News broke on January 3 that Sazerac was terminating its distribution relationship with Republic National Distributing Company and moving to numerous smaller distributors in about 30 states. This was such a massive change in the industry that a few days later, we covered it on the Bourbon Community Roundtable.
Now, just days after the release of that Roundtable episode, Sazerac sued Republic in federal court in Louisville on January 13. Sazerac came out of the gate with allegations that Republic has refused to pay for tens of millions of dollars for Sazerac products, has stopped payment on nearly $40 million of wholesale products, and that Republic has “bad-mouthed Sazerac in the marketplace.”
As we speculated on the Roundtable, Sazerac also complains and alleges that Republic failed to sufficiently promote Sazerac products to retailers and that Republic “would oftentimes improperly condition the availability of certain high-end (and highly sought after) Sazerac products, such as Pappy Van Winkle, to its retail accounts on the purchase of non-Sazerac products, commonly known as ‘tie-in’ sales.”
Although not mentioned in the Complaint, Sazerac and Republic had expanded their relationship as recently as 2019 when Sazerac bought 19 brands from Diageo. Republic added those new brands to its portfolio in seven states. According to its website, Republic serves almost 90% of the U.S. market volume and it uses its national reach to help supplies build relationships and reach their target consumers, which sounds like precisely what a large producer like Sazerac would need.
One new fact revealed by the Complaint is that Sazerac and Republic entered into a new global distribution agreement in 2021 and it was really Republic who terminated that Agreement, and that happened in summer 2022 (without any news splashes).
In total, Sazerac asks the Court to award it $38.6 million in damages through January 12, 2023, and that continued breaches will result in “at least an additional $48 million in damages.” Remember, Complaints only present one side of the story and Republic has not yet had an opportunity to tell its side of the story. The case is Sazerac Company, Inc. v. Republic National Distributing Company, LLC, No. 3:23-cv-00025.