They say two heads are better than one. Well, how about eight? That’s the number of family owners who currently sit on the Board of Directors of the recently created Republic National Distributing Co. (RNDC). Included in these eight are some legendary names in the industry: Goldring, Carlos, Davis, Block, Dreeben and Rosenberg. Each of them for sure has their own colorful past in the wine and spirits business—some stretching back to even before Prohibition. But today, they have all come together to guide their new venture. And while things have been going relatively smoothly since the May 2007 merger of National Distributing Co. (NDC) and Republic Beverage Co. (RBC), it also has been a monumental task with its share of challenges. In recognition of this, and the exceptional way RNDC has gone about surmounting those challenges, Beverage World has named the company our first  Wine & Spirits Wholesaler of the Year.

Photography by Jesse Hornbuckle

Both NDC and RBC made a decision that they wanted to continue to grow in the business and not only be a survivor, but thrive during this very fluid situation.”

They felt that a “bigger footprint across the United States,” would help them do just that, says Cole. In that regard, the two legacy companies were almost a perfect fit. Their territories fit together almost like a jigsaw puzzle with virtually no overlap and their two cultures were not radically different—by all accounts the family owners had a true meeting of the minds from the very start when it came to things like their ultimate goals and how to run the business.

“They were very similar in terms of culture and values,” says Greg Johnson, RNDC’s chief administrative officer. “And the involvement of those owners—the Goldring family, and the Block Dreeben family for RBC and the Carlos and Davis families for NDC—had led to very similar values and business orientations.”

This good fit was apparent on the supplier side. “We had a lot of suppliers in common,” continues Johnson, “and our owners had been friends for years and had been talking about the future together. So I think from a supplier perspective, we had a great deal in common.”

In fact, most of the challenges since the merger have lied more with tying together the back-office functions, such as information technology, operations and personnel. This is where sleeves had to be rolled up, new systems or processes built, or old ones expanded to additional employees. The family owners decided to leave most of that sleeve-rolling to others in the company, however, entrusting the nuts and bolts work of the merger to an operating committee of outside executives like Cole drawn from the ranks of the two legacy companies.

A Sustainable Model
Cole and other executives who work at RNDC are in strong agreement that the blend of a family-owned company managed by outside executives is one of the strongest things RNDC brings to the table. “It is one of the points of differentiation between Republic National and the other five major national wholesalers in the wine and spirits business,” Cole says. “If you take a look at our competitors, every single one of them is structured exactly as they were 20, 30, 40 years ago where they have a son or a grandson of the founder who is centrally controlling the day-to-day business. We’re very much a different model.”

Cole says the owners created a structure that looks much more like a public corporation. “They had the vision to be actively involved owners overseeing the business, but the structure below them is outside professional management. We are outside, non-family members that report directly to the board,” he explains.

As the company grew to encompass operations in 21 states after the merger, the decision also was made to maintain as much local autonomy as possible across the disparate houses that comprise RNDC. Having your ear to the ground, so to speak, has its advantages, as Bob Hendrickson, RNDC’s president-western region, explains: “Our job as wholesalers really is to be the local market experts. Our suppliers depend on us to not only distribute and execute their brands in the marketplace, but also to be able to communicate back to them what trends are working in the marketplace, what things are working with different segments of the industry and the consumers.”

As a result, below the operating committee, the company is divided into a western region, which Hendrickson heads up, as well as an eastern region, and then individual state presidents below that. “So it’s very much a decentralized, empowered, agile, responsive, aggressive sales organization,” says Cole, “as opposed to one that is very bureaucratic and encumbered with centralization.”

Continues Cole, “The reality is the president who sits in the office knows all the buyers and the legislators and the retailers and what’s going on in the local community, and he is best equipped to make decisions for the realities of the marketplace as opposed to a regional president above him who lives in Dallas, as opposed to me living in New Orleans. If you give the presidents the authority that goes along with the responsibility and help them, we believe it’s a much more effective model for a higher degree and probability of success in pricing, discounting, advertising—in all aspects of the business.”

Charlie Andrews, president-eastern region & control states, thinks the governance model also allows the company to benefit from the tremendous experience of the family owners. “These are multi-generational managers who have inherited their business from their fathers and grandfathers,” he says. “So we are in second-, third-generation owners whose entire careers have evolved around the distribution of wine and spirits. So they are very much involved, they’re very influential leaders within the community in which we work, and very passionate about it.

“But,” he continues, “they’ve also decided that they wanted to set a sustainable model for generations to come. And so, the governance model from which we operate is somewhat different than most other of the family-owned competitors that we deal with.”

Adds Cole, “It’s a very bold and difficult move for owners to give up the hands-on responsibility on a day-to-day business. And our competitors haven’t seen that, but our owners felt that that was the structure that would give them the greatest likelihood of success.”

The Nuts and Bolts
While one could hardly have hoped for a better fit for two merging companies in many respects, it was in the back office functionality—IT, operations, human resources—where much of the work to unify the two organizations had to be done. Much of the unification of these functions fell to Johnson, CAO, who, after working for 11 years at PepsiCo, including as president of KFC Spain, was a strong believer in the team approach when it came to tackling such big projects. In his wide-ranging position as CAO, he is responsible for HR, operations and IT. In February of 2007, he formed the SALT committee (Senior Administrative Leadership Team), whose mission was to meet monthly to develop new policies, products and services drawn from both legacy companies. SALT is comprised of senior managers from Operations, HR, IT and Finance from the legacy companies, along with members of the RNDC Board of Directors and the Operating Committee.

In some areas, SALT had to tackle wide disparities in the capabilities of both legacy companies. For instance, NDC had gained a head-start in having a centralized IT process and standardized human resource policies, procedures and structures. “NDC had actually developed in many ways as a multi-state unit far faster than RBC,” Johnson explains. “RBC was still in the process of acquiring other states and integrating between Louisiana, Texas and Arizona, their core states, at the time of our merger. That process wasn’t complete.”

He continues, “So while we both believed in a philosophy of driving productivity through centralized processes, such as IT, human resources, policies and procedures, NDC was just a little further ahead in that process so a lot of the differences were simply in the need to come up with new IT systems, policies and procedures and benefit structures.”

The result of the efforts so far has included the rollout of a common benefits package company-wide; a grade level compensation management system has been launched for all employees (up from just 25 percent previously) and a comprehensive talent management system was rolled out company wide, which includes a performance appraisal system. This past April it resulted in the participation of 4,000 RNDC employees in online performance reviews.

Both legacy companies also are being converted to a system called “Alpha,” an open IT platform that NDC had been building onto for years. Johnson says it was chosen over a newer system RBC had been in the process of converting to. “There’s a great deal of IT productivity that comes from getting them on a single platform,” says Johnson. “And Alpha is such a good open platform that it allows us to use some really world-class systems to provide other functions.

“It was important that when we standardized,” he adds, “we always focused on the highest common denominator, not the lowest, meaning that if a group of legacy employees had been receiving a superior benefit we wanted to give that to all of our employees.”

For sales, RNDC uses a data retrieval system called Micro Strategy from the vendor of the same name, again for its flexibility and impressive functionality. And over the next two years RNDC will be rolling out a standardized warehouse management system to all of its 34 warehouses.

Customer Focus
Now, about a year and a half since the merger was announced, most of those involved are pleasantly surprised at just how smoothly it has gone. “This was a fascinating thing,” says Johnson. “You took two major wholesalers, both approaching US$2 billion in sales, with decades of culture behind them, and yet they so smoothly merged into this new company where there are eight different family members on the board and yet the board meetings are phenomenal in terms of everyone’s ability to get along.”

This positive tone seems to have filtered all the way down to RNDC’s customers. For example, Tammy LaNasa, beverage director for the San Antonio, Texas, USA-based Del Frisco’s – Sullivan’s, a chain of 24 steakhouses across the US, says the transition to the combined RNDC appeared to be “seamless,” and calls her overall experience working with the company “wonderful. They are my vendor of choice,” she says.

Since the merger, she has noticed she is now able to get virtually any wine or spirit from the one company. (She previously had to work with both legacy companies.) Customer service also is exceptional, she says. “I get a 24-hour promised turnaround on any issue, which I can’t get from anyone else,” she says.

She also is impressed by RNDC’s constant attempts to improve their service. “Because they’re one of the top players in the industry, they could have an attitude of, ‘you have to buy from us, we are who we are.’ But I don’t see that,” she says. “I see them focused on customer service and always trying to improve their business with us and earn their business with us. They take a proactive approach to taking care of business, instead of being reactive.”

LaNasa also says she appreciates how RNDC has simplified communication with her company. “I have one contact with Republic National who handles whatever I need,” she says.

Other benefits of the relationship she notes are top-notch training of her units on wine and spirits, and the providing of industry data from IRI, Distilled Spirits Council of the United States (DISCUS) and other information that is useful to her stores.

Leigh Merritt, director of beverage, for the Tampa, Fla.-based fish restaurant chain Bonefish Grill, agrees that RNDC excels when it comes to customer service. “The national accounts people that I work with and their bosses seem to be very, very focused on making sure that every detail is taken care of,” she says. “For us, they actually go a little bit above and beyond what we would ask of anybody.” For example, she says the wine training program RNDC has helped Bonefish pioneer doesn’t just focus on the wines RNDC supplies, but on all wines, with the idea being the more educated the staff at the restaurants are about wine, the more satisfied customers will be in the long run and the more business Bonefish will do overall.

RNDC also literally goes the extra mile when it comes to its Concierge Service, a top tier of service that legacy RBC began for its key accounts. The service includes a dedicated customer service phone number just for these accounts and a later cutoff for placing delivery orders for the next day. Explains Hendrickson: “When they call in they will not receive a voice mail, they will not be put on hold, they will get a human who has been empowered to take care of their problem.” The service also offers them the opportunity to turn in orders as late as 6 p.m. to be received the next day, and, for their ever-important weekend business, guarantees them same-day deliveries on Fridays on orders up to 4 p.m. Also, Concierge-level customers gain access to some of RNDC’s more highly sought-after vintage wines.

The Future
Having established itself as a one of the top players in wine and spirits distribution through the merger, RNDC is doing anything but resting on its laurels. In fact, the company has already begun looking ahead to additional acquisitions or mergers with the goal of becoming a national player. “We will continue to look at all deals as they present themselves, and in some deals that don’t present themselves, we may be aggressive and go after them,” says Paul Fine, RNDC’s chief financial officer.

Fine lists several criteria that serves as a litmus test for any potential future deal: 1) A suitable geographic
territory; 2) What is the motivation of the owners? 3) Are the owners people RNDC believes it can work with, or are they too inflexible? 4) Is the valuation appropriate? 5) Is there supplier alignment? And, 6) What is the company’s market position in their state?

“We’ve had deals which we’ve walked away from since the merger,” says Fine. “If it doesn’t make good financial sense, and isn’t within our financial disciplines, we’re not going to do the deal.”

Since the merger, RNDC has engaged in other deals, including a 50/50 joint venture with The Capital Group in South Carolina (based in Columbia, S.C., USA, the new company is called RNDC-South Carolina); RNDC-Nebraska was recently formed with the addition of Nebraska Wine & Spirits and RBC-Nebraska (formerly known as United Distillers Products) to the RNDC family, and the acquisition of the N. Goldring Corp. in the Florida panhandle (it became part of RNDC’s Pensacola operation as of April 1, 2008).

All of this change, says Fine (who in a previous job was vice president of finance and treasurer of Tulane University), makes RNDC a “dynamic place to work. Every deal creates change,” he says. “And then there’s constant change from the supplier side. Consolidation has direct implications for us. It’s a constant process of brands moving in and out.”

Cole says that eventually the company also will begin to look seriously at expansion outside of the US. “If there is a model that we can do some due diligence on and make sure that it makes sense for us, then we’d be willing to look at that avenue,” he says. “Everything that we’re doing is about getting better. Making the company a better, more compelling model for our customers and suppliers .”

From Beverage World October 15, 2008