Craft Brewer Tests AZ Franchise Law
Sues to Switch from W&S House to Hensley

FILED JUNE 19, 2012

Dear Client:

Arizona craft brewer Four Peaks Brewing is suing its statewide Arizona distributor, Alliance Beverage Distributing Co., a big statewide wine and spirits house (but also carries some crafts/imports, biggest being Boston Beer Co., but also includes Lagunitas, Ommegang and others). Four Peaks seeks a declaratory judgment allowing it to stop shipping to Alliance so it can sign a distributor agreement with big A-B house Hensley, with whom it has been in talks.

The case hinges in large part on whether Four Peaks and Alliance have a "commercial relationship" under Arizona franchise law. Four Peaks has and Alliance have never signed a distributor agreement. However, under AZ law, a beer "franchise" is established when you meet all of the following: a) a "commercial relationship of definite duration or continuing indefinite duration"; b) a "grant to the wholesaler of the right to offer, sell, and distribute" beer within a "designated territory"; c) "an agreement relating to the transferability of the commercial relationship." [Ed. Note: Not sure if that "agreement" in part C must be in writing or could it be an oral agreement?]

Four Peaks says "there is no commercial relationship" and "not agreement". But even so, Four Peaks says that even if there were a "commercial relationship" as seen by Arizona law, it has the right to terminate Alliance for "good cause." Four Peaks puts forth a laundry list of issues ranging from lack of weekend merchandising and requiring minimum orders to selling old beer.

Four Peaks also alleges that it has offered Alliance fair market value for their brands. "By offering to pay Alliance the fair market value of the distribution rights for Four Peaks' products that are claimed by Alliance, Four Peaks has demonstrated good faith and has established good cause for termination of the relationship between it and Alliance."

Interestingly, Four Peaks has already "negotiated a franchise agreement with Hensley & Company" which is "conditional and prospective and does not become effective unless and until the dispute between Four Peaks and Alliance, as detailed herein, is resolved either through judgment in favor of Four Peaks or settlement."

Bottom line: Four Peaks wants the court to declare that it doesn't have a commercial relationship with Alliance as a "franchise," and if it does, for the court to declare that Four Peaks has demonstrated good faith in offering fair market value for the brands for termination; plus attorney's fees.


TRUTH SQUADERS SPEAK ON VOLUMES, PRICING, INVENTORY, STOCK OUTS, THREE-TIER, AND MORE

Our readers have lots of diverse and strong opinions on our mid-year Truth Squad Survey. First, let's start with the overview, and then we'll get to some direct quotes.

As far as trends for the second half of 2012, 73% of respondents believe that we'll have at least somewhat or much better volume trends. Most believe they will be somewhat better (58%). As for pricing, 44% of respondents believe we'll have the same discounting as last year, while 42% believe we'll have more discounting than last year. That's a pretty high number. Only 8% believe we'll have less discounting.

As far the issues go, out of the twelve issues we listed, the most concerning to our readers is "Costco, Walmart, or others dismantling the three-tier system" with 69% believing it "very concerning." Ironically, "retailer consolidation" also got the highest vote for "not concerning at all".

Others areas that are very concerning are wine and liquor taking share at 60%, fuel pricing at 57%, and unemployment at 52%.


Relative Importance to Readers






SAM ADAMS JOINS WITH CRAFT DISTILLER

Boston Beer Company is partnering with Massachusetts craft distiller Berkshire Mountain Distillers to produce two whiskeys, reports the Boston Globe. They will be made with Sam Adams Boston Lager and a limited-edition offering called Cinder Bock. It will take about 2 years for the whiskeys to come to market as they are currently being aged in wooden barrels. The first rollout of 1,000 cases will sell as Berkshire Mountain products with Sam Adams named on the label. They are expected to sell for over $40 a bottle, and Berkshire will keep any profits.

BREWPIC: In congratulations for getting inducted into the NASCAR Hall of Fame, MillerCoors sent 40 cases of Miller Lite to former Blue Deuce driver Rusty Wallace.


CLARIFICATION: When I compared A-B's sub-premium MIRs to MillerCoors' premium IRCs, several readers noted that A-B also has IRCs out there as well. Bottom line, there's lots of both MIRs and IRCs to go around in Florida.

Until tomorrow, Harry

"Mot men pursue pleasure with such breathless haste that they hurry past it." - Soren Kierkegaard.

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