Alcohol distribution set for another shakeup
Less than eight months after drastic changes to Oklahoma’s system of alcohol distribution, the system is about to undergo more change.
Oklahoma Gov. Kevin Stitt signed Senate Bill 608 on Monday, which requires the top 25 brands of wine and spirits be sold to all wholesalers in the state. Currently, manufacturers of wine and spirits are allowed to designate a single wholesaler to distribute their product within Oklahoma.
The bill partially walks back changes made by State Question 792, which was approved by voters in 2016 and went into effect in October. SQ 792 is most well-known for allowing the sale of wine and strong beer in grocery stores and convenience stores, as well as the sale of cold, strong beer in liquor stores.
“It’s not going to affect anything with how consumers get their wine at the grocery store and the original changes that they voted on in (SQ 792),” Stitt said. “It basically opened up more of the wholesale side of it and gives those smaller stores an option on who to use on the wholesale level to deliver their products to them.”
But the change to distribution was included in SQ 792 alongside the same changes desired by so many consumers, and came with language allowing wholesalers to gain sole distribution rights for specific brands.
“It was an unintended consequence I think that happened on that original change,” Stitt said.
Some of Oklahoma’s 11 wholesalers capitalized.
Oklahoma-based and family-owned Central Liquor Co. and Jarboe Sales Co. were two long-operating wholesalers that secured partnerships with large, out-of-state distributors.
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Republic National Distribution Co. merged with Central to form RNDC-Oklahoma, and Southern Glazer’s Wine and Spirits merged with Jarboe to form Southern Glazer’s Oklahoma.
Both are majority-owned by the Oklahoma-based companies, per the legal requirements of 792. Both also successfully garnered large portions of the alcohol distribution market, and by some estimates, control nearly 80% of the wine and spirits distribution in the state.
But one wholesaler struggled to adapt to the new landscape after SQ 792 was implemented. Tulsa-based Boardwalk Distribution did not merge with a national distributor and failed to secure the rights to distribute any of the top 100 brands. That has had a crippling effect on the company, with owner Bryan Hendershot estimating Boardwalk will lose $100 million in sales in its first year following the October changes.
Hendershot subsequently pushed SB 608, which would grant his company the ability to distribute the top 25 brands of wine and spirits without securing exclusive rights to any.
Hendershot and his wife cumulatively donated more than $104,000 since January to more than 50 members of the Oklahoma Legislature. In 2018, the pair gave $10,800 to Gov. Kevin Stitt, and $5,400 to Majority Floor Leader Sen. Kim David, R-Porter, who helped write SB 608.
Sen. Stephanie Bice, R-Oklahoma City, was a leader in the passage of SQ 792 and voted against SB 608 and argued against the bill, saying it was too soon to overhaul the system again.
“As with any significant change in law, it takes time,” Bice said recently. “There are disruptions to the system, there are tweaks that have to be made. But to upend a system that’s just been upended six months ago, I think is misguided and not well thought out.”
The bill ultimately passed both the House and Senate before Stitt signed it Monday.
When asked about Stitt’s decision to sign the bill, Bice declined to comment.
Stitt said he agreed with the Legislature’s decision on the matter.
“I know it was a controversial bill for some folks in the wholesale arena, but ultimately I thought it was the right thing to get more competition for the small business owners,” Stitt said.