3-Tier System of Distribution
Since the 21st Amendment to the U.S. Constitution repealed Prohibition and granted each state the right to control the importation, distribution and use of alcoholic beverages within its borders, Tennessee, along with other states, has relied upon the three-tier alcohol distribution system to ensure alcohol is distributed and consumed safely in our state.
The three tiers are comprised of tier one — distillers, vintners and brewers; tier two — Tennessee-based licensed beverage distributors or wholesalers; and tier three — licensed retailers. The beverage producers sell their products to the wholesalers who sell only to licensed retailers, who in turn sell solely to customers over the age of 21 in areas of the state where alcohol sales are permitted, and only after proper tax collection.
The three-tier system promotes a safe marketplace and environment for citizens by limiting the authorized channels through which alcohol enters our state, mandating responsible delivery and marketing of those who sell it and regulating the legal face-to-face transition to consumer. The system also helps ensure that minors are not given access to alcohol and that the state can collect taxes on alcohol sales. It also allows for a level playing field for retailers of all sizes, increasing competition and supporting small business.
Tennessee is known as a franchise state, meaning that wholesalers have exclusive relationships with suppliers' brands. By having exclusive rights to distribution, wholesalers have a vested interest in helping build brands over a long period of time, affording better growth for the brand within the market.