Columbia Distributing, one of the National Beer Wholesalers Association’s (NBWA) largest members, has resigned from the trade group “effective immediately.” The news was first reported by Beer Marketer’s Insights.
The decision follows the NBWA filing a 49-page amicus brief Monday with the U.S. Court of Appeals for the Ninth Circuit, supporting Olympic Eagle Distributing in its legal case against Constellation Brands. Constellation is attempting to terminate its 20-year relationship with Olympic in Washington and move distribution of its products in Pierce and King counties to Columbia. The amicus brief is in response to Constellation’s appeal of a temporary injunction issued in Olympic’s favor late last year.
“This case directly implicates the substantial interests of NBWA members and raises significant national policy concerns,” the NBWA wrote in its brief. “For the reasons set forth below, NBWA supports Appellee [Olympic Eagle] and urges the Court to affirm the decision of the District Court.”
For its part, Columbia believes the NBWA’s brief “doesn’t support growth and success,” but rather encourages “behaviors consistent with entitlement and protectionism,” Columbia CEO Chris Steffanci wrote in the company’s resignation letter, shared with Brewbound.
“We also don’t support holding brands and suppliers hostage, nor a trade association that picks one member over another,” Steffanci wrote. “Unfortunately, it is apparent that these behaviors are evident within the National Beer Wholesalers Association.”
NBWA president and CEO Craig Purser responded to Steffanci in an email today, which was later shared with Brewbound. In the email, Purser wrote that the decision to file the amicus brief “was not made by any one person, or solely by NBWA staff, but by the association’s management committee.” That committee passed a resolution on March 4 stating the NBWA would “research, draft and submit” an amicus brief that would “emphasize issues including the history of and policy rationale for franchise laws and their interpretation, and the importance of injunctive relief.”
“This resolution was passed by the management committee after a thoughtful and thorough discussion where a Columbia representative (an NBWA board member) was present and was able to share your position,” Purser wrote. “Columbia’s representative was able to fully listen to and participate in the process prior to the committee directing staff to act. The management committee squarely viewed the brief as consistent with the association’s purpose statement and did not see this as choosing one member over another.
“It is worth noting that while Columbia was in the room for this discussion, Olympic Eagle was not,” Purser continued. “NBWA continues to respect Columbia and we pledge to work together on matters of mutual concern.”
A judge granted Olympic Eagle a preliminary injunction against Constellation in the U.S. District Court for the Western District of Washington in December. U.S. District Judge David G. Estudillo said Constellation – which sells Mexican imports Modelo, Corona and Pacifico – provided Olympic with “no information” in its termination letter, including cause or whether “Olympic fails to meet its obligations.”
“The Washington Legislature clearly finds a public interest in the relationship between beer distributors and suppliers,” Estudillo wrote. “It also recognized the importance of distributors’ ability to continue their distribution rights that they codified ‘protections which are deemed to be incorporated into every agreement of distributorship.’ Thus, the court finds a public interest in maintaining that status quo in the continued enforcement of the distribution agreement.”
Constellation is Olympic’s second largest supplier behind Anheuser-Busch InBev. The distributor could stand to lose about $5.5 million annually if it loses Constellation’s portfolio, making it unprofitable, according to court filings.
Constellation has reportedly offered Olympic Eagle about $70 million – about seven times its one year’s trailing earnings from Constellation’s offerings – as part of its termination deal, according to the ruling.
Washington’s franchise law, the Washington Franchise Investment Protection Act, prohibits the termination of a “franchise prior to the expiration of its term, except for good cause,” according to Estudillo’s ruling.
“Beer franchise laws play a key role in these state regulatory systems because they safeguard the independence of beer distributors, inhibiting the vertical integration of the industry and enabling them to serve as a buffer between suppliers and retailers,” the NBWA wrote in its amicus brief. “This independence not only serves the goals of effective alcohol
regulation and the protection of public health and safety, but also promotes competition with unprecedented choice and variety for consumers.
“If a supplier could unilaterally terminate distribution agreements without cause, that power would prove to be a Damocles’ sword hanging over each Washington distributor enabling the supplier to do indirectly what they are prohibited from doing directly,” the trade group continued.