Budweiser owners tried to keep Yuengling beer out of Mississippi, a lawsuit says

Anheuser-Busch attempted to block craft beer company Yuengling’s entry into the Mississippi market, a move that can lead to higher prices and limited options for consumers, Yuengling claims in a lawsuit filed in Harrison County Circuit Court.

Yuengling, which operates the oldest brewery in the United States, finally entered the Mississippi market with its popular beers in 2016, but not without a considerable struggle detailed in court records. The company claims behemoth Anheuser-Busch, brewer of Budweiser and other popular brands, threatened its distributors in an effort to keep them from selling Yuengling in Mississippi.

The threats forced Yuengling into a last-minute scramble for distributors because Meridian-based Mitchell Distributing backed out of carrying Yuengling brands, the lawsuit says. The lawsuit offers a glimpse into the stiff competition among brewers and the millions that beer distributors can earn — or lose — through contracts to distribute Bud, Miller Lite, Yuengling and other popular brands.

In the lawsuit, Yuengling accuses Anheuser-Busch and Mitchell Distributing of unlawful restraint of trade, wrongful interference with a contract, civil conspiracy, attempting a monopoly and other violations of state law. Yuengling, based in Pennsylvania, is asking for unspecified damages, including punitive damages, attorney’s fees, expenses and court costs from Anheuser-Busch and Mitchell.

In legal filings, both Anheuser-Busch and Mitchell Distributing have denied any wrongdoing.

Yuengling’s attorney, Ted Zeller, told the Sun Herald: “Our intent is to find out everything Anheuser-Busch did to prevent our brands from coming into Mississippi and further, what actions they took to limit our success in the state.

“For us, this case is really about the consumer and the right of the good people of Mississippi to have the beer they want to drink on their shelves and access to it.”

It started with a meeting in St. Louis

A familiar name in South Mississippi, Rex Distributing Co., filed the initial lawsuit a year ago against Anheuser-Busch, Mitchell and Yuengling. Yuengling’s complaints are filed as a counterclaim in the case.

The Magruder family owned Rex. Like other Mississippi distributors, the Magruders were anxious to sign on Yuengling and bring the beer to Mississippi. Yuengling has less than 1 percent of the national beer market, but is the largest American-owned brewer and has a loyal following.

The brewer had already expanded into other Southern states when it decided to enter the Mississippi market.

Rex and Yuengling claim in the lawsuit that Anheuser-Busch gathered Mississippi distributors in St. Louis in November 2015 in an attempt to prevent the distributors from doing business with Yuengling.

Mitchell, legal filings in the case say, had long sought Yuengling’s business. The Anhueser-Busch distributors agreed they would stick together in seeking deals with Yuengling for their individual territories.

“During the meeting,” the Rex lawsuit says, “AB sought to undermine the group’s resolve. It encouraged the distributors not to accept Yuengling’s business. It promised incentives to the distributors if they cooperated.”

Rex was one of the first distributors to offer Yuengling in Mississippi, debuting the brand across the Coast just ahead of the 2016 Super Bowl and Mardi Gras.

Mitchel rewarded for cooperation?

Only one Anheuser-Busch distributor decided against a deal with Yuengling, the company says in its lawsuit:

“In December 2015, after having solicited Yuengling distribution rights for years, and having just successfully completed Yuengling’s application and due diligence process, Mitchell advised Yuengling that it would not agree to be a Yuengling distributor in Mississippi after all.”

At the last minute, Yuengling said, the company had to cobble together distribution in Mitchell’s territory with four Miller/Coors distributors, delaying its debut for two months in some parts of the state.

The problems might have ended there, but the father-daughter team of Dan and Ann Magruder had decided they were ready to sell Rex Distributing after more than 42 years as South Mississippi’s Anheuser-Busch distributor.

They had worked out a deal to sell to an Alabama distributor that submitted the highest bid — $50.5 million — and offered Ann Magruder a job.

Two days before the sale was set to close, Rex was informed Anheuser-Busch would be exercising a contract clause that allowed it to redirect the sale to another company. The Rex lawsuit says the Magruders learned through trade publications that the buyer would be Mitchell.

Both Yuengling and the Magruders contend the Rex distributorship was Anheuser-Busch’s way of rewarding Mitchell for its loyalty, an allegation Anheuser-Busch and Mitchell deny.

Yuengling decided the company could not do business with Mitchell and pulled its contract from Rex. As a result, the Magruders say, their company’s sale price to Mitchell was $3.1 million lower.

Rex attempted to recover its loss, plus punitive damages, through the lawsuit. But Judge Roger Clark dismissed Rex’s claims against both Anheuser-Busch and Mitchell, finding the companies acted within the contracts that applied to Rex’s sale.

Yuengling’s case is still alive, as are Rex’s claims against Yuengling for backing out of the contract.

Anita Lee: 228-896-2331, @calee99