The Middle Is What Is Collapsing

On July 26, 2026, the second-largest alcohol distributor in the United States filed for Chapter 11. At its peak Republic National Distributing Company moved more than $12 billion of wine and spirits a year across 40 states. Its petition lists between $1 billion and $10 billion in liabilities and more than 100,000 creditors. Among the largest unsecured names: Pernod Ricard, Proximo, E. & J. Gallo, Luxco. The companies that made the liquid RNDC sold, waiting to be paid for it.

In April I published a long piece on the three-tier system. I wrote that it does what it was built to do: it stops a distillery from owning the saloon, the tied-house arrangement that defined American drinking before Prohibition. That is still true. No producer owns a bar in this country, and the rule that made it so has held for 90 years.

But I have said since the first part of this series that the same rule did something its authors did not intend. It stopped anyone from owning the whole chain, and then it handed the middle of the chain to whoever could buy the most of it. A system built to prevent monopolies built two of them, one tier down. Two companies now touch roughly a quarter of every bottle sold in the United States. This summer one of them went bankrupt owing its suppliers, and the other is settling a federal price discrimination case for favoring big chains over the corner store. That is not an argument anymore. It is a docket number.

And here is the part that should bother anyone who drinks the stuff. A winery in Napa has been able to ship a bottle to a customer in Ohio for 20 years. A distillery in Kentucky cannot. An importer of single casks in Virginia cannot. Same amendment, same commerce clause, same Supreme Court. Different outcome, for one reason: wine's producers took it to court and won, and spirits' wholesalers spent more than $10 million over the last decade making sure nobody did it again.

This is Part VI of a series. Parts I and II took apart the cask investment pitch. Part III called the American craft boom an oversupply waiting to happen, and Part V counted the wreckage. This one is about the layer nobody photographs: the trucks, the warehouses and the licenses between the still and your shelf, and why that layer is failing at the same time the producers are.

Purpose, Outcome, and Why Nobody Fixes It

Three things about the three-tier system are true at once, and most arguments about it go wrong by mixing them up.

You do not have to take my word on the last point. The Wine and Spirits Wholesalers of America, the trade group for the middle tier, defends the system on its own website by saying it "has ensured the collection of billions of dollars in taxes" and that wholesalers "perform state functions." When California passed a narrow direct-shipping pilot last fall, WSWA "strongly opposed" it on the grounds that it "weakens California's proven three-tier alcohol system that protects consumers, ensures efficient tax collection." Note the order. The wholesalers put tax collection in the sentence. I am just quoting them.

How the Middle Got This Big

Nobody set out to build a duopoly. Four mechanisms did it anyway, and I have watched each of them from the supplier side of the desk.

Franchise law made distributors impossible to fire

In a majority of states, once a brand appoints a distributor, the distributor acquires something close to a property right in that brand inside its territory. Ending the relationship can take years and cost more than the brand is worth. I covered the mechanics in April. The consequence is simple: a distributor that cannot be fired does not have to perform, and a distributor that does not have to perform can grow by acquisition rather than by selling. Which is exactly what the big three did.

The portfolios outgrew the sales force

A small regional distributor carries around 500 brands. The nationals carry 3,000 to 4,000; Southern Glazer's carries 7,000. No salesperson can build 7,000 brands. They cannot remember 7,000 brands. So the rep sells what the chain buyer already ordered, the big multinational lines with their own field teams and incentive money, and a 5,000-case single malt brand sits in the warehouse as a line item. The distributor is still technically representing you. It is just not doing anything.

Cash flows uphill, slowly

The retailer pays the distributor on net-30 terms. The distributor pays the supplier on net-30. Stack them and a small brand waits 60 to 90 days between a bottle leaving a shelf and the money landing. In states without statutory late-payment penalties, which includes California, a retailer that chooses not to pay faces no systemic pressure to do so. The supplier absorbs the drag. RNDC turned that lag into a business model in its final year: an investment executive whose brands were caught in the collapse accused the company of continuing to take retailer payments on his products while the invoices back to him went unpaid. Collect from the shop, stiff the maker, keep the float. That is not a rogue distributor. That is what a middle tier does when it is dying and has no other source of cash.

The small ones went first

RNDC's unraveling began in 2023, when Sazerac walked away over $38.6 million in defaulted invoices. Tito's followed in early 2025, then Jack Daniel's, then High Noon. By this summer RNDC had exited California entirely, shed roughly 4,600 jobs, and sold 11 state markets to Reyes Beverage Group. Meanwhile at the other end, Eagle Rock in Colorado shut its doors, laid off 514 people, and its book went to Southern Glazer's. Consolidation at the bottom feeds concentration at the top. Every regional that closes makes the survivors bigger and the survivors' portfolios longer, which makes the next regional harder to sustain. The loop runs one direction.

The Unbundling

When a layer of an industry fails at its job, the job does not disappear. It gets unbundled. What one company used to do badly for a fee, three narrower companies now do for smaller fees, and the brand stitches them together. That is what is happening to tier two. There are two doors out, and they are not the same door, so let me keep them separate.

Door one: direct to retailer

This is where a brand sells to the shop without a traditional distributor in between. It is still three-tier compliant, because a licensed wholesaler is still on the paper. It is just a wholesaler that has unbundled the truck and the salesman from the license.

LibDib is the clearest example. It is a licensed distributor with a web front end: the brand lists, the retailer orders, LibDib handles compliance and remits the excise, and the brand runs its own sales. We sell into New York through it, so here is the first-hand version. You post a release, set your price, and depending on the service level you have bought you can see LibDib's margin on every sale before it happens. Any retailer in their network can order directly, or ask a LibDib supplier to place the order for them. Then the bottle has to move, and that is where the economics bite. You either pack the order yourself or pay a warehouse to pick, pack and ship it. FedEx takes it to the door in New York. For any other state it goes to a local warehouse first and a last-leg carrier finishes the job, and two cases can cost $30 to $45 to deliver. That adds up fast, and for a low-priced brand it may not work at all. It is not perfect. The tech is overdue for an upgrade and too much of the process is still done by hand that could be automated. But it works for us, for now, and it does the one thing a 7,000-brand distributor never did: it lets us sell our own whisky. The tier did not vanish. It got thin, and the sales work came back to the brand, which is where it always belonged anyway.

Door two: direct to consumer

This is a different door entirely and people conflate the two constantly. Direct to consumer means a bottle ships to a drinker's front door. In spirits, it almost never means the producer ships it. It means a licensed retailer of record takes the order and ships from a place where that is legal. There are two ways to build it.

The first is a network. AccelPay, which merged with ReserveBar this year, routes each order to one of more than 3,500 licensed stores, and that store becomes the seller of record and ships the bottle from its own shelf. That is how it reaches more than 40 states. Every one of those stores buys from its own state's distributor, so a brand can only sell direct where it already has distribution: three-tier in every state the box lands in, with the brand paying the permit toll I describe below before the first bottle ships. It is also a federation of exactly the small retailers the FTC says Southern Glazer's shortchanged. Speakeasy runs the same model on a smaller footprint. The network does not skip the booth. It pays the toll in every state and calls the result direct to consumer.

The second is a hub. One licensed retailer in a jurisdiction that does not restrict export, with a fulfillment center behind it, shipping outward to wherever the box is allowed to land. There are a dozen operators in this business now. Mash Networks, Big Drink and Bevstack are three of them.

The Whiskey Lab sells direct the way every brand our size does, through a licensed DTC operator that is the retailer of record. And a lot of this business starts in Washington, D.C., for a reason that is narrower than the internet believes.

The District's regulator says in writing that it does not restrict export. A licensee may ship to another state "so long as they are authorized to sell closed containers," and should "comply with the receiving jurisdiction's laws and regulations." That one answer in an ABCA guide is the entire D.C. theory. The District will not stop the box leaving. It says nothing about whether the box may arrive.

Arrival is the destination state's call, and for spirits the answer is nearly always no. 12 states plus D.C. let an out-of-state retailer ship to their residents at all. Only Nebraska, New Hampshire, North Dakota and D.C. let that shipment contain spirits (Sovos, January 2026). A D.C. shop selling a bottle of Scotch to someone's front door has 3 states it can lawfully reach. The other 47 are wine only, or closed.

That is not what the shops advertise. D.C. retailers tell customers they ship to 40-plus states, and the operators built around the District say the same. The belief that a District license is somehow exempt has enough life in it that Sovos called it "outlandish" in a compliance note published August 28. It is not exempt. 10 state agencies have sent cease-and-desist letters to out-of-state shippers. Ohio and Michigan went to court in 2020, and Tennessee moved against six online sellers in 2023 (SevenFifty Daily). UPS carries spirits only "from licensed shippers to licensed consignees, where permitted by applicable law" (UPS).

Which brings this back to the argument this whole series is about. By statute the D.C. route reaches 3 states for spirits and remits tax in each of them. In practice the industry reaches 40-plus, and the destination states collect nothing on bottles they never see. The gap between 3 and 40 is not a loophole a few shops found. Every operator in this business lives inside it, and 10 states are writing letters about it instead of passing a permit that would let them tax it. The wall is not keeping Scotch out of those states. It is only keeping the tax out of the treasury.

What it costs to be legal everywhere

Here is the part of the system that never makes the brochure. To sell a bottle of Scotch to a licensed wholesaler in a given state, a brand needs a permit in that state. Not to sell to a consumer. To sell to a middleman. Brand label registration runs $23 to $50 per label per state. Wholesale and supplier licenses run from $25 in Wisconsin to nearly $20,000 in California, averaging around $1,400. Multiply by 50 states, add a warehouse, compliance software, a lawyer who knows which 12 states have reciprocity clauses this year, and the $600 to $4,000 a month a pay-to-play operator charges if you rent the infrastructure instead of owning it.

And every state writes its own rules for what an out-of-state seller or distributor has to be. Some will let a brand act as its own distributor with representatives and a warehouse managed from outside the state. Others will not. None of it was built to be efficient, which is why compliance companies exist to hold the registrations and file the reports on a brand's behalf rather than have every brand register in every state on its own. None of that is tax. None of it goes to a consumer protection. It is the toll for permission to reach a wholesaler who may or may not ever sell your bottle.

The Wall Is Cracking by Circuit, Not by Congress

If the middle tier is failing, the obvious question is whether the law will let brands route around it. In wine, it already has, and it did not happen through legislation. It happened in court. The spirits version is happening now, and almost nobody outside the trade press has noticed.

Read that timeline as a map. In Ohio, Michigan, Kentucky and Tennessee, and in the First Circuit's New England states, an out-of-state retailer now has a court-created right to ship that Congress never voted on and the state legislature did not grant. In the Third, Fourth, Eighth and Ninth Circuits, it does not. 12 states plus DC allow it by statute regardless. The rest is a patchwork that changes every time a panel sits, and the Supreme Court has just told the circuits to work it out themselves.

That is the wine path, exactly. And the constitutional argument that opened wine does not contain the word "wine." The 21st Amendment does not distinguish a Pinot from a Speyside. The reason spirits lag is not law. It is that nobody with a spirits case has pushed it as far as the wine retailers have, and the wholesalers have spent more than $10 million over the last decade making sure that stays true.

What Drinkers Want, and Who Is Standing in the Door

In August 2025 the American Craft Spirits Association and Sovos commissioned The Harris Poll to ask 2,004 American adults about direct shipping. Among people who drink craft spirits at least monthly, 84% want the legal ability to buy direct and 82% want the law changed to allow it. Among all adults of drinking age, not just enthusiasts, two-thirds want the law changed. And 77% of craft drinkers said they had tasted something while traveling that they wished they could have shipped home and could not.

Against that stands the wholesalers' lobby, and behind it, honestly, the retailers. The American Beverage Licensees, which represents package stores and bars, opposes direct shipping almost everywhere it is proposed. I do not think they are wrong to. A shop in Vermont that cannot ship out is competing with a shop in DC that can ship in. Any change is painful for whoever built their business on the old rule. That is not a moral failing. It is the same thing RNDC's suppliers are living through right now, from the other side.

Even the one door that opened this year was built to exclude the model I run. California's AB 1246, the pilot WSWA opposed, lets a distiller ship to California residents if it makes at least 65% of its own spirit and produces under 150,000 gallons a year. A distiller. An importer of independent single casks does not qualify. The most consumer-friendly spirits shipping law passed in a decade was written so that a company like mine, or any of the independent bottlers whose casks we import, cannot use it.

The Push for Parity

Strip the sales question out of this entirely, because it is a distraction. The argument is not that shipping direct would make anyone money. The argument is about capability, and I put it at the top of this piece because it is the whole case: the winery can ship to Ohio and the distillery cannot, and the only reason is that wine litigated and spirits' wholesalers spent $10 million making sure nobody else did.

That is changing, and it is changing on the ground rather than in Washington. More than 50 direct-shipping bills were introduced in state legislatures in the 2024 to 2025 session alone. Arkansas and Mississippi enacted new licensing schemes. California passed AB 1246, narrow and temporary and written to exclude importers, but the first crack in the largest market in the country. The American Craft Spirits Association has made parity with wine its top legislative priority, and the trade press has started calling the current rules what they are: outdated.

Parity would not hand anyone a customer. What it would hand a brand is the same thing the winery has: a second legal route to a person who already wants the bottle, that does not run through a warehouse carrying 7,000 other brands. The right to be reached. Nothing more, and in this industry, nothing less.

Do Not Build Into a Single Pipe

RNDC's suppliers did nothing wrong. Pernod Ricard did not make a bad whiskey. Gallo did not mismanage a vineyard. They sold through the second-largest distributor in America, which is the reasonable, conservative, board-approved thing to do, and the pipe closed with their money inside it. The small brands on that creditor list, the ones that are not going to make a headline, had a single distributor in a single state, and it was RNDC. They are done.

One honest number before the lesson, because this series has never skipped the inconvenient ones. Wine has had its second door for 20 years, in 48 states, and in 2025 its direct shipping channel still fell 15% by volume. Rights are not demand. A second door does not make you money. It makes you harder to kill.

Business is hard. Television makes it look glamorous. It can be brutal, and the brutality usually arrives through a door you did not think to watch. So if you are going to build something in this industry, do not build yourself into a single stovepipe that you do not own and cannot manage. When that pipe closes, and in this industry it will, so does your business, and you will not have had a vote.

Here is what that looks like for us, not as a boast, because none of it is finished. The Whiskey Lab is the importer of record for every cask on our shelf and holds its own wholesale license. We run our own warehouse rather than renting space in someone else's. We sell into New York through a thin tier two. We sell direct to the drinker through a licensed DTC operator. And more than 1,000 people subscribe to hear from us once a month, nearly every one of whom found us because someone talked to them, not because a rep put us on a shelf. We are small, agile and growing fast, because the whisky is top notch and nearly anyone can get to it. Four doors. If one closes tomorrow the other three stay open, and I built it that way on purpose after the first time a pipe closed on me.

Part VII is about the second kind. Not because they are virtuous, but because the model was built for a world without a middle, 200 bottles at a time, and that world is arriving whether anyone planned for it or not.

Jay Roberts, The Whiskey Lab · November 2026 · Jay is the founder of The Whiskey Lab, an importer and wholesaler of independently bottled Scotch. He is a former US Navy submariner and physicist.

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