More Markets, More Problems

Striving for the ideal solution often creates its own issues – and declining sales is an unintended consequence

I was once again very impressed with Azur Associates’ well-researched Wine Market Annual Summary and Outlook 2026, and while there were no surprises – regular readers reviewing the Azur deck will recognize some of my previous rants, now confirmed with Wall Street boardroom-worthy stats and graphs.

For all of its impressive breadth of coverage and analysis, and granted you can’t include the entire world in a mere 53 dense slides, the review provided highly insightful information on performing categories, distributor market share, and the continued push toward a “Total Beverage” solution by the largest wholesalers – but didn’t delve into trends in trade-level buying (independent on- and off-premise, chains, control states, etc.) or seismic shifts in how distributor staffing might affect trade and consumer purchase behavior.

Doing the heavy lifting

Before I get into that, let me start by acknowledging – as I frequently do -- that distributors are the backbone of beverage alcohol in America. Our team depends on more than 100 wholesalers, each powered by tens of thousands – literally an army -- of sales reps with deep local relationships, warehouses full of inventory, fleets of trucks, and friendly, reliable drivers who don’t just deliver product but, in many cases, physically place it on shelves --an unglamorous, logistical ballet that makes the entire system function.

As someone who’s been a supplier over the years, I can’t pretend that -- even as a sizable producer -- I’d ever be able to reach as many accounts and customers without our hard-working distribution teams.

The largest of these distributors have been pressured – nay, compelled - by market forces to tenaciously compete -- and most recently RNDC to the breaking point. I think it’s a warning other wholesalers should heed, and perhaps also a glimpse of hope for emerging mid-market players.

Over the past decade, the industry has leaned hard into a “Total Beverage” strategy, where beer distributors have added wine and spirits, and wine and spirits distributors started acquiring beer houses, creating a theoretically elegant system of one truck, one rep, one invoice -- which sounds fantastic until you remember that selling a Hazy Triple, a Brachetto d’Acqui, endless canned, boxed or “balled” (I guess) malt-, spirit- or wine-based RTDs, and a 12 Year Old Speyside might require different skill sets, not just one enthusiastic generalist with a massive bag, a sell sheet binder and a functional beverage habit.

I am of course over-simplifying here: the largest distributors have key account specialists that make the coveted placements in specific categories which are then followed up by broad-market account reps. Still: one person can only cover X number of accounts in a meaningful way.

Further, big wholesale organizations have been investing in systems where accounts may log in and do the ordering themselves – which works for certain customers like Total Wine & More, whose ordering systems are automated – but not terribly well for the majority of independent stores and restaurants that depend on their local reps coming in and saying hello – then helping out with what needs to be re-stocked.

What was that ideal solution, again?

Getting back to Total Beverage Strategy: This is where one starts to feel a sense of (sorry, Boomer) deja vu, because we’ve been here before -- in the 1980s -- when companies like Kmart and General Electric went on acquisition sprees into adjacent categories they didn’t fully understand, convinced that scale and “synergy” would paper over the inconvenient reality that expertise doesn’t fall like manna just because the balance sheet got bigger. To paraphrase Mr. Smalls, more markets, more problems.

Fast-forward to today, and one might recognize similar patterns emerging across large, multi-state distributors like Southern Glazer’s Wine & Spirits, Reyes Beverage Group, and Breakthru Beverage Group, all of which are highly capable organizations that nonetheless face the same structural challenge: you can expand across categories, but if you don’t maintain depth, you may eventually become very big and very average at the same time.

If you want a real-time case study, look no further than Republic National Distributing Company, which (outside of Georgia, where it began as National Distributing Company) is being “sold off for parts”. This didn’t happen because of one catastrophic decision, but rather a long series of very rational ones that added up to something I find rather… irrational.

To wit: The most consequential of those decisions continues, in my estimation, to be the aggressive and ongoing shedding of “non-performing” brands, a phrase that sounds clinical and data-driven, but often means cutting suppliers who were in fact moving some volume – maybe a couple of pallets (some even more) steadily each year, regularly generating 30% margins without anyone really trying – given the axe because they didn’t fit an increasingly narrow definition of scale, growth or simplicity (“we already HAVE one of those at that price point!”).

And when these brands were cut -- often with a polite (but still brutal) email asking for the “inventory of brand(s)” (yes, I saw that actual usage!) be picked up within 30 days -- the immediate impact wasn’t just operational, it was mathematical: remove 100 to 200 brands a year and then act surprised when topline revenue declines. Gosh, how did that happen? Also the whole “you guys don’t have that anymore?” thing.

However, the idea was to make room for other “new” (read: new to that distributor) brands with “meat on the bone”: in other words, with a set of performing products and a universe of accounts ready to be serviced, and for actual “opportunities” (read: whatever seems hot and trendy). This always comes with more costs for transition: orderly transfer of goods, initial inventory, logistics, training of staff, sampling, launches, data integration, compliance – which eat into any new margins, at least at the start. And then it’s still a risk: why did the brand(s) (see what I did there?) move in the first place? Were they unhappy with past performance elsewhere? Uhhh… yes. Will the new folks do any better? Uhhh… they seemed super-enthused!

Paying the piper

This is where the secondary effects kick in, and we’ve all seen the recent headlines about WARN Act notices regarding job reductions: declining revenue creates pressure to cut costs, and cost-cutting leads to layoffs of (typically) experienced, relationship-driven salespeople who actually knew their accounts (sorry, Boomer), followed by the hiring of less experienced, entry-level reps who are asked to cover more ground with less support, which is not exactly a recipe for precision selling in categories defined by nuance. Add to that the expenses of letting folks go (severance packages) and finding and training the new folks (hiring packages).

At this point, the multi-category portfolio itself starts to dissolve into a kind of blobby, undifferentiated mega-book, where everyone is expected to sell everything, which sounds efficient until you recognize that it effectively guarantees that no one becomes an expert in anything, and expertise is the entire game when you’re dealing with products that require storytelling, context, and a level of guidance that most buyers not only appreciate but actively depend on.

Because here’s the reality: buyers are mostly overwhelmed (not jaded, but perhaps a tad cynical) with hundreds of thousands of SKUs in the U.S. market, and what they need is not fewer options but better curation, not less noise but clearer signals, and not less sales calls but more informed conversations that actually help them make better decisions faster.

Instead, what they’re increasingly getting is a diluted, automated version of everything, which leads us to the part of the story that matters most – the cycle.

Less is… less

Less selection combined with less category expertise leads directly to less trade engagement, because fewer relevant products are being shown and fewer compelling stories are being told, which in turn leads to less account and guest excitement, because there are fewer moments of discovery, fewer reasons to trade up (or across into more interesting selections), and fewer opportunities to differentiate from the account across the street.

Less excitement leads to fewer sales -- as offerings on the shelf or list stagnate, fewer sales mean less revenue for the distributor, and less revenue triggers another round of brand purges, which further reduces selection, further erodes expertise, and sends the whole dang thing right back to the beginning -- only a bit weaker.

It’s a vicious cycle, and it constantly feeds on itself until we see a result like RNDC.

A glimpse of hope

However, in another segment of the market, small and mid-sized distributors are quietly doing something almost radical: they’re staying in their lane (which turns out to be a competitive advantage), building focused portfolios with intention (e.g.: concentrating on sustainable all-natural RTDs, or wines from Spain and Portugal, or spirits from Eastern Europe ), necessarily maintaining manageable SKU counts, and investing in people who truly understand their products and their customers.

They know which accounts need a value-driven by-the-glass option that still has a story, which retailers want something new but not risky to stack up front, and which placements require education vs. enthusiasm, and they’re winning because they’re not trying to be everything to everyone, they’re trying to be the exact right thing to someone in particular.

This ain’t nostalgia, it’s how markets work when three or four big distribution/sales companies work with the top five suppliers in those industries – in any category, in any business. Pick any of these: retail, automotive, insurance, logistics, etc., there are plenty of cautionary tales to go around

None of this means that large distributors are doomed, because they still have enormous advantages in infrastructure, capital, and major supplier relationships, but it does mean that the current spreadsheet-oriented trajectory (breadth is prioritized over depth, efficiency is defined as reduction, rather than utilization) isn’t sustainable if the goal is short-term domination rather than long-term strategic growth.

As the dust settles

Hopefully we are reaching the point where the industry is deciding who is going to be broad, and who is going to be effective, but pretending you can be both things -- without trade-offs -- is how you end up retracing the steps of companies that once looked invincible and innovative -- and now serve as case studies, or, if you prefer your cautionary tales with a bit more drama, looming Enrons, which also believed that endless growth, category addition, and automation would eventually make everything perfect.

Spoiler alert: it did not.

The good news is that beverage alcohol is still, at its core, a relationship business, which means it will likely correct course, but only if it remembers that moving product is not the same as selling it, that covering accounts is not the same as serving them, and that optimizing a portfolio is not the same as curating one.

Because in the end, depth is cherished, expertise compels, and the distributors who understand this will not only survive this cycle – they will be the ones who emerge as the new market leaders. Where they take their eventual growth depends on what they will remember about these remarkable times.