USA: MillerCoors and Pabst Brewing go to court in November

MillerCoors and Pabst Brewing are set to go to court in November of this year over a $400 million lawsuit Pabst lodged against the US American unit of MolsonCoors.

In 1996 Pabst Brewing Company, once one of the largest breweries in the United States closed down its production in Milwaukee after 152 years. Since then Pabst’s legacy brands like Pabst Blue Ribbon and Old Milwaukee are brewed under contract by third parties. For decades now, MillerCoors brews and distributes all of Pabst's beers under an agreement, which is set to expire in 2020.

In September 2015 MillerCoors closed its Eden, N.C., brewery as a way to "optimize our brewery footprint and streamline operations for greater efficiency," according to Fernando Palacios, MillerCoors' chief integrated supply chain officer.

In March 2016 Pabst sued MillerCoors for $400 million claiming a contract breach as a consequence of the plant closure and disputes about the future of Pabst and MillerCoors' distribution partnership. Should MillerCoors not extend the contract past 2020, Pabst would have to find or build new brewing capacities, which is not easy considering the high volumes of the Pabst brands.

MillerCoors argued that it has sole discretion to assess whether it has sufficient capacity and has no responsibility to offer Pabst a solution to the capacity issues. Especially the brewing group has no obligation to extend its contract with Pabst past 2020.

In April, a Milwaukee court judge dismissed MillerCoors' motion for summary judgment and paved the path for a trial in November of this year. He also had concerns about the potential closing of another one of MillerCoors’ remaining seven plants. According to a report, MillerCoors is considering to close its brewery in Irwindale, California, should the negative sales trend of MillerCoors continue.

Miller Coors reported last quarter again a decline in its sales volume of 3.8 % and a drop in EBITDA of 12.2%. However the judge quoted Miller Coors’ current CEO Gavin Hattersley, who said that sales in 2018 will be flat and will increase again in 2019. "This raises a question as to whether MillerCoors will have to close the second brewery. There is currently no official decision by the board to close second brewery," the judge wrote.

Both parties will now wait for a final pre-trail hearing on Sept. 27, and the final trial on Nov. 12, pending any sort of resolution in the meantime.

Maybe Gavin Hattersley will not have to wait that long to go to court. He is also accused by craft brewer Stone Brewing for trademark infringements of its Keystone brand (inside.beer, 12.2.2018) and has responded with counterclaims (inside.beer, 12.4.2018). Meanwhile Stone Brewing is seeking an injunction against MillerCoors that would prohibit the brewer to sell Keystone Light in certain packages. (inside.beer, 1.6.2018)

 

Newsletter

Please subscribe here for your free weekly newsletter!