Virginia may be for lovers, but it won’t be a place where drinkers can purchase Bell’s beer for much longer.
Bell’s Brewery founder Larry Bell notified the company’s seven Virginia wholesalers on Friday that the Michigan craft brewery would cease shipments to the state after filling final orders.
“We are not taking any new orders from them at this point,” Bell told Brewbound.
“Those were difficult calls to make,” he added. “It feels like the government shutdown. Here’s people that aren’t getting a paycheck because of somebody else’s dispute. But the fact of the matter is, with Virginia law, that if we stay in the market, we could be exposing ourselves to legal risk that could be financially devastating.”
Bell declined to explain further, citing ongoing legal proceedings before the Virginia Alcoholic Beverage Control Authority (ABC). However, at the center of his company’s retraction from the state is a dispute over the attempted sale of Bell’s distribution rights to a subsidiary of the Reyes Beverage Group.
In October, Reyes subsidiary Premium Distributors of Virginia reached a deal to acquire Richmond-based Loveland Distributing Company, which has sold Bell’s beer since 2015.
According to the Richmond Times-Dispatch, Bell’s had been attempting to terminate its contract with Loveland prior to the closing of that business’ sale to Reyes. Meanwhile, a complaint filed by Loveland with the ABC argues that Bell’s failed to show “good cause” for termination of its distribution agreement, as required by the Virginia Beer Franchise Act. Loveland and Premium also argued to the ABC that Bell’s offerings account for “a significant portion of Loveland’s beer sales.”
A hearing has not been scheduled yet in the dispute, but the parties have a Wednesday deadline to submit calendar requests.
Speaking to Brewbound, Bell said the state of Virginia makes up five percent of Bell’s business, or roughly 300,000 case equivalents.
“And growing,” he said. “It’s a very good state for us.”
Bell added that his company’s overall shipments grew 2.7 percent in 2018, driven by distribution expansion and organic growth in the company’s home markets. In 2017, Bell’s ranked as the seventh largest craft brewery in the U.S., producing about 463,808 barrels of beer, according to trade group the Brewers Association.
Asked how Bell’s will look to make up the lost business, Bell said, “this is most likely just lost business.” However, he said those losses would not lead to layoffs.
“Nobody from Bell’s is getting fired,” he said. “Nobody is getting let go. We’re keeping all of our people.”
Nevertheless, Bell’s Brewery’s exit from Virginia is reminiscent of its retraction from Illinois in 2006 when National Wine & Spirits Inc. attempted to sell the company’s distribution rights to Reyes subsidiary Chicago Beverage Systems. Bell’s stayed out of the state for two years before returning with new group of wholesalers.
In Virginia, Bell’s list of wholesalers includes Blue Ridge Beverage, Copa Wine Corporation, Hoffman Beverage, Hop and Wine Beverage, Loveland Distributing, M. Price Distribution and Wendell Distributing.
Speaking to Brewbound, Blue Ridge Beverage CEO Bob Archer said Bell’s was a “one of the big players” in the company’s portfolio with “a significant margin.”
“I just hate being collateral damage when it’s such a great relationship,” he said.
Blue Ridge Beverage, a MillerCoors wholesaler that sells beer in about 50 counties and more than a dozen independent cities in the middle and southwestern Virginia, bought Bell’s distribution rights in 2015 from Hop and Wine, which maintained the beer company’s distribution rights in the northern part of the state, Archer said.
“We weren’t just handed the franchise,” he added. “We’ve shown that commitment by investing in even getting the brands. It’s not just the future cash flow of his products. It’s the investment that we made up front to even get ‘em, with his approval.”
Archer told Brewbound that he’d still like to sell Bell’s beer in the state, and he believes Blue Ridge would have “a legal right to the brand” if the company returned to the territory.
“It’s not a question of arguing with his perspective with what he wants to do with his business,” he added. “We understand that. We know where he’s coming from, but it’s the solution to his problem is damaging to other distributors, to a state, and, I think, to the beer business, because that isn’t the way to resolve it, in my opinion.”