine is a perfect match with the sample.

Question 7

How long does a tender take?

Answer 7

A long time - sometimes 7-8 months before the wine is released in store.

Question 8

What is the benefit to smaller producers?

Answer 8

The tender process doesn’t discriminate against smaller producers as ultimately the selection is made on quality.

Question 9

Which one province in Canada does not have government controlled alcohol sales ?

Answer 9

Alberta

Question 10

What is the LCBO

Answer 10

Liquor Control Board of Ontario

Question 11

Who can sell alcohol in Canadian provided other than Alberta?

Answer 11

Liquor board owned shops, it approved agencies. These are local producers licensed to sell their own brands

Question 12

Is Alberta’s private market for consumers?

Answer 12

No it’s wholesale

Question 13

How does local US supply compare to the growth pattern for demand?

Answer 13

Demand outstrips supply so the export market into the US is huge

Question 14

What was the Volstead act, and when was it in place?

Answer 14

Prohibition- it prohibited the production, sale and consumption of alcohol between 1919 and 1933.

Question 15

What was the one exception to the Volatead act?

Answer 15

Wine for religious purposes

Question 16

When was the three tier system implemented?

Answer 16

In 1933 following the repeal of prohibition

Question 17

What was the point of bringing in the three tier system?

Answer 17

To stop a return to previous saloon behaviour, where alcohol was purchased from one brewer/ distiller only which created monopolies

Question 18

What other benefits are there to the three tier system from the government’s perspective

Answer 18

Tax - taxes are levied on each of the three tiers. Plus additional jobs, easier regulations.

Question 19

What are the three tiers?

Answer 19

1/ supplier (producers as importers)
2/ distributor (including wholesaler and broker)
3/ retailer (on and off trade)

Question 20

Is it possible for a company to fall into more than one tier?

Answer 20

Yes even though it’s uncommon.
Examples:
E&J Gallo - producer AND importer
Republic National Distribution Company - wholesaler AND importer

Question 21

What about cellar door?

Answer 21

This varies on a state by state basis. There are some places where producers can sell direct, but usually with some conditions

Question 22

Hire much control does the federal government have over interstate rules?

Answer 22

None. The states have their own rules that are 100% their own. These can be v different to other neighbouring states

Question 23

What is a control state?

Answer 23

One where the state has monopoly over one or more of the three tiers, usually retail.

Question 24

How many control states are there in the US, and do they all have the same rules?

Answer 24

17.

No, the rules vary drastically

Question 25

Name 3 control states, and briefly describe their rules

Answer 25

Pennsylvania - one of the strictest. spirits one bought in state controlled stores, and on trade needs to buy through them as well.
New Hampshire - allows beer and wine sales in grocery and convenience stores, but also allows some small private license holders for brands that the state run stores dont carry.
Idaho - monopoly on off-trade sale of alcohol over 16% ABV
Michigan - monopoly over wholesale of spirits.

Question 26

What are the other two category of states (Control is one)

Answer 26

Open and Franchise states

Question 27

What involvement does the state have in an open state?

Answer 27

Minimal. Importers and distributors can set up freely and sell to most people

Question 28

Who (which tier) is protected in a franchise state?

Answer 28

The distributors. An appointment with a distributor in a franchise state is effectively a lifetime commitment. This protects them from sudden changes from suppliers. IF. a supplier is unhappy with a distributor, however, there isn’t much they can do, other than appoint a second (or third…) distributor to alongside the other.

Question 29

Give an example of a franchise state

Answer 29

Conneticut

Question 30

Which kind of retailers benefit form the types of law in place in Conneticut?

Answer 30

It is a franchise state with very strict laws, which favour small retailers, as the minimum pricing and inability to offer discounts with volume mean larger stores offer no value.

Question 31

What downside is there to Conneticut’s laws?

Answer 31

it can create border wars, with people crossing into neighbouring states to benefit from cheaper alcohol.

Question 32

are there more distributors or producers in the US market?

Answer 32

Producers - almost 9x as many! the distributors are conglomerating.

Question 33

What are the drawbacks of the smaller boutique distributors

Answer 33

they don’t have the same reach as the larger ones, and it’s very difficult to change distributors in franchise states