Monday, May 4, 2009

Surprise! MillerCoors Distribution Agreement Does Not Benefit MillerCoors Distributors

You should read the entire article (warning: PDF) in Modern Brewery Age. Sorry for the late news (this article was published in October), but this is the first time I've run across it and I think it's interesting for both industry folks who aren't aware of this and general consumers caught up in the BeerWars thing to see in what ways the industry has moved on from what was in that movie.

Basically, the article dissects the new distribution agreement that MillerCoors has sent out to its distributors. Quite frankly it's a pretty stunning show of power by MillerCoors that puts its distributors over a barrel and asks them to be happy about it. What would be truly awesome is if no distributor actually signed this thing and just told MillerCoors to bugger off.

The gist of the agreement can be summarized in three parts. First, no, MillerCoors will not negotiate with you - you either sign it or you don't, with the implication that if you don't sign it, someone will and they are perfectly happy dealing with only that distributor (aka "consolidation").

Second, you hand over all control for the sale of your distribution rights. Basically, the agreement states that if you even attempt to sell your distribution rights to any MillerCoors brand that you must appoint MillerCoors as your agent and they will negotiate the sale for you for any brands (not just MillerCoors brands) that are part of the sale. Oh, and if you don't like the deal they make, you can still sell to a third party subject to MillerCoors approval and their right of first refusal. Why would anyone agree to this??

Third, if you don't like it? Tough. You have to go to arbitration to settle any contract disputes. While that may sound innocuous, as the article points out: "... arbitrators are free to fashion remedies they deem equitable and are not bound by legal precedent. Moreover, arbitration rulings are almost impossible to overturn even if the arbitrator fails to follow the law."

Oh there's other fun stuff in there, too, like the ability to set up a second distributor in your "exclusive" territory, go through your books with a fine-tooth comb, the ability to terminate you if you acquire other brands that might shift attention away from MillerCoors (what!?!), and more.

So, yeah, um, MillerCoors distributors ... good luck with that.

Combine this with AB-InBev's notice to its suppliers and vendors that it will now only pay bills at Net120 terms and it's any wonder that distributors deal with these people at all. If you thought the three-tier system and distributors were out to conspire against craft you've got it all wrong, it's turning out that even the distributors are up against the wall in light of the global consolidation.

The good news is that craft brands are proving more and more valuable. The bad news is, if you agree to this agreement and want to distribute anything other Leinie's, you may be facing the recall of your MillerCoors distribution rights.

1 comment:

  1. One more reason to do away with the required three-tier distribution system...it doesn't seem to be helping anyone and the big players can strong-arm the distributors and force themselves onto retailers shelves.

    Allow importers/producers to opt out of the system and deal directly with retailers and/or consumers and the bad-deal making will be greatly reduced. Let AB-InBev-SAB-Miller-Coors deal directly with the big retailers, but let the small guys do it too (with the smaller retailers who care). It wouldn't eliminate the need for distributors, but it would give breweries, wineries, distilleries the OPTION to make their own way if they so choose.

    I've been pitched deals by distributors that would have given me a free case for each I purchased, but I had to buy a minimum of one particular product (of course it's the shittiest) or bring in product at certain ratios or any free goods are the poorest seller. I understand the reasoning, but if something sucks...why would you force it on me?

    Sorry for the ramble, just feeling a bit abused.

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