In the latest example of a craft beer maker being bought out by a larger competitor, Japan’s Sapporo Holdings Ltd. has acquired San Francisco’s venerable Anchor Brewing Company. This follows a string of similar deals, including Anheuser-Busch InBev’s purchase of Wicked Weed Brewing and Heineken’s buyout of Lagunitas Brewing Co., among others.
As with most brand acquisitions, the deal between Sapporo and Anchor Brewing will lead to overlapping distribution networks. The result will probably be the termination of some distribution relationships, triggering California’s Brand Transfer Law, codified at California Business and Professions Code section 25000.2.
The Brand Transfer Law was designed to protect beer wholesalers who lose distribution rights when a beer manufacturer is acquired. Once notice is given that an existing distribution contract will be cancelled, the law requires the successor wholesaler to compensate the displaced wholesaler for the fair market value of the cancelled distribution rights. Cal. Bus. & Prof. Code §§ 25000.2(a)(9), (d). The wholesalers are required to negotiate the appropriate fair market value of the contract, which traditionally is a multiple of the trailing twelve months gross profit, with a multiplier. If the wholesalers can’t reach agreement by the statute’s mandatory deadline they must enter prompt, mandatory arbitration. Id. at §§ 25000.2(d), (f).
Attorneys at Slater Hersey LLP are well-versed in the Brand Transfer Law, having represented beer distributors in both arbitration and collateral litigation. Two examples where Slater Hersey helped distributor clients obtain excellent results are Maita Distrib. Inc. of San Mateo v. DBI Beverage Inc., 667 F. Supp. 2d 1140 (N.D. Cal. 2009), and Mussetter Distrib. Inc. v. DBI Beverage Inc., 685 F. Supp 2d 1028 (N.D. Cal. 2010).
As Slater Hersey partner Mark Slater has argued, the California Brand Transfer Law is not without its share of pitfalls, especially concerning the potential for parallel litigation. Navigating the statute’s tight deadlines and litigation risks requires astute transaction management through the negotiation and arbitration phases. Our attorneys are well equipped for these types of negotiations, and can help clients work through their Section 25000.2 challenges to ensure smooth and efficient brand transfers.