Sierra Nevada Files Counter Lawsuit Against Matagrano, Inc. for Breach of Contract
Sierra Nevada has filed a counter lawsuit against Matagrano, Inc., the Chico-headquartered craft brewery’s former South San Francisco-based wholesaler, in the Superior Court of the state of California, County of San Mateo.
In its complaint, Sierra Nevada alleges that “Matagrano promptly embarked upon a pattern of retaliation” after the brewery informed the wholesaler that it was terminating the companies’ distribution agreement, effective April 2. Matagrano filed a lawsuit against Sierra Nevada on April 23, 20 years to the day after Sierra Nevada signed on with Matagrano for distribution.
Sierra Nevada alleges that in the month between its giving Matagrano notice, the wholesaler began a litany of “wrongful activities,” including:
- “Disabling access to Sierra Nevada keg products within Matagrano’s order system, rendering them unavailable to retailers for purchase;
- Falsely representing to retailers that Matagrano did not have any Sierra Nevada kegs for sale when in fact Matagrano was in possession of the requested inventory;
- Moving Sierra Nevada products to unfavorable shelf positions, suppressing consumer visibility, demand and orders.”
“In short, rather than using its ‘best efforts’ to promote demand and sales during the term of the agreement, Matagrano prior to contract termination actively sought to damage Sierra Nevada sales and related goodwill throughout the territory,” Sierra Nevada wrote.
Sierra Nevada is seeking compensatory damages, punitive damages, attorneys’ fees and costs of litigation, interest on all amounts awarded and “any other appropriate relief.”
Matagrano sold Sierra Nevada products only in San Mateo County, one of three counties in its distribution area, which also includes San Francisco and Santa Clara counties. Typically, Matagrano sold between 125,000 and 130,000 case equivalents of Sierra Nevada products in San Mateo county.
In its lawsuit against the brewery, Matagrano estimated its damages from losing the ability to sell Sierra Nevada’s portfolio exceed $8 million.
Sierra Nevada moved its portfolio to Reyes Beer Division’s Golden Brands, which sells the brand in other parts of the state.
“As our business landscape becomes more complex, we continually evaluate our processes to ensure efficiency and to meet the evolving demands on our business,” a Sierra Nevada spokesperson told Brewbound in a statement in April. “We have thus made the decision to consolidate our distributor alignment in the San Francisco Bay Area by moving away from our relationship with Matagrano. We acknowledge our longstanding partnership, but this necessary decision is best for the future of our business.”
Judge Denies Motion to Dismiss Corona Hard Seltzer Trademark Lawsuit
The trademark lawsuit between Constellation Brands and Anheuser-Busch InBev’s Grupo Modelo over the former’s ability to produce and sell Corona Hard Seltzer will continue, despite Constellation’s motion to dismiss, a federal judge ruled this week.
“While there appear to be strong arguments on both sides of the case, and they have been ably and well presented by all counsel, the complaint states plausible claims for breach of contract and trademark infringement,” Judge Lewis A. Kaplan wrote in a memo on Wednesday, June 16. “The motion to dismiss is denied in all aspects.”
In a hearing on Wednesday, both companies spent an hour arguing what is and what is not a beer, which inspired Kaplan to recall a quote from Justice Felix Frankfurter that words are occasionally “empty vessels into which one can pour anything you will,” according to a Law360 report.
“You’ve both proven the accuracy of Justice Frankfurter’s famous statement,” Kaplan said. “You have both not only poured an awful lot into these words, but you’ve raised quite a head on the glass.”
Grupo Modelo, A-B’s Mexican business division, filed the lawsuit against Constellation in the U.S. District Court Southern District of New York in February, alleging that Constellation is violating the 2013 companies’ licensing agreement by using the Corona brand for a hard seltzer. Under that agreement, which followed A-B’s 2012 acquisition of Grupo Modelo, Constellation produces and imports Corona, Modelo and Pacifico to sell in the U.S. and Guam.
The licensing agreement defines beer as “beer, ale, porter, stout, malt beverages, and any other versions or combinations of the foregoing, including non-alcoholic versions of any of the foregoing.” Grupo Modelo asserts that Constellation is “misusing and misappropriating” the Corona trademark by applying it to Corona Hard Seltzer.
“We never agreed that Constellation could use our Corona name for products such as hard seltzer,” a Grupo Modelo spokesperson told Brewbound in February. “Corona has a rich history and authentic Mexican heritage, and we are filing this lawsuit to protect our rights to this iconic brand.”
Constellation launched Corona Hard Seltzer in March 2020, just two months after A-B launched Bud Light Seltzer. However, Corona Hard Seltzer isn’t the first beyond beer product to bear the Corona brand. Constellation debuted Corona Refresca, a flavored malt beverage, in spring 2019. The companies communicated throughout the 18-month development process for Corona Refresca, but did not communicate at all during Corona Hard Seltzer’s incubation period, according to Grupo Modelo’s complaint.
Grupo Modelo’s prayer for relief includes requests for court declarations that Constellation has infringed on Corona brand marks and violated Modelo’s rights, an injunction against Constellation from “producing, marketing and selling Corona Hard Seltzer,” and a jury trial.
Year-to-date through mid-May, off-premise dollar sales of Corona Hard Seltzer variety pack No. 1 increased 37.3%, to $38.8 million, compared to the same period last year, according to market research firm IRI. The company launched a second variety pack in early 2021.
Off-premise dollar sales of the Bud Light Seltzer brand family, a distant third place behind segment leaders Mark Anthony Brands’ White Claw and Boston Beer’s Truly Hard Seltzer, increased 53.1%, to $148.1 million year-to-date through May 16, compared to the same period last year, according to IRI.