The State of Predatory Wholesaling in the American Alcohol Industry

What must be done must first be voiced

Let’s be clear just in case any doesn’t quite get it: If Southern Glazers Wine & Spirits, Republic National Distribution Company, and Breaktrhu Beverage—the behemoth wine and spirits middlemen that dominate the vast majority of the wine and spirits distribution channel—hadn’t taken control of state legislatures around the country, paid-ff and manipulated lawmakers and garnered themselves protectionist laws that allow them a free hand to generate billions in unjustified revenue without working for it, their simple-minded incompetence would make them the laughing stock of the alcohol industry.

This is what’s evident, but largely is not directly said in a Food & Wine Magazine article entitled, “U.S. Craft Distilleries Are in Crisis.”

The “crisis” described in the article is put this way: “Producers and consumers are on opposite sides of a chasm…the result of what some in the drinks industry view as a skewed and perhaps even predatory distribution system.”

In other words, as consumers lean into the innovative and quality-oriented craft distilleries’ products and as the number of craft distillers grows in the United States, the dominant wholesalers are granted so much power via restrictive distiller distribution and sales las that the very distillers that are advancing the American spirits industry are forced out of business—for the sake of a few, predatory wholesaler’s bottom lines.

The vast majority of distillers in the U.S. may not self-distribute their products to retailers and restaurants in their own states or in other states. And the vast majority of distillers have no right to ship their whiskeys, gins, and vodkas to consumers in their own state or other states. This makes it exceedingly difficult for craft distillers to grow, which is exactly how the privileged middle tier wants it.

The article highlights Jordan Cotton, the co-founder and CEO of Cotton & Reed Rum Distillers who gives the best explanation of how wholesalers and politicians in their pocket have rigged the system in favor of the Southerns and RNDCs of the world and against the real innovators in the industry—the craft distillers:

“Without additional paths to market, the distillers won't make it….Distributors have the right to operate that way (dominating the market), but using their cash and influence to buy up the competition and promote laws that restrict market access — from a small distiller's standpoint, that's playing dirty pool….The alcohol distribution system has worked roughly the same way for 90 years while the world has changed around it…This represents a state-sanctioned stranglehold on commerce. If a business doesn’t want to distribute my products, fine, that is their right. But opposing small distilleries’ right to sell a bottle directly to a consumer, or to a store? To serve a tasting flight? To offer cocktails? To sell online? That doesn’t serve consumers, that's just pulling up the ladder behind yourself….Modernizing any of these areas would improve small distilleries’ market access and odds of survival, but distributors view this as a threat…It's the best path to get everybody what they want: The major distributors can keep focusing on selling big brands the old school way, the consumer can get a bottle of the cool new spirit they heard about without flying across the country, and the brand reaches a previously inaccessible audience.”

Cotton is, of course, correct here in every single respect in every word they speak.

But it's not just distillers. Across the country wineries, brewers, and retailers are stymied from serving existing demand by archaic laws that only serve middlemen box movers who haven’t innovated since 1933, but instead chose to perfect the acquisition of politically purchased anti-competitive restrictions on producers and retailers: