Biggest Distributor Deals of 2012


Dear Client:

We don't have to remind you that as distributors are faced with the constant pressure to increase margins and drive costs out of the supply chain, the big just keep getting bigger. And keeping up with distributor consolidation and alignment is about as easy as herding cats. So here's a roundup of some of the biggest distribution news in the last year.

SOUTHERN WINE & SPIRITS: The biggest story from Southern Wine & Spirits this year is the company's on-going attempts to strike down Missouri's residency requirement. You'll recall Southern filed the initial complaint in January citing the Equal Protection Clause, the Commerce Clause, and the Privileges and Immunities Clause of the US Constitution. The judge ultimately sided with the state, but in July Southern filed an appeal focusing primarily on the Commerce Clause. In an interesting turn of events Missouri Beverage (MoBev) intervened on Southern's behalf this time. They claimed the residency requirement benefits large, in-state wholesalers because those wholesalers face less genuine competition from premium brands. Simultaneously, it hurts smaller wholesalers like MoBev by shrinking the market of potential out-of-state investors and purchasers that might acquire a smaller wholesaler. This case will likely continue on into 2013.

Another big development for Southern involves Diageo. Recall Diageo has made a number of changes to its distributor agreements in the past year, which has resulted in it aligning more closely with Southern. In June of 2011, Diageo announced it had named Southern Wine & Spirits its new national broker in all control states. With that comes a number of key changes, which includes "enhancements" to the teams representing Diageo brands, and increased focus on multicultural and on-premise.

A year after the declaration, Diageo spoke openly about the success it had found in aligning with Southern during the company's yearly results call in August. Diageo saw a 30% increase in key brands and had three of the top five most widely-distributed innovation brands as measured by IRI.

Though, Diageo is just one of many. Skyy Spirits (now Campari America) renewed its agreement spanning 18 states with Southern and added them in Indiana.

As of March, Sidney Frank Importing Company left Wirtz Beverage in Illinois to join Southern, and also aligned with Southern in the Pacific Northwest leaving Young's Market. When it's all said and done, Southern will serve as the exclusive distributor for SFIC in 10 states and broker in seven.

Beam Inc. made Southern its exclusive distributor in the state of Washington this summer, where Southern has served as its broker since 2010. Beam is partnered with Southern in 29 states, making it Beam's single largest distribution partner. Pernod Ricard and Patron Spirits Company also named Southern their distributor in Washington.

Furthermore, Chateau Ste. Michelle Wine Estates also moved its portfolio from Wirtz to Southern in Minnesota, marking the 15th state where Southern represents its brands.

Don't forget Southern purchased Odom's interests in their joint-venture in January for the wine and spirits business. That covers Washington, Alaska, Idaho, Montana, Oregon, Wyoming and Utah.

CHARMER SUNBELT-GROUP: In April Glazer's Distributors and The Charmer Sunbelt Group formed a joint-venture in Alabama and Mississippi. Alliance Beverage of Alabama and Alliance Beverage of Mississippi will combine the companies' existing brokerage operations in the two control states. General Wholesale Company, which currently partners with Charmer Sunbelt in both states, will continue their interest in the ventures.

This fall CSG announced they would be purchasing complete ownership of Associated Distributors in Virginia and Ben Arnold-Sunbelt Beverage Company in South Carolina. The Associated Distributors transaction is set to close at the end of this month.

Treasury Wine Estate and Drinks Americas announced partnerships with Charmer this year as well. Charmer will represent TWE's entire portfolio in Delaware through United Distributors, and in New Jersey through (non-exclusively) R&R Marketing. Note, Drinks Americas also went with R&R Marketing. TWE and Charmer are now partnered in nine states.

REPUBLIC NATIONAL DISTRIBUTION COMPANY: As of June, Banfi Vintners has pulled out of Charmer Sunbelt and appointed Republic National Distributing Company (RNDC) its exclusive distributor in Florida and South Carolina. It is transitioning over from CSG's Ben Arnold Beverage Co. in South Carolina and Premier Beverage in Florida. All or part of the Banfi portfolio will now be represented in 17 of the 22 states in which RNDC operates, making RNDC Banfi's leading wholesale partner in the US.

In May Constellation Brands announced that it was near completion of its distribution alignment with RNDC, Young's Market, Johnson Brother and Horizon Beverage Company. In this phase of alignment RNDC was awarded exclusive distribution for Constellation's portfolio in North and South Dakota.

GLAZER'S: It's been a big year for Glazer's. In September they announced they'd be expanding to the USVI in a joint venture with Premier Wine and Spirits. Glazer's called it the first step of a "long term strategy to grow internationally."

Glazer's acquired fine wine distributor 55 Degrees, and the distribution rights for Meier's Wine Cellars in Ohio. Meier's is the oldest winery in Ohio and was previously with Heidelberg in the state. Recall that in September 2011 Luxco acquired the outstanding stock of Paramount Distillers of Cleveland and its Meier's Wine Cellars subsidiary in Cincinnati. Glazer's and Luxco currently do business together in 11 states.

Also recall they made a big move in November of 2011 by purchasing Halo Distributing Company in San Antonio and Victor L. Robilio Company, Inc. Robilio distributes wine, spirits and specialty items in Memphis, Tennessee for suppliers including: Diageo, Pernod Ricard, William Grant, Heaven Hill, Skyy Spirits, TWE, Banfi, Constellation, Kobrand and Winebow. And Halo is one of the country's largest malt beverage distributors.

We realize it's not the sexiest of topics to read, or write for that matter, but we think it is important to stay on top of distribution news. If we missed anything let us know.

Until tomorrow, Emily

"The secret to mountain biking is pretty simple. The slower you go the more likely it is you'll crash"
- Julie Furtado

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