Other kind of Markets

Question 1

Other kind of Markets

Monopoly

Answer 1

• Government-run monopoly for the retail sale of alcoholic drinks (particularly in Scandinavian countries and Canada)
• Bars and restaurants can buy from the monopoly or from specialist independent distributors
• usually high evel of tax on alcoholic drinks = very expensive
• AIM = limit alcohol consumption
• No promotion of individual products from shops = no incentive for promotion or price reduction
• Lenghtly process to choose samples of wine submitted by producers (can take 7/8 months)
• When accepted, potential sales all over the country (not only a handful of localized shops)

Question 2

Other kinds of markets

USA three-tier system

Answer 2

• was introduced in 1933 after prohibition ended
• aim of preventing a return to the pre-prohibition ‘saloon’ days of gambling, prostitution, crime and drunkenness
• introduced to prevent direct sales from the producer/supplier to the retailer to avoid producer monopolies and increased prices.
• benefit from individual state distribution tier = provision of additional jobs and easier regulation and collection of taxes

The three tiers are:
* supplier (including producers, importers)
* distributor (including wholesalers, brokers)
* retailer (including off-premises licencees, e.g. supermarkets and wine specialists, and on-
premises licences, e.g. bars and restaurants).

SYSTEM EXPLAINED:
- Law generally limit or completely prohibit cross ownership between most retailers and the upper two tiers
- a producer may also be an importer, but cannot be a wholesaler
- a wholesaler can also import, but cannot produce
- a producer cannot by-pass a wholesaler and sell direct to a retailer

• each state have drastically different laws =- need for “compliance officers” within alcoholic beverages companies
• Open states: minimal state involvment (Suppliers and distributors are free to enter into and exit out of agreements to sell and distribute brands freely)
• Franchise states: strong franchise laws that severely restrict the freedom of suppliers to change distributor arrangements (appointment of a distributor by a supplier = almost a lifetime appointment)
  (laws exist to protect distributors against sudden and massive changes to their business)