Other Types of Markets Flashcards
Monopoly markets
What are the 2 places that sell alcohol in Sweden?
- Systembolaget
- Specialist independent distributors, licensed under special conditions
Bars & restaurants can buy from either
Monopoly markets
What is the aim of the monopoly system?
To limit alcohol consumption
- Less accessibility = less price pressure
- Staff do not promote products or producers = reduces incentive for promotion / price reduction
Monopoly markets
Describe the process for a producer to get stocked in the Systembolaget? How long does the process take?
- Register with importer who is approved supplier of Systembolaget
- Producer submits samples for the quarterly tender requests that Systembolaget issues for various types of wines it wants to add to range
- Samples blind tasted against each tender
- Once selected, tasted again & chemically analysed prior to launch to confirm identical to tasting samples
7-8 months
Monopoly markets
What are the advantages of the Systembolaget for producers?
- Since decision based on quality alone, equal opportunity for small producers
- Once accepted available throughout Sweden = high volume
US Three Tier System
What were the “perceived” benefits of the three tier system when introduced?
- Prevent return of pre-prohibition “Saloon” days
- To prevent direct sales from the producer to the retailer to avoid monoplies and increased prices
- Additional jobs - from distribution tiers
- Easier regulation and collection of taxes - from distribution tier
- Tax revenue - from distribution tier
US Three Tier System
What are the three tiers?
- Supplier (producer / importer)
- Distributor (wholesales, brokers)
- Retailer (off & on premises)
US Three Tier System
What does the three-tier system limit or prohibit?
Cross ownership between retailers and upper two tiers
US Three Tier System
How are some wineries (in some states) still able to sell direct to consumers?
Through an on-premise and/or off premise licenses (but with conditions attached)
US Three Tier System
Why are the US laws so complicated? What has that led to the need for?
In 1933, Federal government ceded control to states = drastically different laws
Need for compliance officers in alcoholic bevergage companies
US Three Tier System
Describe the three categories of states with regard to their legislation of the three tier system
- Control states - state holds monopoly over one or more tier
- Open states - minimal involvement. Suppliers and distributors free to enter into & exit agreements to sell an distribute brands
- Franchise states - restrict freedom of suppliers to change distributors
What is a general characteristic of control states?
State is the only licensed off-premises retailer of alcohol (sometimes just for spirits).
But note there are many variations
US Three Tier System
What are the disadvantages of franchise states for suppliers? How can they get around it?
Even if legitimately dissatisfied with distributor, little recouse to be released - effectively a lifetime appointment
Appoint an additional distributor
US Three Tier System
What are the advantages of Franchise states for the distributors?
Avoid massive disruption to their business and catastrophic loss of revenue
Distributor may have dropped distribution rights of other brands, invested in trade-markering, added staff/ infrastructure then suddenly dropped
US Three Tier System
Describe 4 characteristics of Connecticut’s strict laws. What is an advantage and disadvantage.
- Restricts number of off-premise licenses
- Restricts number of licenses by town / city - shops sometimes bought by large entities to get license
- Prohibits quantity discounts
- Minimum bottle pricing
Benefitted small business but led to border wars
US Three Tier System
What are some strengths of the three tier system?
- Significant tax revenue since tax levied on each tier
- Retention of distributor tier leads to specialists in logisitical efficiency covering large areas of US
- Distributors provide trained sales force and marketing materials
- Above creates exposure for producer
