Mixing business with measures
Democracy, capitalism and an entire state’s history’s worth of resistance to the alcohol industry collided in 2016 at voting booths across Oklahoma.
Voters overwhelmingly approved a measure to allow stronger beer in grocery and convenience stores, and provide liquor stores the ability to refrigerate their products. It effectively eliminated a need for “3.2” beer, which was sold for decades due to restrictions on a product’s alcohol by
volume sold by certain retailers.
The measure rode a wave of support on the promise of consumer convenience, while overcoming voices of dissent warning of damage to locally owned businesses and potentially higher prices to consumers. It wasn’t the first time alcohol reform in Oklahoma had been attempted, but it was the most drastic change in more than half-acentury.
A passion for change
Stephanie Bice was elected to the state Senate in 2014 with aspirations of overhauling Oklahoma liquor laws. Bice felt the laws cumbersome to the customer experience — if she was cooking for her family or friends on a Sunday, why shouldn’t she or anyone else be able to purchase a bottle of wine at a grocery store? Why shouldn’t liquor stores be able to refrigerate their products, like many other states across the country?
But Bice would need help from colleagues like Clark Jolley, R-Edmond, and industry professionals to achieve her goals. Balancing multiple interests in an industry worth hundreds of millions of dollars annually was the only way to achieve alcohol reform, and it was going to take time.
“There’s a lot of players, a lot of stakeholders and a lot of different aspects of the industry that were impacted,” Bice said. “It was a huge undertaking to get all of those stakeholders engaged and to come to some sort of agreement in some way, shape or form.”
Bice met with many in the industry, from producers to wholesalers to retailers, seeking support from key players along the way. Her work to win over these stakeholders is evidenced by the myriad businesses and individuals with ties to the industry who can be found in Bice’s campaign contribution reports, including Oklahoma Beer Alliance President Lisette Barnes, Krebs Brewing Co. owner Zachary Prichard, the Walmart political action committee, the Oklahoma Restaurant Association Political Action Campaign, the owners of Central Liquor and more.
Most in the grocery store and convenience store business were proponents of the measure as it presented a lucrative opportunity, granting entry into the wine and strong beer market.
Liquor store owners were split on the issue, with some excited for the prospect of selling cold beer while others were wary of lost profits and increased competition for beer and wine.
Wholesalers, like Central Liquor, were also split on the legislation. Perhaps the least-publicized change made possible by State Question 792 was an adjustment to the distribution model within Oklahoma, which altered a market worth hundreds of millions annually and triggered a race to capture market share. Brokers and wholesalers were granted the opportunity to merge, and business is booming in this new middle tier.
Before the law change, a handful of brokers and wholesalers functioned separately. Brokers facilitated deals between beer, liquor and wine manufacturers from across the country and wholesalers within Oklahoma. By merging the two tiers, these new firms are free to
perform tasks of both broker and wholesaler, while fighting for a share of the newly combined market.
The size of this new merged market is staggering. Rick Naifeh, a broker under the old system and owner of Oklahoma Citybased Premium Wine and Spirits, estimates businesses in the middle tier of the alcohol industry will be fighting for a piece of a $500 million pie. He plans to expand his business by merging with Thirst Wine Merchants to form Revolution — a new wholesaler in the market.
However, not everyone has the same ability to self-expand. Limits were written into the law requiring the firms in this middle tier be partially owned by an Oklahoma business. Many already are, but the two largest — RNDC and Southern Glazer’s — are not.
RNDC and Southern Glazer’s are both national distributors. The two companies cumulatively employ tens of thousands of people and operate in dozens of states across the country. Both companies operated as brokers within Oklahoma before the law change took place, but in order to expand in the wake of State Question 792 they needed to merge with a local wholesaler. RNDC ultimately merged with Central, and Southern Glazer’s joined with Tulsabased Jarboe Sales Co.
“That made our decision to go forward with them,” former Central Liquor owner and partner Brad Naifeh told The Oklahoman in December, when the merger between Central and RNDC was announced.
Brad Naifeh died this summer and while he was
a relative of Rick Naifeh, Central Liquor and Premium Wine and Spirits are operated separately. Brad Naifeh’s wholesale business was key to Republic’s entry into the market.
“You had to be an Oklahoma person to be a liquor wholesaler,” Brad Naifeh said. “When the law changed, we could take an outside wholesaler.”
RNDC Regional President Jay Johnson said the relationship with the Naifeh family was a driving factor in the decision to merge with Central Liquor.
“We’ve had a longterm relationship with the Naifeh family,” Johnson said. “We know them, we trust them, they’re great citizens of Oklahoma. It’s a big, big plus for us to be partners with the Naifehs.”
This relationship leads others in the industry to believe the inclusion of this distribution change was included for the benefit of these larger firms.
“The way they wrote the law, in order for Republic to come into the state they had to buy a wholesaler,” Vance Gregory said. “An Oklahoma wholesaler, and it just so happens they’ve had this relationship (with Central) a long time.”
“This was definitely a plan,” Rick Naifeh said. “This didn’t just happen.”
Gregory and Rick
Naifeh both estimate Republic and Southern Glazer’s now control 80 percent of the distribution market. This would not have been possible without a merger with Central and Jarboe, which was only necessary because of the legislation change.
“People outside the industry sadly did not fully appreciate it,” Gregory said. “For better or worse, you can wave the consumer flag all you want, but nonetheless this is not being driven by consumers. This is being driven by corporate interests and that still sticks in my craw, it really does, and as a citizen I don’t like it.”
In the name of consumer convenience
Despite its reputation as a conservative, Biblebelt state — Oklahoma passed SQ 792 by an overwhelming margin, carrying 65 percent of the vote. Potential mergers and acquisitions were eventual byproducts of Oklahoma’s desire for convenient and expanded access to alcoholic beverages.
This thirst will affect the industry, the economy and the state of Oklahoma for years to come. But to what extent, and to whose benefit remains to be seen.
Some small businesses fear for their ability to remain profitable and open. Distributors believe the state will experience an influx of products for customers to select in stores, and consumer prices are debated by those across the industry.
There’s a lot of players, a lot of stakeholders and a lot of different aspects of the industry that were impacted. It was a huge undertaking to get all of those stakeholders engaged and to come to some sort of agreement in some way, shape or form.” State Sen. Stephanie Bice
Work continues at Midwest Wine & Spirits in Midwest City as the store gets ready for Monday – the first day grocery stores and liquor stores can sell full-strength, cold beer in Oklahoma.
State Sen. Stephanie Bice speaks about liquor legislation during a visit earlier this month to Stonecloud Brewing Co. in Oklahoma City.
Bradley Naifeh, a former co-owner of Central Liquor Company who died in June, is shown in this 2009 file photo in the warehouse at Central Liquor Co. in Oklahoma City.