Republic National Distributing Company (RNDC), the second-largest alcohol distributor in the United States, has announced it will cease all operations in California effective September 2, citing unsustainable business conditions.

The Texas-based distributor’s decision has triggered a scramble among more than 2,500 beverage brands seeking new wholesale partners in the nation’s largest wine market.

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Republic National Distributing has said that it will no longer do business in California after September 2.

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In a public statement, RNDC President and CEO Bob Hendrickson said the decision to leave California was “driven by rising operational costs, industry headwinds, and supplier changes that made the market unsustainable.”

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The company plans to shift its focus to other markets, including Texas and Kentucky, where it sees stronger growth potential.

“This moment gives us an opportunity to sharpen our focus and reinvest in the markets where we’re best positioned to grow,” Hendrickson added.

California’s business environment has long faced criticism from companies for its high taxes and regulatory burdens.

The state’s income tax ranks among the highest in the country, with added costs from property taxes, sales taxes, energy prices, and labor laws.

California’s minimum wage currently sits at $16.50 an hour, one of the highest rates in the nation.

The state also requires extensive permitting and licensing procedures that can delay or complicate business operations.

Republic National’s departure comes just over a year after it expanded its presence in the state through the acquisition of Young’s Market Co. in 2022.

Despite strong sales—industry analyst Impact Databank estimated RNDC generated $2.8 billion in California revenue in 2022—the company has seen key suppliers and clients defect to competitors in recent months.

Republic National lost distribution rights for several major brands in California, including Tito’s Handmade Vodka, Jack Daniel’s, and High Noon.

Many of these brands have reportedly shifted to competitors such as Reyes Beverage Group.

While RNDC has not publicly confirmed the reasons behind the split, the loss of these contracts is believed to have played a significant role in the company’s decision to exit the state.

Some employees and industry observers have attributed the company’s withdrawal to internal mismanagement.

Speaking anonymously to trade publication VinePair, one California-based employee claimed, “They started focusing on numbers instead of customer satisfaction and that’s what drove them to their fall.”

A former employee alleged that RNDC’s Texas-based executives “were in over their heads” in California and failed to engage directly with customers or learn the regional market.

The exit has left many California wineries and beverage producers in a difficult position. John Buehler, owner of Buehler Vineyards in Napa Valley, said the company’s sudden withdrawal has created uncertainty across the industry.

“Wholesale purchases drive 80 percent of the business,” Buehler said in an interview with the San Francisco Chronicle.

“It was really such short notice. It left everybody in the lurch.”

Although RNDC continues to distribute Buehler’s wines in other states, he said he will now need to secure a new distributor in California.

Republic National’s strategic shift toward Texas began earlier this year. In May, the company announced a reinvestment plan in its Texas operations, which it said would create approximately 100 new jobs.

“We’ve taken a close look at where we are—and more importantly, where we need to be,” said RNDC Chief Sales and Execution Officer Taylor Sommer.

“After listening to our associates, customers and supplier partners, one thing is clear: we need to strengthen our presence and performance in the market. Texas is a critical part of our foundation, and we’re proud to reinvest here.”

As RNDC prepares to shut down California operations, thousands of brands are now in the process of securing new distribution arrangements.

The company’s departure also signals broader challenges facing the beverage alcohol industry amid rising costs and evolving consumer habits across the country.