After a long and expensive legal battle during the spring and early summer of 2008, we were able to move Warsteiner from RNDC in Florida, when they violated our contract, to the AB network of distributors on the west side. We were excited knowing we no longer had to deal with distribution issues or execution problems. The AB distributors were our choice, not only for their performance, but also due to their limited import portfolio. Warsteiner would be their first premium German import.
Less than a year later, we were informed by the AB group that they were trading Warsteiner (and Grolsch) for some of their InBev brands to JJ Taylor. While JJ Taylor is an outstanding distributor, this action was upsetting. We had made the decision to approve the AB group based on their performance and competitive advantages and had spent a great deal of money to make this change. We felt we were used as “trade bait.” It was clear, we had no option, despite the fact that we wanted to stay with the AB network.
Recently, it was reported that Glazer’s in Louisiana, which continues to divest their beer portfolio in markets where they do not have an MC operation, sold their brands to the AB distributor in New Orleans. Part of the portfolio includes Paulaner USA products. Since Southern Eagle (the AB distributor) currently has Spaten in house, Paulaner, for competitive reasons, has decided not to approve the sale of their brand. Paulaner and Spaten are both from the state of Bavaria and well know for the Munich Oktoberfest. They are fierce competitors.
Glazer’s has responded by filing a lawsuit asking for a permanent injunction or declaratory relief. Their claim is that the Louisiana alcohol beverage code provides that beer suppliers’ approval “shall not be withheld or unreasonably delayed to a proposed transferee who meets such nondiscriminatory, material and reasonable qualifications and standards.”
So the question is: does the vendor have a say in who they want to distribute their products, or does the distributor? Perhaps the bigger questions is: who owns the brand? If the Paulaner distributor contract has a provision which addresses the approval process, then does contractual law take precedence over state statues?
On many occasions, I have received notification from lawyers who represent a selling distributor of my brands, requesting approval to transfer to the buying company. In almost every case, closing was in a matter of weeks, giving us little time to determine which direction to go. Is it unreasonable for a selling distributor to reach out to the vendors and notify them of their intentions and ask their preference? Maybe it’s a matter of dollars? By opening early discussions, one would expect to eliminate potential legal costs.
If Paulaner’s distributor of choice in New Orleans agrees to pay Glazer’s asking price, then should Paulaner be able to move to that house? There are a number of similar situations currently happening across the US dealing with who has the ultimate say. This will continue, and in fact, probably increase, as franchise laws will be challenged. As Yogi Berra said, “When you come to a fork in the road, take it.”