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Sizable sell-offs and large-scale layoffs by top players punctuated a dizzying month of change for wine & spirits distribution. And federal enforcement actions got more serious recently, too. First the FTC's sweeping suit against #1 wine & spirits distrib Southern Glazer's caught a slew of other wholesalers in its tangled legal web, as SGWS sent subpoenas to 11 major distribs for extensive pricing and sales data and documents. Then fed prosecutors indicted 5 former Southern sales leaders as part of an ongoing criminal conspiracy case that now counts 11 current and former industry members as defendants, with potential for plenty more. Tho somewhat distinct, both series of stories are far from wrapping up, suggesting major changes still to come. Reyes to Acquire RNDC Ops in 5 More States; Hundreds Laid Off at SGWS, RNDC, Breakthru Too Pending sales and big cuts have made at least a couple multi-billion $$ cos appear more precarious. The #2 wine & spirits distrib RNDC, a $12 bil biz not so long ago, announced another round of layoffs in early Feb, impacting at least a couple hundred employees in FL, TX, LA, WA and more. A mo later, it announced that Reyes Bev Group will acquire its ops in 5 more states: TX, AZ, CO, LA and OK. That expanded the deal already in place for RBG to pick up RNDC houses in FL, HI, MD, SC, VA and DC (tho IL no longer part of the deal). Recall, RNDC had already lost key brands to RBG (and others) in CA, precipitating about a thousand jobs cut a yr ago before co shuttered the biz there last Sep. These moves alone constitute a sudden reshuffling of alc bev distribution at an unprecedented scale.Other big players pared back their workforces last mo, too. The #3 wine & spirits distrib Breakthru Bev Group laid off hundreds of workers, it shared. The cuts impacted around 500 employees, initial reports suggested, tho other sources said the $8.5 bil biz shed up to 900 of its 10K or so workers. And even the $25+-bil behemoth Southern Glazer's (SGWS) slimmed its workforce of about 24K by 1%, laying off a couple hundred of its own folks. Tho Southern is in a much different position than its top competitors, having recently added a bunch of employees too thru acquisition of AB's NYC branch, among other moves. Still, that's in the realm of 1,000-1,500 jobs lost in 1 mo at just 3 huge cos that distributed over half of all wine & spirits sold in the US.But why? Inventories piled higher. And demand challenges mounted. But as some sources point to shifts in incentive structures, others suggest that tuff contract terms with major suppliers called for payments if distribs didn't meet targets. For some players, big-time revs may not be matched by comparatively paltry profits.Feds Take Disparate Approaches to Reining In Perceived Wrongs All the while, fed attys pursued 2 separate sweeping cases involving SGWS or its employees. The distrib has not been formally named in the criminal conspiracy and bribery case. Charging documents continue to describe the co as "Distributor 1," leaving open questions about the corporation's involvement, if any, in either the bribery scheme or the effort to hide it. But the co is the explicit target of another unique fed case: the FTC's first major price discrimination suit in decades, claiming the co's near-national, systematic pricing practices violated the Robinson-Patman Act. In that case, the FTC claims that big grocery chains like Albertsons and Vons got better pricing on wine & spirits sold by SGWS than small, indie retailers. In the other case, fed prosecutors allege that distrib execs "coordinated" bribes to influence buyers of those same retailers to stock certain wine brands at the expense of others.The indictment handed down by a fed grand jury in NorCal in early Mar against 5 distrib sales execs and a supplier rep alleges circumstances surrounding 18 distinct bribes totaling not quite $200K in the form of $1,000 gift cards, golf trips, luxury watches, purses and more. But is that really the kind of scale that would pique the interest of the IRS, which leads this investigation? How about the "millions of dollars in prepaid gifts cards" and planned trips purchased by a 3d party vendor charged in the scheme late last yr? The operator of that vendor is cooperating with prosecutors, so the new indictment references by number the invoices issued to and paid by the distrib and suppliers, citing "programming" or "planning" meetings to appear as "legitimate business expenses." Sound familiar?SGWS in "Full Compliance," "Cooperating"; Yrs of Fed Investigations The DOJ and IRS each issued a press release on the charges, followed by a statement from the TTB. Responding to the story about 5 of its former employees, Southern Glazer's commented that the co "is committed to full compliance with all applicable laws and industry regulations, and we hold ourselves and our employees to the highest standards of ethics and integrity. We have cooperated with relevant authorities and will continue to do so."SGWS has indeed had to work amid the presence of federal investigators for some time. TTB began investigating the use of gift cards as bribes in CA back in 2018, the indictment notes. The agency also raided the distrib's NorCal office with the IRS in the fall of 2022, just over a yr after dozens of small suppliers complained to the feds about widespread pay-to-play schemes in the industry. That had to have been around the same time the FTC began its investigation on price discrimination: ct docs acknowledge that the agency spent 2 yrs looking at the co before filing its suit in Dec 2024. Then too, in June of 2022, a group of CA retailers filed a private price discrimination suit against SGWS with similar claims. Most of those charges went to arbitration, tho certain claims are set to go to trial as early as next mo.Massive FTC Case on Long Timeline; Will Competing Distribs Need to Turn Over Data to SGWS? The FTC's parallel price discrimination case wouldn't go to trial before Sep 2027, at the earliest. And given its scale, it could be pushed back even further. The agency's allegations currently hinge on what it claims were discriminatory prices in 17 mil transactions with 40K retailers for 17K products. And the FTC could still add to that list.As if the parties weren't already drowning in data, last summer SGWS subpoenaed 11 competing distribs for an extensive set of their internal info, which co claims will help them prove that their pricing merely sought to meet their competitors and that the FTC's case is bogus, anyway. After months of back-and-forth between attys, 8 of those distribs now find themselves in fed cts fighting the subpoena: Hensley in AZ: Favorite Brands and Mexcor in TX; and RNDC, Reyes, Breakthru, Johnson Bros and Winebow, pushing back in tandem in CA. Most of those disputes are ongoing, tho a judge in TX already decided that Favorite Brands must cooperate. Three other distribs, Columbia, Olympic Eagle and Empire Merchants compromised on handing over a smaller subset of data to Southern (or its attys, at least). The requests, like the underlying dispute with the FTC, does not involve beer, even tho many of these players sell quite a bit of beer. Southern significantly expanded its beer biz last summer, acquiring AB's branch in NYC, and reportedly seeks more. (To dive deeper into this dispute, request a copy of a special edition of sibling pub INSIGHTS Express from late Feb. Subscribe to Express to stay up to date on all of these stories as they break.)All the Marbles In its extensive request of other distribs, Southern sought not only detailed transaction-level data on purchases from suppliers and sales to retailers, it also asked for documents that support why certain prices were paid by certain parties. In the separate bribery and conspiracy case, charging docs cite interactions that impacted why certain retailers stocked certain brands. In this way, the separate cases crisscross each other, creating a tangle of allegations that implicate core operations and business decisions, raising questions about practices many may have considered standard for many years. The feds are pushing for big change in the middle-tier of the wine & spirits biz, even as the ground shakes underfoot.

Top 3 Wine & Spirits Distribs Cut 1,000+ Jobs, Reyes to Buy More of RNDC as Fed Suits Swirl Around SGWS

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