Welcome to BevNET’s spirits newsletter! This week we’ll be digging into the impact of distributor layoffs on craft brands.

What insiders are reading: Check out our convo with Branca USA’s CEO and experts on the future of adult non-alc.

Thanks for reading. 

-BevNET spirits editor, Ferron Salniker

Last week rumors swirled that Southern Glazer’s Wine and Spirits (SGWS) had laid off thousands of employees. While many of the job cuts came from the fine wine division according to a report from Wine-Searcher, downward wine trends aren’t the entire story. The layoffs more broadly point to distributor consolidation and an overloaded product funnel that will continue to challenge the business plans of smaller or craft brands.

SGWS has not returned requests for comment, so much of what’s floating around is through reddit and old-fashioned word of mouth. But we know this isn’t the first reorg by the distribution giant in recent years and it follows other reported layoffs by competitor RNDC beginning last year. 

As for what we’ve heard from sources: the layoffs did impact BOTH fine wine and craft spirit roles in many markets, but not all, and those weren’t the only divisions touched. Close-to-retirement folks were ‘packaged out’ and the layoffs impacted “a lot of support layer roles,” said Caitlyn LuBell, founder and chief connection officer of recruitment agency BoozeBiz, who is beginning to hear from former employees. We were also told by multiple sources that more layoffs could be on the way.

So what do the ongoing reorgs mean for lower-volume craft brands? It’s likely not going to get easier for one of the big guys to perform well selling your brand.

“I have a friend who's a rep who used to have 75 accounts, and he has 183 now,” said LuBell.

Smaller and emerging brands are already complaining that distributor consolidation is making it harder for many of them to get access to markets, and that the books of mid-sized regional distributors are overwhelmed too. 

“The supplier has to be much more strategic and smarter about how they go to market than they did 20 years ago,” said Mark Harmann, national sales director for the Independent Distributor Network.

As brands have gone to other operators like MHW, LibDib or Park Street for distribution support, they are also now supplementing with fractional sales support. LuBell said her brand cultivator program, which pairs contract salespeople with only a few brands each, has been in high demand in the past few months. Other smart moves Harmann mentioned? Founders and sales people spending more time helping accounts to get pull-through, not expecting to work a market with a distributor, and hitting those B and C markets before competing in the A markets.

Here’s a piece from this summer that unpacks the topic a little more. In the meantime, I’m off to unpack some candy. 

The Telenovela-level drama over additives goes on. In April, the ongoing conflict between Tequila Matchmaker’s Additive-Free Alliance initiative, which offered the only database of additive-free brands, and the Tequila Regulatory Council (CRT) — the group that certifies and regulates tequila—culminated in a raid of a Mexican property belonging to Tequila Matchmaker’s founders. Now, the CRT has reasserted that no tequila brands are allowed to use the terms additive-free on labels, and the brands listed under a new Tequila Matchmaker site as additive-free have been removed. 

This comes as Uncle Nearest CEO Fawn Weaver hopped on social media to highlight that the marketing myth of tequila as a cleaner, healthier spirit is undone by additives– and Americans should reconsider their native spirit, bourbon, if they were leaving it on the shelf for health reasons. Despite the inflamed tequila lovers’ comments, the actual tension in this wider conversation isn’t between tequila or bourbon– it’s about the increasing demand for transparency in spirits and who, across categories, is embracing or running from it. 

My colleagues at Brewbound reported on another round of layoffs: Glass bottle maker O-I is expected to fire around 150 employees as it closes its Streator, Illinois-based plant on Nov. 18. The company is also closing an innovation hub in Perrysburg, Ohio, Packaging Dive reported. Work from those plants will shift to other O-I plants, and additional furnace closures are expected later in 2024. 

Within beer, bottles have steadily lost share to cans in recent years, and RTDs are leading spirits industry growth– with canned formats winning over bottles.