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Sonoma County Brewery in major legal battle with wholesaler over competition concerns in California’s $ 9 billion beer market

A major battle in the more than $ 9 billion California beer market is unfolding in a San Francisco courthouse with a Sonoma County brewery taking center stage.

On the one hand, Reyes Holdings, the country’s largest beer wholesaler and the eighth largest privately held company in the United States with $ 35 billion in revenue, according to Forbes.

The Illinois-based family business has been on a fast-paced buying spree since 2018. In California, 17 different deals involving Reyes and its subsidiaries have seen Reyes hold 55% of the market share of all beers. sold in the state, according to an account. The astonishing growth of the business and its implications has been the No. 1 topic among beer industry insiders in the state, although it is largely unknown to consumers.

On the other side, Seismic Brewing of Santa Rosa, who is being sued for allegedly breaking a contract the brewery made with a distributor Reyes later bought. Seismic, who is owned by Christopher Jackson, claims he terminated his contract properly after Reyes sought to impose onerous restrictions not covered by the original deal.

Jackson, a second generation family member who runs Jackson Family Wines, has been on a mission to be a pioneer in the craft beer market since the local brewery was founded in 2015. He maintains that Reyes and its subsidiaries engage in anti-competitive practices that have unfairly squeezed out family distributors, imposed onerous terms on small craft brewers, and limited availability to consumers in the most populous areas of the state.

The case at the heart of the matter is a dispute between Reyes and Seismic over the termination of a wholesale contract to sell the brewery’s beer in stores and restaurants in certain northern California markets. But he also shone the spotlight on the massive changes in the distribution of beer in the state and nationwide, changes that some say will hamper the ability of Golden State beer enthusiasts to buy their local beer locally. favorite craft beer.

“Distributors are the gatekeepers of the beer business,” said Kevin Luckey, executive director of California Family Beer Distributors, a business group that has mingled with Reyes. “Beer is as much about access. You have to buy beer in a grocery store. You have to go get some beer from a bar.

The legal case has grown in importance as the Biden administration examines anti-competitive practices across the economy, including the wine, beer and liquor industry. Commentators cited Reyes specifically for criticism in the federal inquiry, arguing the need to put more constraints on the consolidation of beer wholesalers to promote greater competition in the $ 94 billion U.S. market.

At the state level, there is an even bigger movement with Seismic stating in a Tuesday filing that state attorney general Rob Bonta is conducting his own antitrust investigation into the industry. In its case, Seismic said the state subpoenaed the brewery over an investigation into “anti-competitive activity related to the distribution and pricing of beer in California.”

Bonta’s office said in a statement it could not comment on the investigation, or even acknowledge its existence, as his subpoenas are confidential.

The issue has so far remained under the radar, given the complex consequences of prohibition, when every state was allowed to regulate alcohol under a three-tier system to avoid monopolization. Producers sell their inventory to wholesalers, who in turn market and sell beer, wine and spirits to retailers.

California has a few exceptions, allowing breweries to sell locally as well as self-distribute or operate their own distribution arms. Stone Brewing Co. of Escondido, for example, has its own wholesale branch that serves Southern California.

The dispute between Reyes and Seismic was sparked when a Reyes subsidiary named Harbor Distributing bought DBI Beverage in 2019, which operates key distribution companies in areas such as Sacramento, San Francisco and San Jose. DBI previously served Seismic on wholesale contracts.

Jackson claims he ultimately gave up on those contracts after Reyes failed to maintain the same terms DBI initially agreed to and wanted to impose more onerous policies that would make switching distributors “virtually impossible”, a filing says legal of Seismic. In return, DBI – now controlled by Reyes – sued Seismic last year for breach of contract.

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