Alcohol Distribution: Spirits, Wine And Beer - Overproof

Alcohol distribution in the United States operates under the Three-Tier System, consisting of the producer, the distributor, and the retailer. In this system, the producer makes the alcohol, sells it to distributors, and the distributors deliver and sell the alcohol to retailers, such as bars, restaurants, and liquor stores. The consumer then buys the product from the retailer.

As an alcohol distributor, you will buy the producers’ products and sell the alcoholic beverages to merchants and other wholesalers. Potential customers may include other alcohol distributors, retail companies, and exporters.

Types of Distribution

Determining the right distribution strategy plays an important role and can become a significant competitive advantage. According to Marketing91, the three main distribution points to keep in mind are:

• How to get the product from the manufacturing point to the end consumer.
• How to control costs and save time while executing the distribution strategy.
• How to build a competitive advantage through distribution.

There are five different types of distribution:

Exclusive Distribution – Only certain retailers are given the option to carry the product in their stores.

Indirect Distribution – The product reaches the end consumer through multiple channels in between.

Direct Distribution – The company sells directly to the end consumer or uses a shorter channel. For example, selling through Amazon or eBay.

Intensive Distribution – The company tries to cover as much of the market as possible, typically for mass-marketing products.

Selective Distribution – The company limits the outlets where the product is sold, choosing specific locations.

Featured Resource: Distribution 101 For Alcohol Brands [2025 Update]

Download Free Guide Now

Self Distribution: An Emerging Option for Craft Producers

While traditional distribution models remain dominant, self distribution has emerged as an alternative path for some craft producers, particularly in the beer and wine sectors. Self distribution allows manufacturers to sell directly to retailers, bypassing the wholesaler tier. This option can be especially appealing for small, local producers looking to establish a foothold in their home markets. However, self distribution laws vary significantly by state and beverage type, with beer and wine often having more flexibility than spirits.

For craft producers considering this route, it is crucial to weigh the potential benefits against the challenges. Benefits may include:

• Greater control over brand representation.
• Potentially higher margins.

On the other hand, producers must consider challenges such as:

• Managing logistics.
• Ensuring regulatory compliance.
• Scaling operations efficiently.

While self distribution can offer a valuable entry point for some brands, many eventually transition to traditional distribution methods as they grow and seek to expand their reach.

How to become an alcohol distributor?

To become an alcohol distributor in the U.S., you must comply with all federal and state regulations to sell liquor at the wholesale level. The necessary steps include:

• Acquiring warehouse space to store the products.
• Applying for a license to wholesale liquor with the state department of taxation (each state has its own laws regarding liquor distribution).
• Applying for a Federal Employer Identification Number (EIN) with the IRS.
• Applying for a permit with the Alcohol and Tobacco Tax and Trade Bureau (TTB) to operate as an alcohol wholesaler. TTB permits are required for companies operating alcohol and tobacco businesses above the retail level.
• Connecting with vendors, suppliers, and customers.

Emerging technologies now allow companies to connect with customers and suppliers more efficiently than ever before. In addition to traditional methods such as trade shows, focus groups, newsletters, potential-client visits, and cold calling, suppliers now have access to social media platforms, webinars, and mobile marketing systems to reach customers directly. For more information about becoming a liquor distributor, see here.

How does an alcohol distributor make money?

An alcohol distributor’s role is to buy goods in large quantities and sell them at a profit. According to Entrepreneur Magazine, distributors make money by purchasing products at a low price and adding a margin that keeps the deal attractive to consumers.

The salary for alcohol distributors varies widely, depending on factors such as location and experience. According to SimplyHired.com, the average salary ranges between $44,000 and $56,000.

When pricing products, distributors work with:

• Price to Distributor (PTD) – The amount the producer charges the distributor.
• Price to Retailer (PTR) – The price the distributor charges the retailer.
• Price to Consumer (PTC) – The final price on the store shelf.

To price products properly, it’s important to work backward from the PTC (the retail shelf price). Distributors typically aim for a 25% to 30% gross profit when selling to retailers. Gross profit represents the difference between the cost and the sale price of the product. For more information on pricing strategies, see here.

FAQ

Why does alcohol distribution in the United States operate under the Three-Tier System?

According to the National Alcohol Beverage Control Association, with the passage of the 21st amendment ending national prohibition, states were given the authority to regulate alcohol as they saw fit. The states developed a structure of checks and balances that provided safe alcohol to the consumer while ensuring a simple method to collect tax revenue. This is known as the three-tier system. The three-tier system is simple in theory: manufacturers provide alcoholic products to wholesalers, who distribute the products to retailers, who sell to the consumers. No one entity can be involved in more than one tier under most state models and each tier is regulated and licensed separately.

What will my role be as an alcohol distributor?

As a liquor distributor, you will be purchasing the products from manufacturers and selling the alcoholic beverages to merchants and other wholesalers.

Why do I have to acquire a warehouse when applying for a liquor license?

All distribution companies must have warehouse space to store the products. You may choose to lease a storage space or purchase a warehouse building. Some states may require you to already have a warehouse to store the beverages before you apply for any required liquor licenses or permits. More information can be found, here.

Do I have to keep my competitors in mind when pricing the product?

Yes, businesses need to keep an eye on their competitor’s pricing strategy while setting prices to get the much-needed competitive edge in the market.

Ready to take your alcohol brand’s marketing and sales to the next level? Overproof helps you set and track KPIs, optimize sales strategies and empower your team with real-time insights to drive growth. Book a demo today to see how Overproof can help your brand succeed in every market.

BOOK A 15-MIN DEMO