Ettelman & Hochheiser, P.C.

100 Quentin Roosevelt Blvd • Garden City, NY 11530 • Tel (516) 227-6300 • Fax (516) 227-6307,,,

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Upcoming InBev Consolidations Led to Legal Fireworks in Metro NY

"Beer Marketer's Insights" January 10, 2005

Initial rumblings of consolidation quakes came from Calif and concerned Heineken, but first eruptions in NY and involve InBev. Two new NY state lawsuits focused on InBev con solidations (see below). InBev has so far pushed much further than Heineken in attempt to consolidate its network and ultimately get down to 300 distribs. In 1st phase, InBev has either completed or has in works "north of 50 transactions" affecting about 5% of its volume, sales veep Tom Cardella told INSIGHTS, including several sizable ones in Jersey, Pa and metro NY. But InBev offering compensation even where it could just terminate without payment under state law (for example, Coors branch in Colo reasonably content with settlement it got on Beck's).

In NY, 2 lawsuits filed before InBev made move. Both lawsuits named Manhattan Beer (half owned by Simon Bergson, half by Honickman family) as defendant - Manhattan is NY's largest distrib (Coors/Corona), and apparently InBev ' s anointed consolidator in NY state. The first lawsuit was filed by distribs Oak and Boening (owned by Boening family) and the 2d by Clare Rose (AB) on Long Island (Rose family). Rose sued InBev too. Attys Ettelman and Hochheiser had represented Hap Boening's distribs and several AB distribs back in 2000-2001, when they got $72 mil settlement from Heineken ($62 mil went to Boenings) after Heineken terminated them under NY's 1996 franchise law, which allowed terminations under a policy of consolidation. In this case, atty Keith Hochheiser said that "for years Manhattan Beer has taken predatory actions which violate our clients' rights and various laws." But Manhattan Beer's atty Drew Jaglom countered "Nothing alleged is unlawful conduct. The case is wrong on the facts and wrong on the law."

Boening Charges Conspiracy to Terminate/Dual/Drive Out of Biz

Oak and Boening Brothers wide-ranging complaint makes a series of charges about Manhattan's alleged "unlawful attempts" to "monopolize the beer distribution business" in 14 counties. It "conspired" with "brewers" with 'ultimate goal" to "drive all competing wholesalers... out of business except" AB distribs and "possibly" Miller and Heineken. Manhattan "exerted improper influence" on suppliers, according to complaint, "in order to have the brewers either terminate plaintiffs and other distributors or to have the brewers refuse to offer brand extensions." Manhattan "presently... attempting to exert influence upon or conspiring with" InBev and Molson to "further their scheme" tho neither Mol son or InBev are named as defendants (they still could be later). Also accused "conspirators" of "spreading false rumors...concerning plaintiffs' viability as going con cerns and purported terminations by other brewers." Manhattan "has gone so far as to so licit orders from plaintiff's customers" for brands sold by Oak/Boening, saying it "will have the brand imminently."

After Oak and Boening lost Heineken, Manhattan began "full-blown assault" on their biz. As a result of Manhattan's "intentional and malicious interference," Oak and Boening "have either lost or been forced to transfer" to Manhattan, Scottish & Newcastle, Rhein gold, Saranac, Rolling Rock and FEMSA brands. They also didn't get brand extensions like Molson XXX, Two Dogs, Accel and Seagram's Smooth. "As a result" Manhattan "has been the recipient and beneficiary of the good will which plaintiffs have developed without having to pay for same." Oak and Boening "have been threatened with termination by and/or had their relationships negatively impacted with" Beck's, Molson, Bass Ale, Seagram's, etc. After Oak lost Heineken, it was down to about 1/2 mil cases; Bass and Molson are among its biggest brands. Boening Bros is still several mil cases.

Most unusual aspect of Oak/Boening's complaint: pages of it detail allegations concerning Mark Rodman, called Manhattan Beer's "primary consultant," tho he is not a defendant. Among other charges, according to complaint, Mark "intimately involved" in passage of NY franchise law which tho "intended to be a shield" was utilized as "a sword" to "destroy" wholesaler rights. Ironically, Mark was presented the NY distrib assn's major award at last yr's convention by 2 distribs: Simon Bergson and Hap Boening.

InBev Didn't Give Clare Rose Beck's Premier Light; Triggered Lawsuit on Brand Extension

In 2d complaint, large AB distrib Clare Rose on Long Island sued Manhattan and InBev, alleging that by giving "brand extension" Beck's Premier Light to Manhattan, the defendants violated NY franchise law, interfered with their (unwritten) , agreement and broke other laws. By granting new light brand to Manhattan, Rose charged, InBev "attempted to coerce Clare Rose selling all of its Beck's distribution rights" to Manhattan. This lawsuit "directly related" to Boening Bros lawsuit. Oak and Boening also allege that InBev intends to give Manhattan Beck's Premier Light in "the entire relevant market" and that this constitutes "intentional interference" with their existing agreements. Then too, Rose charges "new label under an existing brand will erode at least some of the market share held by the brewer's existing brands.... In effect, the brewer is transferring a part of its existing wholesaler's business to the wholesaler's competitor without compensation." InBev said it doesn't "comment on pending lawsuits."