A Major Wine Company Is Leaving the State, as Gen-Z’s Drinking Habits Shift

A major wine distributor plans to leave California and lay off nearly 2,000 employees this fall, citing changes in the industry that have made the home state of the U.S.’s wine country an “unsustainable” market amid a national downturn.

Republic National Distributing Company, one of the biggest alcohol wholesalers in the U.S., announced it would leave the state — and its few thousand California-based brands — last month after experiencing rising costs, supplier changes and “industry headwinds,” CEO Bob Hendrickson said in a statement.

RNDC is just one company facing financial strains, as experts warn the wine industry must adapt to consumer preferences. The announcement comes after years of declining wine sales nationally, including in California.

The brand will officially depart Sept. 2, and is set to lay off 1,756 employees based in the state the same day, according to Worker Adjustment and Retraining notices filed last week.

“Moving forward, we are using this moment to sharpen our focus and reinvest in the markets where we’re best positioned to grow,” Hendrickson’s statement reads.

California sellers shipped 9% fewer cases of wine in the U.S. and abroad in 2022 than in 2021, and another 7% fewer in 2023 than in 2022, according to Wine Institute data.

In 2024, Napa and Sonoma counties — widely considered some of the top wine destinations in the U.S. — saw some of the largest decreases in direct-to-consumer sales throughout the U.S., dropping 12% and 13%, respectively, according to data from Wine Business Analytics.

Rob McMillan, a wine business analyst and the founder of Silicon Valley Bank’s wine division, said the reason for the decrease is two-pronged: younger people are drinking less, and people are reaching for more of a variety when they do drink.

“It’s changed a lot,” he said, of the number of young people choosing to drink.

U.S. government data showed that the amount of alcohol that 20 to 29-year-olds drank was higher than that of older generations. Now, that amount is pretty much the same as older age groups, according to McMillan. He said a higher number of young people are also choosing to abstain from drinking altogether.

The Baby Boomer generation, which has been one of the biggest wine-drinking groups, is also getting older and drinking less, he said. When they do drink, it’s generally at a higher price point than the majority of the bottles that go through large distributors, including Republic.

It’s not that people — or young people — who Republic’s brands appeal to aren’t drinking at all, though.

In recent years, seltzers, ciders and other canned “ready-to-drink” alcoholic beverages have gained popularity with drinkers of all ages.

“There’s more options,” McMillan, who has studied the wine industry for forty years, said. “I’ll have a [ready-to-drink] once in a while. I’m not just a wine drinker, and that’s a change from the past.

He said that a young person looking to purchase a drink they know they will like, without breaking the bank, might opt for a canned Moscow Mule or another classic cocktail with a familiar taste, rather than a bottle of wine whose notes may be new.

“That’s where you’re going to make that entry,” into alcohol, he said. “We [the wine industry] just haven’t done, I don’t think, as good a job as the spirits category.”

While spirit sales are up compared to wine, the whole category of alcohol sales is down. Aside from people choosing to be sober in higher numbers, McMillan said, alcohol is also now rivaled by drinks infused with other psychoactive properties, like cannabis and psilocybin mushrooms.

In the near future, he said, the wine industry needs to recalibrate with what consumers now want.

“What happened to RNDC isn’t an isolated thing,” according to McMillan. “Fewer consumers, fewer distributors, fewer gallons made — the whole thing has to adjust essentially. It doesn’t mean the whole thing is falling apart, but we’re going through an adjustment.”