When a brand wants to enter the US market, there are many things to be considered. At MHW, our job is to ease this transition and make sure brands are well prepared before finalizing their plan of entry. Understanding the difference between control states and open states is an essential part of this process.
The rules and regulations relating to the importation and distribution of alcohol in the United States are quite specific compared to other countries. Each state in the US also has its own laws controlling how brands can sell their alcohol. Some states are controlled by the government, control states, and others are more open and allow you to sell directly through distributors, open states. Here’s a deep dive into each:
Control States
There are 18 states/jurisdictions that operate as “control states,” which means that the state oversees the wholesaling or retailing of alcohol products. The government in each state does everything from regulating manufacturing to managing the state-run retail stores, but each one does it a little differently. The control state model benefits producers in the way that once a product is approved for sale in the state, it is sold at locations throughout it, all for the same price. Product can also be delivered to one location in the state and will be distributed throughout on behalf of the producer. This system is said to provide a level playing field that doesn’t exist in other states.
The control states/jurisdictions in the US are:
- Alabama
- Idaho
- Iowa
- Maine
- Michigan
- Mississippi
- Montana
- Montgomery County, MD
- New Hampshire
- North Carolina
- Ohio
- Oregon
- Pennsylvania
- Utah
- Vermont
- Virgina
- West Virginia
- Wyoming
Open States
The remainder of states in the US are “open states.” In these states producers can sell directly to distributors or customers. Anybody looking to purchase alcohol can go to privately owned retail stores, instead of ones operated by the government. At these privately owned stores, your product can be sold at various price points and are able to be discounted.
The open states in the US are:
- Alaska
- Arizona
- Arkansas
- California
- Colorado
- Connecticut
- Delaware
- Florida
- Georgia
- Hawaii
- Illinois
- Indiana
- Kansas
- Kentucky
- Louisiana
- Maryland
- Massachusetts
- Minnesota
- Missouri
- Nebraska
- Nevada
- New Jersey
- New Mexico
- New York
- North Dakota
- Oklahoma
- Rhode Island
- South Carolina
- South Dakota
- Tennessee
- Texas
- Washington
- Wisconsin
Franchise States
Some states are also “Franchise” states. State franchise laws, where they exist, protect in-state distributors from abrupt terminations by their suppliers for no reason. Producers need to be selective when selecting a distributor because of these. Franchise laws in certain open states make it legally difficult to switch distributors once you’ve selected one. Essentially, you’re “married” to one distributor after you sign with them. It is essential to reach out to distributors and discuss your brand and their approach at length to find the best fit for you.