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Thursday, February 26, 2015

The Impending Train Wreck Over 10 Barrel

As train wrecks go, some are more entertaining than others. That's especially true when there's a trainload of bullies on one side of the track and some more or less regular folks on the other. When you see the bully train jump the track and crash, it's a good feeling. Admit it.

Well, there's a nice little train wreck brewing right here in Portland. It involves our old friends, Anheuser-Busch, along with Maletis Distributing and 10 Barrel Brewing. Not a love triangle, exactly. The dispute is over who will distribute 10 Barrel in the Portland area.

You may recall that 10 Barrel was purchased by AB last year. The intended outcome of that purchase was that 10 Barrel brands would be distributed by AB-owned Western Distributing in this area. The problem is, Maletis owns the franchise rights to 10 Barrel here.

Keep in mind that Maletis is what's known as an independent AB distributor. That means they distribute the normal line of AB products within their territory. They own franchise rights within that area, just like they own the rights to 10 Barrel there, purchased long ago.

Another thing you need to know is that franchise laws are on the stiff side in Oregon. That essentially means a large national company can't simply come in and unilaterally revoke contracted rights to sell their products. They would have to show cause for that action..or buy the rights back.

There's more. If franchise rights are stripped without cause or compensation, the injured party can sue and receive triple damages. So doing something stupid or flippant can be costly in these situations. Not that anyone involved in this case is stupid or flippant.

This is a nice reminder that brewery acquisitions can be messy. Aligning distribution rights can be a challenge. When AB bought 10 Barrel, it surely assumed acquiring the rights from Maletis would be a slam dunk. That might have been done by swapping brands. But Anheuser-Busch has nothing to swap that Maletis wants or needs. They'd prefer cash.

Apparently, the folks who brew "The Hard Way" have not made Maletis an acceptable offer. So Maletis continues to distribute 10 Barrel brands in the area where it has the rights to do so...an area that extends into Western's territory. Needless to say, the brass at AB are incensed. They want their brand. And they want it now!

There's a bit of a back story here, which is that Anheuser-Busch has been unhappy with Maletis for a while. They don't like the fact that Maletis has built a broad craft portfolio. That kind of thing detracts from the corporate montra, which is to move red, white and blue product. Maletis is rumored to have been told its days as an AB distributor are numbered.

The plain reality is that Maletis just doesn't get along with its cranky Uncle Bud. They've put up with him for convenience sake for a long time. But they aren't compelled by law to hand over the rights to 10 Barrel or any other brand unless they feel the price is right. And so far the price has not been right.

Anheuser-Busch's response? Because they've been unable to hammer out a financial deal, AB plans to withhold two new brands they're rolling out. Maletis won't receive them. Who knows what other punitive measures might be in play. Always use the stick if you're stingy with carrots.

This seems a dubious move. These new brands aren't going to have significant traction here. Maletis will simply hang on to 10 Barrel until it gets the price it wants. If it's true that Anheuser-Busch wants to end Maletis' run as an AB distributor, those rights will also have to be bought back.

What we have is an escalating conflict caused to a large extent by the growing power of craft beer. AB is trying to expand its craft portfolio because its own brands are in freefall. Maletis has a nice craft portfolio and doesn't feel inclined to be a subservient partner with its cranky uncle.

This train wreck is gonna be a hoot.


  1. Go Maletis! I work at a store where Maletis is one of our distributors and I love their craft catalog. The only AB product we order from them is actually 10 Barrel, and frankly I wouldn't feel a loss if that product line was no longer available. I'm sure we could find another Oregon craft brewer in the Maletis lineup who makes equally good beers, if not better.

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  3. Nice, insightful post. Chockablock with information.

    *iOSs caused Blogger seizures late night.


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