How pay-for-performance hollowed out wine distribution
For years, the wine trade blamed direct-to-consumer sales for weakening distribution. But Alfonso Cevola argues the more serious damage came from compensation reform that rewired incentives, sidelined expertise and made much of the portfolio economically invisible.
The wine industry has spent years looking for someone to blame for sinking sales. Direct-to-consumer sales (DTC) became the preferred villain: cannibalising distribution, fragmenting the market, undermining the three-tier system. The three-tier establishment built an entire policy posture around it. Lobby groups organised. Trade associations issued white papers. The narrative was convenient, and it absolved the distribution tier of responsibility for its own dysfunction. Namely…
A few years before Covid, one of the dominant players in the U.S. wine and spirits distribution system replaced the commission model with something called PFP: pay for performance. The shift was framed as modernisation, an upgrade from the chaos of individualised selling to accountable, measurable performance management. It was the single most consequential structural change to wine distribution in a generation, and the industry spent years attributing its consequences to everything except their actual cause.
What commission built, and what PFP replaced it with
Under commission, a rep’s income was tied to the breadth of their book. Every case moved was money in their pocket, which meant every wine in the portfolio was worth their time, including the small Barolo producer without a marketing budget, the Etna Rosso that needed a story told. A commissioned rep had financial reasons to know their accounts deeply: which sommelier was quietly building a regional Italian list, which independent retailer would take a chance on an unfamiliar producer if someone spent thirty minutes on the story. Niche products had a pathway to market because the rep had skin in their success.
PFP replaced that alignment with predetermined goals tied to specific SKUs, funded by supplier contributions to bonus pools. Large suppliers bought their way into the performance metrics. Reps received meagre base salaries—in most major markets, salaries that required a second income or taking on a roommate—supplemented by management-discretionary bonuses tied to pre-selected targets. The rational response was to cherry-pick the highest-paying goals and deprioritise everything else. The shopping-list effect replaced the book. A wine without a budget behind it became invisible—not because buyers didn’t want it, but because the incentive structure made selling it economically irrational for everyone in the chain.
The manoeuvring ran deeper still. Supplier-funded bonus money, nominally meant to develop markets, flowed upward instead—to directors, vice presidents, and senior management. Executives who hadn’t walked a route in years collected supplier-funded bonuses alongside the reps nominally earning them. Suppliers desperate for shelf priority “incentivised” multiple management levels simultaneously. Small producers without the budget to participate at scale were frozen out. Their wines sat in portfolios on paper and received no meaningful selling effort—not because distributors lacked the product, but because the structure made selling it irrational.
The structural ceiling—and what happens when you remove the divisions
PFP imposes a hard ceiling on selling capacity. The bonus pool mathematics that govern what gets sold cannot be made to work across the full width of a national portfolio in a declining market. Prioritisation is inevitable—and under PFP, it is purchased by suppliers with the largest budgets, not earned by wines with mere market potential. The bigger the operation, the more pronounced the distortion. A regional distributor working 200 SKUs can chase goals and still touch most of its book. A near-national operation working with thousands of suppliers cannot. The ceiling is structural, and it does not expand with the portfolio.
Then, gradually eliminate the specialised divisions that existed to work around those limits, such as in October 2024, when it was widely reported that SGWS cut a significant portion of its workforce, with its fine wine operations absorbing a disproportionate share. The Domaine & Estates division—which CEO Wayne Chaplin had publicly called a strategic pillar as recently as 2022, still signing national clients in September 2024—was gutted in layoffs and formally folded into the Signature Division in February 2026, the same month management issued a press release about its “commitment to fine wine.” The division built to house what the PFP model couldn’t accommodate was first defunded, then defrocked, then deep-sixed.
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The workforce that left
The generational consequences also have been underdiscussed. Entry-level distribution roles in major markets pay salaries that don’t cover rent without supplemental income. Bonus structures are controlled by management discretion, not field performance. The twenty-four-year-old with genuine knowledge of wine and producers—the kind of person who built a thirty-year career in this industry a generation ago—runs the numbers and jockeys around it entirely, toward tech, pharma, real estate, anything that doesn’t ask them to subsidise a management bonus pool with poverty wages.
A February 2026 survey by Drinks United, independently conducted by IWSR across 680 UK drinks trade respondents, found nearly a quarter had considered leaving the industry due to harassment or discrimination. Among Gen Z and frontline staff, those reporting feeling unsafe at work rose to nearly two in five. WSET CEO Michelle Brampton observed that junior staff have less control over their environment, less power within hierarchies, and less confidence to raise concerns—conditions structurally identical to those PFP produced in U.S. distribution. The economics and the culture they generate are inseparable. You cannot strip people’s earning autonomy through target-chasing, cap their upside through management discretion, and express surprise when the industry cannot attract people who actually care about what they’re selling.
What walked out the door was not just headcount. It was specific, accumulated expertise—category specialists who understood regional wine, who could translate terroir to a buyer’s shelf, who had years of relationship capital with accounts that move difficult product. They were replaced, where replaced at all, by generalists chasing a target list. The institutional memory of how to develop a market, rather than merely service one, is largely gone.
Too big to function
SGWS now operates in 47 U.S. markets. At that scale, PFP’s distortions are not incidental—they are structural. The bonus pool mathematics cannot be made to work across the full breadth of a near-national portfolio. Prioritisation is inevitable, and under PFP it is purchased, not earned. Meanwhile, RNDC is contracting and Breakthru is cutting. Whatever the specific internal causes at each company, the pattern is the same: the largest distributors in the country are all shrinking simultaneously, concentrating market power into fewer hands with less capacity to serve the width of the supplier base that depends on them.
Before the next wave
In the last week of February 2026, SGWS, Breakthru, and RNDC all announced workforce reductions or structural changes within 48 hours of each other. The causes at each company may differ. What they share is timing, scale, and language: market conditions, strategic alignment, evolving dynamics. Three of the largest distributors in the country contracting in the same week is not a coincidence. It is a signal about the structural health of the tier itself.
The consolidation underway compounds rather than solves. RNDC’s contraction hands more market power to SGWS, which is itself cutting. Reyes Beverage Group—built on beer distribution economics—is absorbing RNDC’s operations in seven states. For producers outside the top-volume tier, fewer distributors means fewer options, less leverage, and less likelihood that anyone in the chain has a financial incentive to tell their story.
Which brings us back to the scapegoat. The industry blamed DTC for years—regulatory lobbying, legislative campaigns, the full apparatus of three-tier self-protection aimed at a channel that was allegedly cannibalising distribution. The 2025 Sovos ShipCompliant/WineBusiness Analytics report ended that argument: DTC shipment volume fell 10% in 2024, the steepest decline since the report’s inception in 2010, with every segment, every region, and every winery size posting losses. Both channels are contracting simultaneously. While PFP is not a DTC problem, it further indicates that the industry is fighting battles on multiple fronts — and losing ground.
And none of this accounts for the tsunami that is hitting our shores. It isn’t that alcohol is dangerous. Something more massive is coming — and it has nothing to do with distribution.
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