July 1, 2013
A recent circuit court ruling set the stage for a prolonged fight between local distributor Major Brands and national supplier Diageo — the latest move in Missouri’s liquor wars, which the Wall Street Journal labels a “national test case” for the future of the franchise distribution system.
Diageo, which is the world’s largest distiller by sales whose brands include Johnnie Walker and Smirnoff, wants to restructure its wholesaler relationships across the United States to lower costs, and other distillers are seeking to make the same move, the Wall Street Journal reports. If the liquor producers are successful in challenging the franchise law in Missouri (which allows suppliers to end relationships with distributors only for ‘good cause’) and cutting ties with wholesalers here, they might be able to transfer that strategy to the nation’s other remaining states with franchise laws.
If the suppliers win their battle here, they “want to ‘Missouri’ the rest of the country,” U.S. Sen. Claire McCaskill, who supports Major Brands in the dispute, told the Wall Street Journal.
In the recent ruling, Circuit Court Judge Robert Dierker upheld Missouri’s franchise law, stating that Diageo had broken its contractual relationship with Major Brands, which is led by CEO Sue McCollum. However, Dierker denied Major Brands a preliminary injunction to prevent Diageo from terminating its franchise agreement with Major Brands as of July 1.
The liquor wars erupted in January when French wine and spirits distiller Pernod Ricard announced it was terminating its contract with Major Brands and Glazer’s Midwest, Missouri’s largest wholesalers. Within weeks, other suppliers, including Diageo North Americas Inc. and Bacardi USA, followed suit, putting nearly half of Major Brands’ $550 million-a-year business at risk.
Source: St. Louis Business Journal