Divorce—Three-tier System Style

Two giants of alcohol go after each other and expose flaws in the system

A number of years ago when I got divorced, the process was actually very amicable. In fact, I remember when it came to divvying up the wine collection, we got everything out, put all the bottles on tables separated by color, then we chose, one by one. It was weird but pleasant.

The same amicability cannot be said of the divorce between Sazerac, maker of some of the most famous and sought-after whiskey sold in America, and their primary wholesaler, Republic-National (RNDC).

Based on the lawsuit filed by Sazerac against RNDC earlier this year, and the response and countersuit filed by RNDC very recently, It appears that the couple’s multi-million dollar relationship was put under pressure when Sazerac decided they needed to put in place a new compensation deal with RNDC that matched their desire to become more hands-on in the way their products were marketed and sold and then when inflationary pressure made that new deal difficult on RNDC.

Sazerac is accusing RNDC of all sorts of divorce-justifying deeds:

-Owing Sazerac upwards of $40 million for products shipped to RNDC
-”Badmouthing” Sazerac after the divorce was announced.
-Raising prices on Sazerac products
-Using Sazerac’s best products to as a lure to get retailers to buy other stuff

Meanwhile, RNDC has some accusations of their own according to their response to the Sazerac lawsuit and a countersuit they filed. In that complaint, RNDC claims the following:

“The relationship between RNDC and Sazerac thrived for decades but has been torn apart by Sazerac's two-plus year effort to strip RNDC of its distributor role and circumvent the three-tier system that has helped make this industry so successful [while attempting to] strip all its distributors—not just RNDC—of their typical and, in many states, legally mandated distributor functions regardless of performance."