TLDR: Beer distributors are a promising, but unproven lifeline for craft spirits brands

I talk a whole lot about the three-tier system and distributor consolidation.

I do this not because I like it, but because it is potentially the greatest factor contributing to the likelihood of a successful spirits investment.

Having a great product that customers love does not matter unless that business understands and is set up to thrive in today’s market environment.

Today’s topic is exciting to me because it represents a lifeline that could be monumentally transformative for the spirits industry and specifically for craft brands.

Status Quo

Right now, two distributors dominate the market: Southern Glazer’s and RNDC.

Most small brands start with smaller, local distributors but if you grow successfully, you always end up in the same place.

On one hand, it’s a win.

You have grown enough to draw the attention and interest of the big guys. They both have a national footprint and you theoretically have the chance to grow into as many states as there is demand.

In reality, it’s more like a teenager from a small town in Nebraska getting invited to her first audition in LA.

She packs her life into a Honda Fit, breaks up with her boyfriend (Green Light), and moves to the glamorous big city.

Doesn’t take long to realize it’s not all it’s cracked up to be.

The game is rigged. She loses audition after audition to the daughters of studio executives or rich girls whose parents send Bentleys to casting directors.

Her agent won't pick up the phone, and money is the only thing that talks.

That’s pretty much exactly what it’s like to be a small brand at a big distributor.

There’s got to be a better way.

The Beer Way?

The Beer industry operates under the same three-tier system, but it’s an entirely different ball game on the distributor side.

There are hundreds of distributors, and often several good options within any market.

These distributors are smaller, scrappier, and generally have to do actual work because of a beautiful thing called:

But if these options exist, why do spirits brands put up with the current situation and keep going with RNDC or Southern?

1. Different sales footprint: There are plenty of places that sell both beer and spirits, but it’s not a perfect overlap. Think convenience stores or grocery stores (in markets like TX where that’s not allowed). The beer guys may not have relationships in certain restaurants or liquor stores.

2. Status Quo: Taylor Swift came from nothing, why can’t I? The situation may be brutal, but at least you have some examples of brands who have successfully navigated the big distributors to an exit. It’s a big risk to take the untraveled road.

Change is in the Air

To the sales distribution point, these beer distributors see the opportunity (and margin $$$) available within spirits. Selling a 9L case of $50 bourbon makes them a heck of a lot more money than a case of Miller Lite. There’s enough financial incentive to add a few stops to the truck’s route.

Plus as RTDs grow in prevalence, the footprint in gas stations and convenience stores becomes much more interesting to a spirits supplier.

But to break the status quo, we would need a notable trailblazer…

Sazerac is not a little guy. They’ve got brands like Southern Comfort, Fireball, and Blanton’s in their portfolio.

In early 2023, they decided to leave RNDC and move their distribution to a network of traditionally beer-focused distributors.

This was a big freaking deal, but Sazerac is the proverbial rich, studio executive’s daughter from our analogy.

Why would they make the jump?

Even for someone like them, it’s brutal to be in the same portfolio with 4 or 5 of your biggest competitors.

And there are some subtle indications that they might see growth opportunities in the convenience store channel…

It’s still early innings on this move and the jury is out on whether it will play out for them in the long run.

I, along with all the smaller brands in America will be watching closely to see how this plays out and if there might be a better way.