Powerful alcohol distributor abruptly quits California as it takes stand over problems doing business in the state
The second largest alcohol distributor in the US has announced it is pulling out of California, blaming rising costs of doing business in the state.
Texas-based Republic National Distributing has said that it will no longer do business in California after September 2.
This has sent more than 2,500 drinks brands scrambling to find a new wholesaler and distributor in the state, which is famous in large part for its wine production.
The departure of a wholesale giant from the largest wine market in the US is also a warning sign for an industry which is already struggling as Americans increasingly cut back on alcohol.
Republic National, which is based in Grand Prairie, has not suggested that politics played a role in its decision to quit California.
But the news may be resonating widely in part because of the narrative it presents that a Texas company wants nothing to do with California, the San Francisco Chronicle reported.
President and CEO Bob Hendrickson said: 'This decision is driven by rising operational costs, industry headwinds, and supplier changes that made the market unsustainable.'
He added that the company is 'using this moment to sharpen our focus and reinvest in the markets where we're best positioned to grow', naming Texas and Kentucky.
It comes weeks after the distributor announced a 'strategic reinvestment' in its Texas operations.
Several dozen of Republic National's crucial brands have defected in recent months to other distributors.
This means the company no longer has the rights to sell popular spirits such as Jack Daniel's, Tito's and High Noon in California.
While it is unclear why all the brands cut ties with the company, it is likely to have been a financial blow as many shifted distribution to a major rival, Reyes Beverage Group.
Some workers have blamed executive mismanagement for the company's departure from California, according to specialist outlet VinePair.
'They started focusing on numbers instead of customer satisfaction and that's what drove them to their fall,' an anonymous California-based worker told the outlet.
A former worker claimed the the company was 'terribly run' and its execs were 'in over their heads' in the Golden State.
They alleged executives from Texas did not get out to meet customers or 'learn the market.'
John Buehler, owner of Napa Valley's Buehler Vineyards, said Republic National's departure from California 'left everybody in the lurch.'
Wholesale purchases drive 80 percent of the business. 'It was really such short notice,' he told the San Francisco Chronicle.
Although Republic National continues to sell his wines in a handful other states, he will now need to find a new distributor in the Golden State.
The company had only recently increased its presence in California when it purchased distributor Young's Market Co. in 2022.
Industry analyst Impact Databank estimated Republic National made $2.8 billion in sales in California alone in 2022.
But despite this success, Buehler told the outlet that the distributor consistently underperformed for him in terms of sales.
'I think I should have seen the writing on the wall,' he said.
'You lose these suppliers, and you're not attracting any new suppliers. Still, I had no idea that they were going to close up shop.'
It comes after Republic National announced a 'strategic reinvestment' in its Texas operations in May, according to Global Drinks Intel.
The company said the move would create around 100 jobs.
'We've taken a close look at where we are – and more importantly, where we need to be,' chief sales and execution officer Taylor Sommer said at the time.
'After listening to our associates, customers and supplier partners, one thing is clear: we need to strengthen our presence and performance in the market.
'Texas is a critical part of our foundation, and we're proud to reinvest here.'
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