Last week’s “Friday the 13th” bore a legal nightmare for two significant beverage industry players.
On Friday, Sazerac Company filed a lawsuit against distributor Republic National Distributing Company, LLC (RNDC), according to a Jan. 16 newsletter from Beer Business Daily. The suit alleges that RNDC failed to pay for $38.6 million in invoices for Sazerac products.
The spirits company holds over 450 brands worldwide, including Buffalo Trace, Van Winkle, Fireball, and more.
The unpaid products have allegedly been shipped to RNDC and have likely already been sold to retail shops, according to Beer Business Daily. The invoices, pertaining to product shipped in December, were due in early January and amount to an approximate total of $40.7 million, with a “depletion credit” of $2.1 million.
In June 2022, RNDC announced it would terminate its contract with Sazerac, and the two parties have since been struggling to define their working relationship. Unable to come to any new agreement, Sazerac terminated all partnerships with RNDC, effective Feb. 1, 2023. After the announcement, Sazerac alleges that RNDC raised prices, canceled promotional pushes, and otherwise created a difficult transition for the company. It’s estimated that if RNDC continues nonpayment of invoices until the termination date, the total amount owed will increase by $48 million.
Among Sazerac’s other claims is that RNDC used illegal “tie-in” sales to “condition the availability” of coveted brands such as Pappy Van Winkle, on the basis of also including non-Sazerac products. According to the Alcohol and Tobacco Tax and Trade Bureau, a tie-in sale occurs “when an industry member requires a retailer to purchase a product that the retailer did not want to purchase, in order to obtain the product the retailer wants.”
While Sazerac Company also says it renegotiated its distributing partnership with a “global distribution agreement” in September 2021, it claims in the lawsuit that RNDC “demand[ed] that the parties meet to discuss adjustments to the rate per case” and further pushed back on terms of the agreement.
Sazerac also claims that in early January, RNDC “has bad-mouthed Sazerac and otherwise attempted to harm Sazerac by unfairly distributing future sales and the transition to new distributors,” as court documents detail. The lawsuit also alleges that the distributing company failed to properly promote Sazerac products in retail spaces. The 13-page lawsuit was filed in a federal court in the Kentucky Western District, according to legal documents.
Sazerac and RNDC have had a distributing agreement for years. In the past year, however, the spirits company has shifted to focus on other distributors and internal marketing. The legal situation is still developing; more information is likely to emerge in the coming weeks.