When Marriott International recently switched from Pepsi to Coca-Cola as its beverage supplier across nearly 10,000 hotels worldwide, it sparked widespread attention. After more than three decades, one of the world’s largest hotel chains made a quick, centralized decision through a single contract negotiation—driven by pricing, product variety, and commercial terms. This kind of switch is pretty standard in the non-alcohol beverage world. But in the wine and spirits business, it’s a different story—and that’s by design.
This contrast serves as a timely reminder of why alcohol distribution in the U.S. operates the way it does, and why today’s alcohol structure, a combination of federal requirements overlaid with important state-specific provisions is so important for competition, consumer choice, and market stability.
What is the Coca-Cola – Marriott Relationship?
The Coca-Cola – Marriott agreement shines a light on how non-alcoholic beverages are distributed. Big chains can quickly negotiate with a single supplier and roll out exclusive agreements across all their locations for an extended period. This is a common practice for most consumer goods, but what works for one industry doesn’t necessarily work for others.
Why Alcohol Was Designed to Be Different
Alcohol distribution is treated differently because it must address unique economic and public interest risks. After Prohibition, states began adopting the three-tier system to rebuild the marketplace in a way that prevents any one supplier or retailer from dominating while ensuring safeguards around public health and safety. This system promotes transparency and ensures oversight. Here’s what it looks like:
- Producers can’t directly control access to retail or on-premise locations.
- Independent wholesalers compete to represent a range of brands and then compete for placement within a variety of retailers.
- Retailers get to choose products based on what their consumers want.
- No national chain can be locked into just one alcohol supplier.
Of course, a retailer may choose to carry only certain brands, but unlike other consumer goods contracts, alcohol brands can’t require that they be the only brands on the shelf, nor that the retailer purchase a given product beyond a single transaction. These limitations are safeguards ensuring that competition thrives in local markets every day.
Competition Every Day, Not Just Once
The key difference between these systems isn’t just whether competition exists, but how it plays out.
In the non-alcohol world, competition mostly happens before a contract is signed. Once a supplier is exclusive, access is closed off. But in wine and spirits, competition is ongoing:
- Wholesalers compete on service, execution, and investment.
- Suppliers strive for attention from distributors and retailers.
- Retailers curate their selections based on their customers’ preferences.
- Trade practice rules prohibit suppliers and wholesalers from excluding other brands from a retailer’s shelves and menus.
This approach supports family-owned and mid-sized producers, empowers thousands of independent retailers, and ensures consumers have a wide variety of choices on shelves and menus—regardless of a brand's budget.
Why This Matters Now
Today’s beverage alcohol market faces real challenges, including slowing consumption, shifting consumer preferences, inventory pressures, and increased consolidation among suppliers. In this climate, it’s easy to think changes to the system should be considered, but it is important to remember that those changes would come with a cost.
The three-tier system remains one of the industry’s most crucial stabilizing forces— encouraging responsible practices and ensuring consumer choice in every state and community. While non-alcohol consumer goods companies can move quickly through exclusive contracts, the alcohol distribution system relies on a deliberate structure that balances commercial interests with public responsibility.
A System Built for Balance
The three-tier system was designed to ensure that no single company controls the marketplace, that competition thrives locally, and that consumers benefit from choice, accountability, and transparency. More than 90 years after its establishment, that design remains as relevant as ever.