Divorces often get nasty, and the breakup of the long-term relationship between Sazerac Co. and Republic National Distributing Co. appears to fit that mold exactly. The parties have gone to court.
RNDC says the lawsuit represents "the culmination of a scheme that Sazerac put into motion long before it suddenly terminated RNDC’s long-standing distributor rights in 30+ markets—a termination notice that was sent without any prior warning late on the Friday afternoon before the New Year’s holiday weekend."
For decades, RNDC says, it had loyally served as Sazerac's distributor of choice across the country. Sazerac's brand, revenues and profits "grew substantially." But more than two years ago, Sazerac developed "an ill-advised plan to cut costs and regulatory corners by bringing traditional and licensed distributor-only functions in-house, slashing its distributors’ profit margins in the process. In doing so, Sazerac made clear how little it values the supplier-distributor relationship at the heart of the beer, wine, and spirits industry."
Sazerac imposed a new distributor agreement on RNDC, one that wasn't reduced to writing – RNDC says Sazerac never committed anything to writing – and the compensation was so low that it was uneconomic for RNDC to represent Sazerac and its brands. So RNDC "began good-faith negotiations to protect the time-honored supplier-distribuor relaionships that the relationship became untenable."
RNDC, in court filings responding yo Sazerac's lawsuit, said Sazerac used its time during the negotiations to patch together distributors to replace RNDC across the country.
Sazerac had taken the responsibility for ordering stock from RNDC, and proceeded to stuff RNDC's warehouses with product that it wouldn't be able to sell during the customary 45-50 days. Late on New Year's Eve, Sazerac notified RNDC that it was being terminated. It then announced this to the press and the market the termination of RNDC in 30+ markets, causing widespread confusion among the industry, customers and the media. Sazerac knew it had "literally forced RNDC to purchase tens of millions of dollars in Sazerac product before the large-scale New Year’s Eve termination,
In normal terminations the losing and gaining wholesalers and the supplier all work together to insure a smooth transition. But not in this case. "Sazerac doubled its own revenues and profits by selling new Sazerac product to its dozens of newly appointed distributors across 30+ markets, leaving RNDC with little to no opportunity to sell its remaining inventory to successor distributors (as is standard industry practice)." Sazerac also, RNDC alleges. Sazerac also spread "a false narrative of why Sazerac has chosen its new, impractical distribution model" and did nothing to ensure a smooth transition.' Not a single Sazerac executive called RNDC to discuss the transition up to the moment the lawsuit was filed, RNDC alleges.
In its lawsuit against RNDC, Sazerac alleges the distributor that stopped paying amounts due, when in fact it is Sazerac that owes RNDC "tens of millions of dollars."
Responding to Sazerac's lawsuit, RNDC accuses Sazerac of fraud. It also accuses Sazerac of unjust enrichment by requiring its new distributors to buy product from Sazerac while making it impossible for them to buy product from RNDC.