E-Malt.com News article: 1801

USA: Milwaukee-based Miller Brewing Co. has failed in its bid to terminate its brewing contract with The Boston Beer Co., brewer of the Samuel Adams beer brands, Business Journal of Milwaukee reported. Miller was seeking an arbitrator's declaration that it had the right to cancel its agreement with the Boston-based brewer as of May 30, 2004. Miller filed its petition with the American Arbitration Association, East Providence, R.I., during the fourth quarter of 2002.

An arbitrator ruled Oct. 29 that Miller didn't have early termination rights and ordered Miller to continue producing products for Boston Beer under the terms of the existing agreement. Miller also was ordered to reimburse Boston Beer $785,000 for its legal fees and expenses related to the arbitration proceedings. Miller had brewed Samuel Adams products for Boston Beer at its now-shuttered Tumwater, Wash., brewery, as well as at a Miller brewery in Eden, N.C. Miller closed the Tumwater facility in July.

Samuel Adams beer brands that had been produced at the Tumwater plant now are being brewed at Miller's North Carolina plant. The Tumwater plant had provided Boston Beer easier access to West Coast distributors, Boston Beer spokeswoman Michelle Sullivan said. "It's certainly become a bigger challenge" to get Samuel Adams products to the West Coast, she said.

After the Tumwater plant closed, Miller agreed to cover the incremental costs associated with shipping Boston Beer products to areas previously supplied by the Tumwater brewery, Sullivan said. Boston Brewery executives expect that arrangement to continue, she said.

Miller began producing beer for Boston Beer Co. in 1999 when it purchased the Tumwater brewery from Pabst Brewing Co., Sullivan said. Pabst had been brewing beer for Boston Beer Co. prior to the sale of the brewery to Miller, she said. Miller management declined to comment.

Boston Beer Co.'s third-quarter earnings release showed that the company's general and administrative expenses for the third quarter rose $951,000, to $4.4 million, primarily due to legal fees and related expenses incurred in connection with the arbitration proceedings with Miller.

Boston Beer operates two breweries, one in Boston and the former Hudepohl-Schoenling brewery in Cincinnati, which it purchased in 1996. Boston Beer's contract with Miller remains in effect until Oct. 31, 2008.

Boston Beer shipped 333,039 barrels of beer in the third quarter, down slightly less than 1 % compared with the same period a year ago. The company didn't provide figures as to how many barrels were produced through the agreement with Miller.

Founded in 1984, Boston Beer Co. brews a variety of beverages, including Samuel Adams Boston Lager, its flagship brand. Boston Beer produces 11 other varieties of Samuel Adams beer, as well as HardCore Hard Cider and Twisted Tea Hard Iced Tea.

Miller reportedly was interested in acquiring Boston Beer Co. in 1999. Such a deal never transpired.



14 November, 2003