Columbia Distributing was formed with the merger of three Northwest beer and wine houses, one of which was Mt. Hood Beverage. Mt. Hood Beverage was formed when Dick Lytle purchased Coast Distributors in 1990, at which time I was the General Manager for Coast.
Coast, which had existed for over 100 years, was one of the largest U.S. beer distributors at that time. It was also the largest Pabst distributor, by volume, in the country. Hamm’s, sold more beer in Oregon than Budweiser or Coors during this time period, in fact, we did close to three million cases of Hamm’s in 1989. Of course, we also had PBR along with a number of G. Heileman brands across the state. Maletis Distributing in Portland, however, had Henry’s and Rainer, and Henry’s still enjoyed a market share of 12% in Portland.
In 1991, Heileman, which had already filed for bankruptcy protection, attempted to terminate Maletis. Heileman had brought in a team to do a 90-day market drive with the express purpose of discovering any out of date product. They found quite a bit of old beer. Heileman wanted to move to Coast, however, while running Coast, I cannot recall having any discussions with either Heileman or Maletis regarding the purchase of these brands.
Maletis sued, and I was retained to determine future loss of profit and, in my opinion, to determine if the termination was justified. Just prior to jury selection in New York City, both parties reached an agreement, thus foregoing trial. The brands did move to Coast. Combined, both parties spent several millions of dollars in litigation.
The industry has seen an onslaught of attempts by craft breweries to modify the current franchise laws, targeting terminations without cause. Many states have changed their franchise laws to allow crafts, which have a small share of the wholesaler’s total business, can now buy out for fair market value. The percent of the wholesalers business taking advantage of the changes in franchise laws ranges by state, but typically encompasses under 10% of the wholesaler’s volume.
It has taken the craft segment almost two decades to accomplish the current franchise law changes, and it continues today. The recent events in a couple of states emphasizes the importance of franchise laws. Recently, Pabst terminated three Washington state wholesalers and moved the Pabst brands to Columbia. The fair market value is yet to be determined!
It is not unreasonable to believe that conversations between Pabst, Columbia and the three Washington wholesalers took place last year. Since Pabst is a large part of the overall business in Washington, one might assume all three wholesalers had no interest in selling distribution rights. Pabst’s termination forces this issue through the court system.
This attempt by Pabst to terminate longtime wholesalers, along with AB’s actions in Mississippi, does nothing to help crafts’ attempts to change franchise laws. In fact, wholesalers can use these cases to strengthen their position that franchise protection is needed now more than ever. For crafts, these actions could not have come at a worst time.
There will be a lot of money spent in Washington over these terminations, and in the end, Pabst will be at Columbia, but those wholesalers will be compensated. Your life works to the degree to which you keep your agreements…
EDITORS NOTE; I am sorry to report that Fred Schumacher past away last Sunday at 78 years old. Fred, who was the man responsible for importing Hofbrau into the US, also worked for the Jos. Schlitz Brewing Co. He will be missed.
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