After granting five New York wholesalers a temporary restraining order (TRO) last week against Boston Beer Company (BBC) and Manhattan Beer Distributors’ attempt to terminate their rights to sell Boston Beer’s Samuel Adams, Angry Orchard and Twisted Tea brands, New York Supreme Court Justice Andrew Borrok changed course and denied their motion for an injunction against the sale of their rights to Manhattan Beer.
“The balance of the equities, given the harm to their business, necessarily favors the granting of the injunction,” Borrok said in a hearing on December 21.
However, following a hearing today, Borrok decided that “the distributor-movants have failed to demonstrate irreparable harm.”
“They merely indicate that the impact on their business would be ‘significant,’” he wrote. “To wit, the distributor-movants fail to adequately quantify the impact on their business. Therefore, the injunction must be denied.”
The TRO – which barred Manhattan Beer from selling Samuel Adams, Angry Orchard and Twisted Tea in certain counties – went into effect on December 21, the same day that Boston Beer notified retailers that the distributor would be selling all its products in the New York metro area. Lifting it today meant that some retailers in affected territories missed out on last-minute holiday sales of those brands.
“Thanks for screwing all of us for the holiday,” Stop & Shop assistant category manager Steven Letterle wrote in an email on December 22 to Boston Beer off-premise division director George Ward that was submitted to the court. “Our stores won’t be able to receive any Sam Adams this week now. Merry Christmas!”
Boston Beer notified affected wholesalers of its regional wholesale network consolidation policy in March, which detailed that its brands only had wholesaler alignment in one of New York’s 62 counties.
Two months later, legal representatives for five of the affected wholesalers pushed back against the company’s effort to terminate their relationships in pursuit of consolidation under Manhattan Beer in the majority of that wholesaler’s territory. Those wholesalers and the territory in which they sell Samuel Adams, Angry Orchard and Twisted Tea include the following, according to the complaint Boston Beer and Manhattan Beer filed in September:
- Boening Brothers Distributors, Suffolk and Nassau counties.
- Oak Beverages, Westchester and Putnam counties;
- Dana Distributors, Orange County;
- Dutchess Beer Distributors, Dutchess and Ulster counties;
- And Gasko and Meyer Inc., Sullivan County.
Boston Beer’s New York distribution network was complicated even before it acquired Dogfish Head in 2019, which led to the company’s nationwide efforts to consolidate its wholesalers. Manhattan Beer sold Samuel Adams, Angry Orchard and Twisted Tea in the five counties that make up New York City – Bronx, Manhattan, Kings, Queens and Richmond counties.
As the company launched more brands, it opted to partner with Manhattan Beer beyond the city’s five boroughs. In 2016, Boston Beer entered into a distribution agreement with Manhattan Beer to sell its then new Truly Hard Seltzer brand in New York City, plus Rockland, Nassau, Suffolk, Westchester, Putnam, Dutchess, Orange, Ulster and Sullivan counties (collectively called the “Designated Territories” in Boston Beer and Manhattan Beer’s September complaint). Last year, when the company launched Dogfish Head canned cocktails and Lemon Quest non-alcoholic beer, it selected Manhattan Beer for the same area.
In the consolidation policy sent to affected wholesalers on March 24, Boston Beer pointed to its 2019 acquisition of Dogfish Head as driving a “significant increase” in its wholesalers.
“BBC has experienced a significant increase in the number of wholesalers in its wholesaler network, as a result of it having ‘inherited’ wholesale distributors of the Dogfish brands who were not previously distributors of the Boston Beer brands,” the company wrote. “Because BBC is compelled to conduct business with these new wholesalers under franchise law, its national network has significantly swelled from an already large number of wholesalers to an unreasonably unwieldy total.”
However, none of the five defendant wholesalers sell Dogfish Head products. Union Beer Distributors and Craft New York, which carried Dogfish Head products in the New York metro area, sold their brand rights to Manhattan Beer.
In a counterclaim filed in New York Supreme Court late Friday afternoon, Gasko and Meyer’s attorney Barry Wadler pointed out that Boston Beer’s consolidation policy does not meet the requirements for “good cause” for termination under New York’s Alcoholic Beverage Control Law 55-c, which specifies that brewers’ national or regional consolidation policies must be “reasonable, nondiscriminatory and essential.”
“The consolidation policy is not ‘essential’ because BBC’s income and profitability is at an all-time high,” Wadler wrote. “Sales of BBC’s brands are continually increasing and are among the highest in the nation for beer and hard seltzer brands. The consolidation policy is not ‘essential’ to preserve or protect BBC’s profitability. Rather, the consolidation policy is designed solely to increase BBC’s already enormously profitable business.”
Wadler called the consolidation policy “discriminatory” because “it is apparent that Manhattan Beer was the preferred wholesaler before the policy was drafted,” he wrote.
“Specifically, BBC is implementing a national consolidation policy [in] which BBC is transferring the Dogfish Head distribution rights from the inherited Dogfish Head wholesalers to BBC’s legacy wholesalers,” he continued. “However, in the New York metropolitan area, BBC is terminating its legacy wholesalers who have no relation to the Dogfish Head brand by transferring such wholesalers’ BBC distribution rights to one of the nation’s largest beverage distributors, Manhattan Beer.”
In May, Oak, Boening, Dutchess and Dana’s attorney Marc Sabow sent a letter to Boston Beer calling the consolidation policy “improper for numerous reasons, including that it is not reasonable, essential, nondiscriminatory or contemporaneous, and as a result fails to constitute ‘good cause’ for termination.”
Sabow noted that his clients had valuation firm Ippolito Christon and Co. price out their Boston Beer brand rights and determined that the fair market value of the brands the distributors stand to lose are more than $56 million in total: $28,949,000 for Boening, $9,746,000 for Oak, $6,652,000 for Dana, and $10,888,000 for Dutchess.
In his December 24 counterclaim, Wadler estimated that the fair market value of Gasko’s Boston Beer rights is “not less than $1,360,000.” Boston Beer products make up 38% of Gasko’s sales in Sullivan County.
Last week, Boston Beer wired compensation to all five distributors in smaller amounts according to documents filed with the court: $19,515,000 to Boening, $6,550,000 to Oak, $4,995,000 to Dana, $7,566,000 to Dutchess and $842,000 to Gasko.