Distributors Republic National and Breakthru to Merge
New company will combine second and third largest wine distributors and cover 30 states
San Rafael, Calif.—Consolidation in the wine distribution tier continued this week, as the second- and third-largest companies—Republic National Distributing and Breakthru Beverage Group—announced a merger. The deal will scale up the new company to a size more comparable to the leader, Southern Glazer’s, and will cover nearly as many state markets.
Republic National (RNDC) is based in Grand Prairie, Texas, and represents 751 U.S. wineries in a total of 21 states. RNDC is a distributor and broker of premium wine and spirits. Breakthru, based in both New York and Illinois, is a distributor and broker of beer, wine and spirits in the U.S and Canada, representing 691 U.S. wineries and serving 15 states, according to Wines Vines Analytics. After accounting for overlaps, the new entity is expected to serve 30 states, including nearly all the largest markets except California.
By contrast, Southern Glazer’s represents 1,178 U.S. wineries and serves 36 states. It appeared the as-yet-unnamed new company will serve several states that Southern Glazer’s does not, including Arizona, Connecticut, Georgia, Massachusetts, New Jersey and Wisconsin.
“The merger of RNDC and Breakthru will create strategic opportunities that will benefit our associates and our business partners in a rapidly changing and highly competitive marketplace,” RNDC president and CEO Thomas Cole stated in an announcement released today.
Breakthru’s president and CEO Greg Baird added: “Breakthru looks forward to joining forces with RNDC to establish an even stronger foundation of industry knowledge, talent, history and heritage.”
Business publisher Forbes estimated RNDC’s 2016 revenue at $6.5 billion and Breakthru’s at $5.4 billion, so the merged companies in a growing market should pass $12 billion in 2017 sales and start playing in the same ballpark as Southern Glazer’s, whose 2016 revenues Forbes estimated at $16.5 billion. The deal is expected to close late in the second quarter of 2018.
“With Southern and Glazer’s getting together (via merger in January 2016), it was basically inevitable that this kind of thing would happen,” said industry analyst Jon Moramarco of bw166 and Gomberg, Fredrikson & Associates. “It’s all about wholesalers taking advantage of economies of scale. There’s not a lot of that to be gained at street level, but in the back of house you’ll see it.”
Likely synergies will be found in the consolidation of such operations as warehouses, computer systems and credit departments, he added.
Small and medium-size wineries often cite distributor consolidation as one of their biggest business challenges, since it means there are fewer distributors to potentially represent them, while the largest wineries find that consolidation offers advantages and efficiencies to brands their size.
The fast-growing number of wineries has an inverse correlation to the shrinking number of distributors. In 1995, the U.S. had about 1,800 wineries and 3,000 distributors, according to winery and distributor sources. When Wines & Vines published a package about the “Distributor Market 2017” in September, however, the number of wineries had grown to 9,200 and the number of distributors had shrunk to 1,200.
RNDC formed in 2006, when the firms of Republic and National merged. Thomas Cole has been president since then, after previously leading several predecessor firms including Magnolia Marketing Co. Robert Hendrickson is the executive vice president and chief operating officer of RNDC and will become chief operating officer of the new company.
Breakthru is a relatively new company in its present form, being the result of M&A activity that brought the Charmer Sunbelt and Wirtz distribution companies together as of early 2016. Chief executive Greg Baird will become chief integration officer of the merged companies.
