How the Safest Business in Alcohol Blew Up

RNDC's collapse exposes how concentrated the middle tier has become

The US alcohol wholesale business is protected by state law, reinforced by the Constitution, and insulated from direct competition.

And yet one of its largest players just imploded.

The news, when it came in June 2025, seemed too incredible to be true. RNDC, the second biggest US wine and spirits wholesaler with $12 billion in revenue and one-sixth of the market, was closing – not selling, but closing – its California business, laying off thousands and likely writing off tens of millions of dollars in losses. It would be leaving perhaps the most lucrative market in the country, an unprecedented move. It’s like Ford saying it would stop doing business in California — and then vanishing from the state, with nary an explanation.

But it was true.

Photo by Rafael Camacho Greilberger on Unsplash

Since the announcement, the news has gotten even worse for the Texas-based company, more formally known as Republic National Distributing Company. More layoffs, more key suppliers leaving, and the sale of its businesses in six states and the District of Columbia. A once mighty company shed almost half its revenue in six months — something that had never happened in the US alcohol wholesale business.

The gatekeeping written into law

The three-tier system which regulates alcohol sales in the US is beyond complicated. The laws differ in each state, often significantly. The one constant is that the 21st Amendment gives states broad authority to regulate alcohol, and in practice that authority has produced a mandatory three-tier system in almost every state. With limited exceptions, retailers must buy from in-state wholesalers, and out-of-state producers are generally barred from selling directly to retailers. Direct sales, common for almost every other consumer packaged goods, are illegal.

In other words, since alcohol wholesalers are legally mandated, it’s almost impossible for them to fail.

Until now. The roots of RNDC’s troubles, say the analysts, former RNDC executives, suppliers, retailers, marketers, and other wholesalers interviewed for this story, are as complex as the three-tier system. Most asked not to be named, given the nature of the article, but they all agree that RNDC expanded nationally to compete with Southern Glazer’s, the biggest US wine and spirits wholesaler. As part of this expansion, it bought No. 4 Young’s Market in California in 2022.

“It was either acquire or be acquired, and California was going to be the crown jewel,” says a former RNDC executive.

To make this happen, RNDC set out to cut costs so as to boost profits, but without necessarily increasing revenue. This was the classic, 1990s-style “leaner and meaner”. In practice it included paring its sales force and asking its retail and restaurant customers to take on more of the wholesaler’s duties (and expenses), like ordering via e-commerce, which would reduce the need for sales people.

RNDC was not unique in this; Southern launched its e-commerce platform about the same time RNDC did in 2019. But RNDC was more aggressive, and its digital drive included buying LibDib, a pioneer in wholesale e-commerce, in 2018.

Bigger was not better

The Young’s merger, which started as a “joint venture” in 2019, seemed to be the culmination of all of this. In doing the Young’s deal, RNDC had seemingly thumbed its nose at US anti-trust officials, who had prevented a merger with number three wholesaler Breakthru Beverage three years earlier, citing fears it would reduce competition and raise prices. Now, RNDC had California, control of Young’s, and a presence in 90% of the U.S. market.

Instead, it was the beginning of the crisis. Some of it was bad luck, first with the pandemic and then with the worst alcohol sales slump in the US in 25 years. But other wholesalers found a way to manage those hurdles.

“Retailing in wine and spirits is about shelf space and end caps,” says attorney Jason R. Canvasser of Clark Hill in Detroit, who represents a variety of clients in the alcohol business. “And if you don’t have sales people in the store fighting for shelf space and end caps, the two of them go to someone who has sales people in the store. So if your best customers aren’t getting shelf space and end caps, they’re not going to be happy.”

In 2022, Sazerac, a long-time RNDC spirits supplier whose brands included high-demand bourbons Pappy Van Winkle and Buffalo Trace, dumped the company in 28 states, including Texas and California. This was news, but not necessarily a sign something was amiss at RNDC. Supplier-wholesaler breakups of this size, while not common, aren’t unusual, either, and it often speaks more about supplier changes.

But then other key suppliers started leaving. Over the next couple of years, brand leaders Tito’s Vodka and Gallo’s High Noon RTD, moved to Reyes in California, while Brown-Forman, home to whiskey powerhouse Jack Daniels, pulled its business from RNDC in 11 states, including California.

People noticed. Pat DeLong, the founder and principal of Napa’s Azur Associates, a beverage alcohol consultancy, said in the spring of 2025 that he thought something was afoot at RNDC, though he expected the company to make an acquisition to replace the losses.

Then, in March 2025, RNDC president and CEO Nick Mehall was replaced. The news release announcing his departure credited Mehall with improving “e-commerce and operational efficiency.” This struck an odd note with employees, said the former RNDC official, since Mehall “never sold a case and never carried a bag.”

Which, say those interviewed, brings the story back to California — and how different it is to RNDC’s home state of Texas.

RNDC replaced Young’s management with its own. “RNDC committed the cardinal sin of distributor management by believing they could manage California in the same manner they managed Texas,” says one consultant. “But that didn’t work, because the markets are unique.”

First, there were important differences in state laws. Part of Texas is still dry or semi-dry and there are a variety of legal opening hours and rules about retail sales; supermarkets can’t sell spirits, for example. In California, everyone can sell everything more or less 24 hours a day. Also, wineries can self-distribute to large accounts, which is not legal in Texas, which can cut wholesaler profit and often increase expenses.

Second, California is more regional, so that Los Angeles is different from San Francisco, which is different from Orange County and so on. In Texas, the wine and spirits markets are not only similar in the major cities, but a handful of liquor stores and grocery chains control those markets. Independents play a much smaller role than they do in California, where there are few state-wide chains but a variety of powerful regional companies. This meant RNDC had to deal with many different retailers in many different markets instead of being able to cut a handful of deals with a handful of chains for the entire state.

Third, these differences presented a series of novel logistical and supply chain challenges, complicated by the company’s poor relationship with the Teamsters, who represented its truck drivers. Tension between the two sides became so bad, said several people, that there were late deliveries, missed deliveries, and even no deliveries.

All of this apparently chased away suppliers. The exodus continued earlier this year when tequila leader Jose Cuervo’s parent company, Proximo Sprits, cut ties with RNDC in all but two states. Proximo had been the biggest spirits supplier left in the company’s portfolio.

Dave Infante's Fingers newsletter also just reported that Delicato Family Wines, the number five US wine producer, pulled its products from nearly half of the markets where it had used RNDC. This apparently includes Texas, RNDC's strongest market.

Stability that concentrates risk

In the end, RNDC may have to sell off assets, though it will probably hold on to Texas and a handful of surrounding states. In any case, a far cry from its 2024 peak.

But the big loss isn’t RNDCs, because it wasn’t just a distributor. It was one of only a few ways to get to market. Producers cannot legally bypass the middle tier, which means RNDC’s wineries and distilleries have almost nowhere to go. And all this is happening in one of the worst downturns for alcohol in more than 30 years.

The three-tier system was designed to prevent chaos. Instead, it has created a market where a single corporate failure can strand thousands of producers overnight. That’s not distributing risk throughout a system — it’s concentrating it.

This post has been updated to clarify the three-tier system and add new information about Delicato.