2 days ago
- Business
- San Francisco Chronicle
A major wine company is exiting California. Here's what it means
Alcohol distribution does not sound like an exciting topic, but it's suddenly the hot gossip within California wine circles.
Republic National Distributing Co., the nation's second-largest alcohol wholesaler, announced last week that it will no longer do business in California after Sept. 2. It's sent more than 2,500 beverage brands scrambling to find a new distributor in the state.
This reshuffling has generated so much attention largely because it looks like a dire warning for an industry already known to be in peril. If a wholesale behemoth is simply opting out of the largest wine market in the U.S. — if it would rather leave than try to compete — that seems like confirmation that the alcohol industry's downturn has not reached its bottom.
While the Grand Prairie, Texas-based Republic National has not suggested that politics played a role in the decision, the news also may be resonating so widely in part because of the narrative it presents: A Texas company wants nothing to do with California.
CEO Bob Hendrickson cited 'rising operational costs, industry head winds, and supplier changes' as reasons for the move. The latter is what everyone in the wine industry seems to be discussing. Some of Republic National's most important brands have defected lately to other distributors, especially to the beer-focused Reyes Beverage Group. Since the beginning of the year, the company has lost the right to sell top-selling spirits including Tito's, High Noon, Cutwater Spirits and Jack Daniel's, among many others.
The loss of those brands had to be a major financial blow to Republic National. Why they all left, and all at once, is unclear. VinePair's Dave Infante posited that it was the result of Reyes' quest to increase its spirits portfolio after a change in California law made it easier for beer wholesalers to sell liquor.
'It left everybody in the lurch,' said John Buehler, owner of Napa Valley's Buehler Vineyards, where wholesale purchases drive 80% of the business. 'It was really such short notice.' Although Republic National continues to sell his wines in a few other states, he'll need to find a new California distributor.
Many wineries and distilleries will now try to jump onto the lists of the other two big dogs, Southern Glazer's Wine and Spirits or Breakthru Beverage Group. The Napa-based importer Wilson Daniels has already announced it's bringing its book of prestigious wines like Burgundy's Domaine de la Romanee-Conti and Piedmont's Gaja to Breakthru, while Treasury Americas president Ben Dollard said he's still 'evaluating alternative arrangements' for wineries including Beaulieu, Frank Family and Daou. Other producers will look to smaller distributors, like Chambers & Chambers or Skurnik Wines & Spirits, for their California sales.
But in a contracting wine market, there may not be room for everybody on those lifeboats. 'It's going to be a thinning of the herd,' Buehler said. 'The ankle biters that were in that portfolio, the little guys — there's going to be a lot of collateral damage.'
Republic National had only recently increased its presence in the Golden State when it completed the purchase of major California distributor Young's Market Co. in 2022. The industry analyst Impact Databank estimated the company's sales that year at $2.8 billion in California alone.
Despite that considerable power, however, Buehler — who had been with Young's since 1992 and moved to Republic National as a result of that acquisition — said that Republic National consistently 'underperformed' for him in terms of sales. He now regrets waiting so long to find a new distributor. 'I think I should have seen the writing on the wall. You lose these suppliers, and you're not attracting any new suppliers,' he said. Still, 'I had no idea that they were going to close up shop.'
At least Republic National appears to still be selling his wine ahead of the September shutdown date. 'I keep getting purchase orders,' Buehler said, 'so I guess it's business as usual.'
