When Revolutionaries Become Cogs in the Wheel

LibDib's partnership with giant RNDC is a loss for the wine and spirits industry

If American policymakers pursued alcohol regulation in a way that centered on modern health and safety priorities, rather than archaic, rent-seeking policies that uplift the profits of the most prolific campaign contributors, then Liberation Distribution (AKA “LibDid”) might be the largest alcohol distribution platform in the U.S.

I come to this conclusion after reading that LibDib has expanded its partnership with Republic National Distribution Company in Oklahoma. LibDib will be using the giant wholesaler’s logistics and delivery capabilities—not its sales force—to move LibDib’s producer client’s products to retail accounts. This does two things. First, it confirms, yet again, that the large wholesaler companies like Republic National, Youngs Market, and SouthernGlazers are really just logistics companies with no interest in actually marketing and selling. Second, it positions LibDib as a sales platform arm for large wholesalers.

Liberation Distribution started out about 6 years ago as the brainchild of the brilliant Cheryl Durzy. Her family owned a small winery in California that suffered under the same kind of alcohol regulatory policies that most small wineries experienced: because most states required wineries to sell only to wholesalers instead of directly to retailers and because wholesalers had so little interest in dealing with and representing small family wineries, Cheryl’s family’s winery had difficulty bringing their outstanding wines to market.

At the time of LibDib’s founding, Durzy wrote this on the company’s blog:

“Distributor and producer consolidation has created a closed market where the little guys cannot get their product into distribution and accounts are being squeezed to purchase beer, wine and craft spirits from the very largest suppliers. While managing my family’s brand I became incredibly frustrated by the lack of options available today. All brands deserve a route to market and LibDib creates an opportunity where makers and buyers can work directly together.”

The LibDib platform allows wine and spirit producers (LibDib calls them “makers”) to post their products on the LibDib website where retailers in states where the company operates can order wine at a click of a button. The price of the maker’s products would reflect the fact that no middleman wholesaler came between the retailer and the wholesaler and the cost of shipment would be divided between the two parties.

The problem LibDib eventually had to address is that in most states where the three-tier alcohol regulatory system requires products to go through a wholesaler before appearing on the shelves of the retailer the regulatory complications made operations difficult. On top of this, for a maker to be successful using LibDib, they needed to budget for sales and marketing in the states they used LibDid for distribution.

But imagine if the unnecessary and archaic requirement that producers must sell to a state’s wholesalers (a requirement of all three-tier systems) did not exist? Imagine if upon a retailer purchasing a couple of cases from a maker on the LibDib platform all that was required afterward was the most economical and efficient way for the producer to ship off the wine to the retailer without any wholesaler involvement. Try to imagine the innovation in wine logistics that would occur among transport companies in order to fulfill the huge need created by this largely imaginary, yet imminently, rational means of producers selling wine to retailers.

In the end, LibDib’s answer to the three-tier system became a partnership with one of the largest enforcers of the three-tier system: Republic National Distribution Company, one of the most massive wine and spirit wholesalers in America. The partnership between the two companies is LibDib’s capitulation to the reality that a small number of large distribution companies in America control the political and regulatory machine behind alcohol regulation and, as a result of doing all they can to enforce the continued existence of the three-tier system of alcohol distribution, have continued to make it near impossible for small producers to gain footholds in markets outside their own state.

The announcement of LibDib and RNDC’s partnership in Oklahoma brings LibDib’s operations to 11 states, including California and New York. It is also confirmation that LibDib is well on its way to being not much more than an appendage of RNDC, rather than an independent company. And that’s fine. That’s a viable model.

One of the realities of LibDib’s envelopment into the RNDC empire is that we lose any possibility of Cheryl Durzy being a vocal advocate for systemic change in the alcohol regulatory arena. Don’t underestimate this loss. Cheryl is a dynamic, smart, hard-working, and convincing industry insider who perfectly understands the corruption that is at the heart of the three-tier system. Using her voice to explain the monumental problems of mandating producers and retailers’ use of wholesalers would be highly effective and impactful.

But this won’t happen. LibDib has become a cog in the three-tier wheel.