Republic National Distribution Co. and Breakthru Beverage Group scrapped plans to merge and withdrew their Hart-Scott-Rodino filing with the U.S. Federal Trade Commission (FTC) has been withdrawn. While both companies were optimistic about the prospects of the combined company, they said the decision to terminate the proposed merger was made after a protracted review by the FTC.
Naturally RNDC and Breakthru put out statements proclaiming a great future.
“Drawing strength from RNDC’s robust market position and positive outlook, we intend to continue on our path toward achieving enhanced efficiencies and innovation while carefully evaluating other strategic options,” stated Tom Cole, Chief Executive Officer of RNDC. “We look forward to further strengthening our relationships with our suppliers and customers and serving the many consumers throughout the U.S. who enjoy premium wine and spirits.”
“We’ve continued to advance the Breakthru business and our innovation platform and operating model are well positioned for growth,” said Greg Baird, Breakthru Beverage CEO. “We are confident that the strengths and stability of Breakthru, combined with the expertise of our team, uniquely positions us to serve our partners, both now and in the future.”
But the reality is that we are now left with one powerhouse distributor with national reach – SGWS is in 44 states – two small distributors whose footprint together doesn’t equal that of SGWS. RNDC operates in 20 states and Breakthru in 14 states, some of which overlap.
And that will impact consumer choice. I asked our local supermarket manager what happened to a product I usually bought. “Our distributor ceased to carry it,” she replied. While the wholesaler association talk about how wholesalers enable consumer choice, the truth of the matter is that wholesalers also have the power – and in some cases the necessity if they lack warehouse space – to limit consumer choice.
The FTC’s approval of the merger of Southern Wine & Spirits and Glazer’s a few years ago put tremendous market power – including the power to short-circuit consumer choice by dropping products – into the hands of one entity.
Every major supplier will seek to list their brands with SGWS even more than they do today because SGWS can deliver virtually nationwide coverage through one distributor. Neither RNDC nor Breakthru can do that.
There was no compelling reason for the FTC to allow Southern Wine and Glazer’s to merge a few years ago. There was a compelling reason for the FTC to approve the merger of RNDC and Breakthru to provide a robust competitor to SWGS. But the FTC’s foot-dragging killed the deal.
If the FTC was interested in promoting competition among wholesalers for the best brands, for the hottest brands, it would move to breakup Southern Glazer’s. That’s not going to happen.