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There’s Always Money in the Banana Stand- How the Own Premise Model is Rewriting the Beer Industry’s Future.

Great article by Pete Bissell of Bissell Brothers Brewing Company in Portland, ME about cultivating a community, fostering success, and looking towards the future in an own-premise model.

Check out the article here

Source: Good Beer Hunting


How to Avoid Pay-to-Play Violations

Source: SevenFifty Daily

By: Ryan Malkin

Mar. 21, 2018

“If you swipe your credit card for $2,000, I’ll put you on our menu right now,” said the bar manager at a high-volume bar and restaurant. Sitting at the bar, listening to sales pitches from suppliers and wholesalers, you occasionally overhear proposals like this one. In this case, if the supplier had exchanged money for that menu placement, the transaction would have been illegal. This practice is called pay to play. Although it may be permissible in some industries to pay a store to place your product at eye level, the same is not true for us in the beverage alcohol industry. Lately, the Alcohol and Tobacco Tax and Trade Bureau (TTB), which is responsible for the administration and enforcement of federal beverage alcohol regulations, has been reinvigorated with fresh enforcement funds.

The federal government has allocated $5 million for TTB trade practice enforcement funds in 2018, available during the agency’s fiscal year, which ends September 30. “Prior to receiving this funding, TTB averaged two trade practice investigations per year based on its limited enforcement resources and the resource-intensive nature of these investigations,” noted TTB’s fiscal 2017 report. Thanks to the new infusion, TTB said it will “substantially increase” the number of trade practice investigations. So far, it has kept that promise.

As of late 2017, the TTB reported 11 active trade practice investigations, two of which were joint crackdowns with state regulators in Miami and Chicago, targeting alleged pay-to-play activities. The investigations are probably not yet complete, as settlements and violations have yet to be announced. In March 2018 the TTB commenced a joint operation with agents from the California Department of Alcoholic Beverage Control, investigating alleged prohibited consignment sale arrangements in Napa and Sonoma Counties.

Possibly setting the tone for the $5 million trade enforcement budget was the 2016 Massachusetts Craft Beer Guild settlement with the TTB for $750,000. The settlement resulted from alleged violations that Craft Beer Guild paid “slotting fees” to retailers in exchange for favorable product placement and shelf space. So what exactly is a “slotting fee”?

Learn Which Practices Are Prohibited

The terms pay to play and slotting fees refer to schemes whereby a supplier, importer, manufacturer, or wholesaler (for simplicity, the “brand”) gives a retailer something in exchange for favorable product placement or shelf space at the retailer’s store, bar, restaurant, or other licensed venue. One of the more common violations is the tied house. Sparing you the history lesson (for that, check out Last Call), this refers to the pre-Prohibition arrangement in which a retailer would be tied to one house or producer. Federal and state tied-house laws were created to keep the upper tiers—for our purposes, the brand—separate from the retailer tier.

It is unlawful to attempt to induce a retailer directly or indirectly—for example, through an affiliate or agency—to purchase any products from the brand to the exclusion in whole or in part of other brands’ products. (So no, just having your agency do it does not make it legal.) The conduct must be “made in the course of interstate or foreign commerce,” but this is generally an easily provable element for TTB, since most products are sold across state lines. There is a small wrinkle for beer in that the state must also impose similar requirements, though most do.

Prohibited brand conduct includes acquiring or holding any interest in any on-premise or off-premise retailer; acquiring any interest in real or personal property owned, occupied, or used by a retailer; paying or crediting a retailer for advertising or display services; guaranteeing a loan or repayment of a retailer’s financial obligations; extending credit to a retailer beyond reasonable limits; requiring a retailer to buy or sell a certain amount of products; or furnishing, giving, renting, lending, or selling to a retailer any equipment, fixtures, signs, supplies, money, services, or other “thing of value.” This, naturally, is the most common, as all brands want to give retailers signs and other point-of-sale materials.

As noted, a tied-house violation occurs if a brand induces a retailer to buy from the brand at the exclusion of other brands in interstate or foreign commerce. Exclusion occurs when the practice “puts the retailer’s independence at risk” by means of a tie or link between the brand and the retailer and results in the retailer purchasing less than it would have of a competitor’s product. There is a test to determine whether exclusion exists. The TTB looks at the practice and asks the following questions: Did the practice restrict the free choice of the retailer to decide which products to purchase or the quantity to purchase? Did it obligate the retailer to participate in a brand promotion to buy the product? Did it require an obligation to purchase or promote the brand or require a commitment not to terminate the relationship with the brand with respect to purchasing products? Did it allow the brand to be involved in the day-to-day operations of the retailer? Or did it result in discrimination among retailers—meaning that the brand did not offer the same thing to all retailers in the local market on the same terms without business justification for the difference in the treatment?

There are some exceptions, however. These permit a brand to offer point-of-sale advertising material; consumer and retailer advertising specials; product displays; combination packages; consumer tastings and samplings; coupons and sweepstakes or contests; educational seminars; and stocking, rotation, and pricing of the brand’s own products. Brands that operate legally will work within these exceptions.

Meanwhile, a “tie in” sale occurs when a brand requires a retailer to buy a product that it didn’t want in order to buy a product that it did. For instance, it would not be permissible for a brand to force a retailer to buy a certain amount of regular vodka in order to be allowed to purchase the special holiday version. Similarly, it would be impermissible to require a retailer to purchase 10 cases of Winery X’s Merlot in order to purchase Winery X’s award-winning Pinot Noir. ”Commercial bribery” refers to the practice whereby a brand induces a wholesaler or retailer to purchase its products “by offering or giving any bonus, premium, or compensation to any officer, or employee, or representative.” For instance, it would not be permissible for a brand to offer a promotional sales contest in which retailer employees would get a cash prize from the brand for selling that brand.

In addition to tied-house violations, unfair trade practices also include exclusive outlets and consignment sales. An “exclusive outlet” occurs when a brand requires a retailer to purchase its products to the exclusion, in whole or in part, of other brands by means of a contract or agreement, written or unwritten. In short, it’s prohibited to require a retailer to purchase distilled spirits, wine, or malt beverages from the brand in more than just a single sales transaction. A “consignment sale” refers to a sale, offer for sale, or contract to sell with the privilege of return. For example, a brand testing the popularity of a new product cannot sell it to the retailer under the condition that if it doesn’t sell, the retailer can return the product.

Avoid “This” for “That” Situations

Remember, state law will play a major role in your day-to-day activities. The above discussion refers solely to federal law, so be sure to check each state’s rules to confirm permissibility. Still, there are some things you can do to ensure compliance both in the states and federally. Although giving permissible point-of-sale items is a great way to market a brand, it should not be conditioned on receipt of display space of shelf position. For instance, don’t provide signs or a new retailer specialty only if the retailer agrees to preferential display or menu placement.

Here’s another common example: Say a brand is entering into an otherwise permissible sponsorship agreement for signage at an event or arena. Think twice before including a purchase requirement and placement requirement. The brand is not bargaining to be the only tequila sold and the only tequila on the menu. Rather, the brand is bargaining for advertising space based on the marketing value it will receive from the ads and other branding.

By avoiding situations where you give something, a thing of value or service, in order to get preferential display or shelf or menu placement, you will hopefully avoid tied-house violations. A good rule of thumb is to consider whether the brand is giving “this” for “that.” If the answer is yes, think twice.

Given the TTB’s enforcement budget, the best way to avoid pay-to-play violations is to be sure you are acting compliantly. Many industry professionals seek to play in the “gray area,” which suggests some risk. About risk, a wise attorney used to say, if you’re driving in a 25 mph zone, you need to know if you’re going 30 mph or 60 mph. Of course, it’s never recommended to violate the rules, and strict compliance should be of paramount importance to brands. To that end, the TTB is hosting trade practice seminars in many cities; check out the schedule and RSVP here.

Ryan Malkin is an attorney who focuses on alcohol and cannabis law. He is counsel to Hoban Law Group, the nation’s premier cannabis law firm, and the principal attorney at Malkin Law, which focuses on alcohol beverage law. Nothing in this article is intended to be and should not be construed as specific legal advice.

Distress in Delivery

Check out this great three-part article by Bryan Roth about distribution and how brewers around the country are attempting to change the face of the middle tier.

Part 1, Part 2, Part 3

Source: Good Beer Hunting

Getting Defensive: Analyzing the Arguments in Stone’s Keystone Lawsuit

Source: Good Beer Hunting

By: Bryan Roth

February 13, 2018

After a weekend of media alerts that began the afternoon of Feb. 9 and continued with cryptic Twitter messages from Stone Brewing executive chairman and co-founder Greg Koch, the big unveil came this week: Stone is suing MillerCoors.

According to the lawsuit, filed in U.S. District Court of Southern California, Stone is seeking payment of damages for MillerCoors’ “misguided campaign to steal the consumer loyalty and awesome reputation of Stone’s craft brews and iconic STONE® trademark” in the promotion of its Keystone family of brands.

Both companies volleyed accusatory statements after Stone’s announcement, which was shared publicly via a prepared YouTube video featuring Koch and followed up by a separate press release.

“By deliberately creating confusion in the marketplace, MillerCoors is threatening not only our legacy, but the ability for beer drinkers everywhere to make informed purchasing decisions,” Koch said in his company’s release.

In response, Marty Maloney, manager of media relations for MillerCoors, said the lawsuit was a “clever publicity stunt.”

“Since Keystone’s debut in 1989, prior to the founding of Stone Brewing in 1996, our consumers have commonly used ‘Stone’ to refer to the Keystone brand and we will let the facts speak for themselves in the legal process,” Maloney said in a statement.

The back and forth is likely to continue, especially among beer enthusiasts, but as the industry waits for MillerCoors’ official, legal response, due within 21 days, the intermediate period is now about one question: does Stone have a case?

“Like any complaint, it’s a very persuasive document,” says Brendan Palfreyman, who specializes in brewery trademarks as an attorney at Syracuse, New York’s Harris Beach PLLC. “Things get a little murky when you get the answer to the complaint, but at first blush, it seems like a pretty decent case.”

There are certainly some grey areas, Palfreyman says, but the core position around a Keystone rebranding in 2017 makes for one area of worthy argument. In April of last year, MillerCoors announced on its blog that new packaging had a specific plan “that plays up the ‘Stone’ nickname.” This marketing tactic is black and white, and Stone’s filed complaint says as much, showing images of Keystone cans with the big, bolded “STONE” on one side. The complaint also points at “confusing case stacks” of Keystone 30-packs that create a “wall of STONE.” When placed in a specific way, the cardboard cases of Keystone only show the word in question. There are several other examples provided by Stone Brewing, showcasing the focus on the word “Stone” across social media and print advertising.

“That’s pretty on the line or stepping across the line,” Palfreyman says. “Keystone has a registered trademark…which is prior to the beginning of Stone Brewing Company. Where Stone and Greg Koch have a valid complaint is if Keystone has, indeed, shifted its branding to the use of ‘Stone’ alone.”

These examples are not the end-all for the lawsuit, especially since MillerCoors still gets the chance to tell its side of the story. The challenge for Stone Brewing is to prove that there is a likelihood of confusion between the two brands, which relies on eight factors that range from similarity of the good to likely expansion of product lines to the overall impression created by use of “Stone.”

Among some of the additional factors are the physical proximity of the goods in a retail marketplace (Stone as craft beer and Keystone as macro are often found separated, although always in the same general location) as well as evidence of confusion. On the latter, Stone only provides one instance: “In December 2017, for example, a consumer reached out to Stone to inquire about the brewery’s new ‘STONE LITE’ product – a non-existent beer that appears only in MillerCoors’s deceptive advertising,” Stone Brewing states on page 18 of its complaint.

“If there’s evidence of actual confusion, it’s typically going to be featured prominently in the complaint because it’s such powerful evidence,” Palfreyman says. “My educated guess would be that’s all they have, but it’s possible they have more and that’d come out in discovery.”

John Szymankiewicz, an attorney with the Beer Law Center and author of the book, Beer Law: What Brewers Need to Know, says that the critical question to ask in this lawsuit is what a consumer understands or believes about these brands.

Specifically, Szymankiewicz notes that a “sophisticated” customer in a legal sense is one that does in-depth research on a specific product before buying it. Two similar trademarks could be OK if a purchaser is knowledgeable and can understand differences clearly and easily. However, beer buyers are generally not “sophisticated” in this sense, he says, because at retail, all beer is within the same general proximity and a typical shopper doesn’t do research before choosing a particular product. The Brewers Association—of which Stone is a very proud member—only counts its defined collection of “craft” breweries responsible for 12.3% of the national volume of beer.

“So, would a typical beer buyer understand that the can that has ‘Stone’ as one of the major design elements of the package is not from Stone Brewing?” Szymankiewicz asks. “Well, I’ll let the judge decide on this one. But I think the answer is ‘no, that’s confusing to consumers.'”

The opposing side to that argument may actually be made by Koch himself. In his announcement video, he holds up a can of Keystone Light, with his middle and ring fingers covering the word “Key” stacked above the word “Stone,” and points out that the can “says ‘Stone Light,’ two words that you would never see together in association with our company.” In this moment, Koch is stating that the words used on the can have no connection to his beer, yet would still create confusion around his own product. But! It also creates an ironic situation that Palfreyman said could be advantageous for MillerCoors’ own response, though it could also only be a “peripheral issue.”

Michael K. Fretwell, an associate attorney with Maryland’s Laubscher, Spendlove & Laubscher, P.C., sees the lawsuit through two issues: what’s on Keystone cans and what’s used to market the product. In terms of MillerCoors using “Stone” to create confusion toward Stone Brewing’s brands on packaging, he says arguments by Koch are not outrageous, but are “a bit thin.”

“If MillerCoors were using ‘Stone’ as the new mark on the cans without anything else, or with little else, then it would be the use of the ‘Stone’ mark and that would be a problem,” Fretwell says. “However, the cans also include ‘Key’ and ‘Light.’ I think it is clear that the can of beer is Keystone Light from MillerCoors.”

Advertising is another issue, however. Fretwell says there are solid arguments because of the 2017 rebranding that more strongly emphasized “Stone” as a standalone word to represent the product, rather than the full name of “Keystone.” In this case, a court could find that MillerCoors is actively working to rebrand its name in the consumer’s mind with “Stone.”

“There is a good chance consumers would see some of the advertising and think it is Stone and not Keystone,” Fretwell says. “Also, the heavy emphasis on the use of ‘Stone’ may lead consumers to start referring to Keystone as simply ‘Stone,’ which could create confusion over time.”

Tony Glover, a Florida-based alcoholic beverage attorney and founder of Glover Law LLC, notes that the method of Stone’s announcement was well-crafted in a way to “generate significant earned media.” Within 24 hours of the press release and video, stories appeared across local and national news outlets.

“Regardless of the outcome, Stone Brewing is further establishing themselves as a hero to craft beer fans and as a leader in the ongoing craft versus macro conflict,” Glover says.

Glover adds that, even though the two products are “quite different,” a court would likely want to focus on whether Keystone’s marketing efforts actually cause enough confusion to damage Stone’s reputation.

In a roundabout way, Szymankiewicz says that confusion could come back to a years-old argument against businesses owned by Anheuser-Busch InBev, MillerCoors, and others. Because ownership structure isn’t plainly listed on the packaging of breweries like MillerCoors’ Blue Moon (once involved in a lawsuit of its own) or ABI’s Wicked Weed, it can create an impression these parent companies are working to obscure the full ownership or source of that beer.

“If anything, these brands strengthen Stone Brewing’s argument that it’s the brand that matters,” Szymankiewicz says of breweries owned by multinational companies. “Whatever is on the can in big letters is what people will identify with, not the actual source of the product.”

Whether or not this is relevant in the court of law is questionable, thanks to failed suits against WalmartCraft Brew Alliance, and MillerCoors. But it does emphasize ongoing tensions between craft and non-craft producers, however those terms may be defined.

In the past, these lawsuits have provided levels of ire, but usually not press kits, which raises the important value of Stone’s efforts in the court of public opinion. Three years ago, Lagunitas founder Tony Magee announced his own trademark suit against Sierra Nevada over the use of “IPA” on a beer label, but dropped it after 24 hours because of social media backlash.

“When the court of public opinion weighed in, they said in no uncertain terms that what I was doing was a bad idea and they didn’t approve,” Magee told the Chicago Tribune at the time. “Overwhelmingly it was clear that the course I had undertaken was the wrong way to go.”

That lesson learned by Magee could be valuable for Stone. At least initially, the careful rollout of the lawsuit—Stone’s PR team has declined to answer questions—has seemed to embolden Koch’s case, perhaps partially aided from beer enthusiasts’ passionate distaste for all things macro. Whether backlash toward MillerCoors and Keystone is legally warranted will be left to the courts, but in this moment, Koch’s efforts are meant to be less of a proper announcement and more of a rallying cry, complete with hashtag.

“Are we doing this for publicity?” Koch asks the camera in his announcement video, which has been viewed 55,000 times in 24 hours. “No. This is a weird way to get publicity, because it really doesn’t talk about the attributes of our beer, which is what we like to do.”

Red Brick Reworks Portfolio, Sharpens On-Premise Focus

Source: Brewbound

By: Justin Kendall

Jan. 11, 2018

Twenty-five years after Greg Kelly started Red Brick Brewing Company — then known as Atlanta Brewing Company — the company is looking re-establish its position in metro Atlanta by revamping its portfolio to include new core products and more taproom exclusive beers.

Speaking to Brewbound, Red Brick director of brewing operations Gavin McKenna said the company is approaching 2018 as an opportunity for the company to “re-stake” its claim in a home market that’s become increasingly crowded.

“We get one chance to get someone to try our beer again, and so every can that goes out we have that in mind,” he said.

“We’re the oldest craft brewery in Atlanta,” he continued, “and we feel like there’s a really cool story to tell there.The cool kid breweries are not forever going to be new breweries, and at some point people are going to have to rediscover breweries along the road. And we want to be in that conversation about what’s happening in the city that’s interesting and vital to beer culture.”

In an effort to insert itself into that conversation, McKenna said Red Brick is refocusing its off-premise business around flagship Hoplanta IPA — which accounts for about 50 percent of the company’s sales — along with two new core offerings, Soul of the City pale ale and Homestand dry-hopped pilsner. He added that the company will also retire year-round release Casual session IPA while putting seasonals Hibiscuwit and Zest in Show Citrus Farmhouse ale on hiatus.

According to McKenna, the three core products will be part of a more focused approach to its chain retail business in accounts such as Kroger and Publix, among others. Chain sales made up 45 percent of the company’s sales and 76 percent of its off-premise business in 2017.

“We want to build those chain retail commitments around a core three of beers that we think are on-trend and what people are looking for,” he said. “And we’re scaled to be able to maintain demand.”

If successful, McKenna believes Red Brick will sell about 10,000 barrels of beer in 2018. The company also has the ability to scale capacity to about 14,000 barrels without additional capital investments, he added.

Red Brick is also taking advantage of a new law enacted last September that allows direct-to-consumer taproom sales for the first time in Georgia. Previously, the state only allowed breweries to sell tours and offer “free” samples — a system that many brewers found confusing and unnecessarily burdensome.

In an effort to capitalize on the extended sales privileges, and prepare for an influx of visitors, Red Brick spent about $50,000 retrofitting its taproom. As part of that investment, the company installed 20 draft lines, and implemented a strategy of primarily serving small-batch, taproom-only releases. And, in the coming months, Red Brick will initiate brewery-only 16 oz. can releases, McKenna said.

“It still feels a little bit like we’re throwing things against a wall and see what sticks,” he said. “It’s not as controlled as it was from us. We have a lot more freedom to do what we want and to try things.”

According to McKenna, taproom sales have been strong, but the company is hoping to double its direct-to-consumer business in 2018 as more consumers become aware of the changes to the law and turnout for Red Brick’s exclusive releases.

“As the word spreads that we’re trying to be a little more distinctive and small-batch focused in our taproom, I think people will be really receptive to that,” he said. “But we still have a lot of room to grow.”

Some of the company’s small-batch releases may trickle out to independent retailers in the Atlanta metro area, McKenna added, noting that Red Brick’s sales team will renew its focus on securing on-premise placements in those accounts.

On-premise sales made up 41 percent of Red Brick’s business last year and, to support the continued growth within that channel, the company will be adding two additional sales reps to help bolster sales within Atlanta and the surrounding neighborhoods.

“We’re putting a lot of effort to make sure we’re well represented there,” McKenna said.

Brewers Association’s 2017 Year in Review

Source: Brewer’s Association

Dec. 13, 2017

Strong brewery growth, increased beer tourism and the launch of the independent craft brewer seal—with more than 2,700 craft brewers signed on—were all part of a watershed year for craft beer in 2017. The Brewers Association (BA) —the not-for-profit trade association dedicated to small and independent American brewers—looks back on the defining beer moments of the year.

“Craft brewers continue to thrive, if at a slower pace, fueled by a passionate community dedicated to bringing innovation, jobs and beer across America—on Main Street and beyond,” said Bart Watson, chief economist, Brewers Association. “Today, 83 percent of the population lives within 10 miles of a local brewery, meaning that the positive impact of breweries is being felt in communities all over the country.”

Of note in 2017:

  • Steady Growth: 6,000 breweries were in operation during 2017—with 98 percent of them small and independent craft brewers.
  • Jobs and Economic ImpactThe BA’s Economic Impact Report, a biennial analysis featuring economic data of craft brewing for all 50 states and the District of Columbia, showed that craft brewers contributed $67.8 billion to the U.S. economy in 2016, a 21.7 percent increase from 2014. Craft brewers were responsible for more than 456,373 full-time equivalent jobs, a 7.5 percent increase from 2014, with 128,768 of those jobs directly at breweries and brewpubs.
  • Independent Craft Brewer Seal: To help educate beer lovers about which beers are independently produced, in June the BA launched a seal touting independent craft brewers. Featuring an iconic beer bottle shape flipped upside down, the seal captures the spirit with which craft brewers have upended beer, while informing beer lovers they are choosing a beer from a brewery that is independently owned. To date, more than 2,700 small and independent craft brewing companies, representing more than 75 percent of domestic volume, have signed on to use the seal.
  • Can’t Beat ’Em? Buy ’Em: Take Craft Back, a tongue-in-cheek crowdfunding campaign to raise $213 billion to purchase Anheuser-Busch InBev, was launched to draw attention to the lack of transparency and growing disparity in marketplace influence between small and independent brewers and Big Beer. Nearly 12,000 craft beer lovers have pledged their support.
  • Bipartisan Beer Support: The Craft Beverage Modernization and Tax Reform Act (CBMTRA), championed by Reps. Erik Paulsen (R-MN) and Ron Kind (D-WI) and Sen. Bob Portman (R-OH), was reintroduced in the 115th Congress and has reached a majority of support in both houses. If passed, the bill—which was added as an amendment to the larger Senate Tax Reform Bill in November—would significantly reduce the federal excise tax on the first 60,000 barrels of any domestic brewery that produces fewer than 2 million barrels a year and would lower the federal excise tax on barrelage up to 6 million barrels.
  • Homebrewing Heats Up: There are currently an estimated 1.1 million homebrewers in the U.S., and in 2017 homebrewers produced more than 1.4 million barrels of beer—equaling one percent of total U.S. beer production. The National Homebrew Competition, hosted by the American Homebrewers Association, continues to be the world’s largest beer competition with 8,618 entries from 3,530 homebrewers worldwide.
  • Beercations and Tap Rooms Are Boomin’: Beer tourism is growing, with the average craft drinker visiting 3.5 breweries near their homes and 2.5 breweries within two hours’ driving distance. Plus 64 percent surveyed said visiting a brewery/tap room was a new or different beer drinking occasion, indicating brewery visits have created a new sales channel for beer.
  • #GivingBack: American craft brewers are not just great at making flavorful beer—they are also a force for good. Craft brewers donated an estimated $73.4 million to charitable causes in 2016, up from $71 million in 2014.

“This has been an incredible year for the craft beer community with both challenges and successes. Emphasized more than ever before is the need to advocate for and educate beer drinkers on the importance and value of craft brewers to our nation and our culture,” said Julia Herz, craft beer program director, Brewers Association. “What is especially gratifying is watching the positive impacts beer tourism and independent breweries are having on local communities.”

Left Hand Brewing Files Lawsuit Against White Labs for Contaminated Yeast

Source: Brewbound

By: Justin Kendall

Nov. 20, 2017

Colorado-based Left Hand Brewing Company has filed a lawsuit against yeast supplier White Labs alleging that the San Diego-based fermentation specialists sold the brewery contaminated brewers yeast, which led to a $2 million recall in 2016.

In the lawsuit, filed last week in Boulder County district court and first reported on by Courthouse News Service, Left Hand alleges negligence and breach of contract by White Labs, which makes, markets and sells brewers yeast via outposts in California (San Diego and Davis), Colorado, North Carolina, Copenhagen and Hong Kong.

“It is unfortunate we had to file a lawsuit, but we didn’t have a choice,” Left Hand co-founder Eric Wallace said in statement released to media outlets. “As an employee-owned brewery, the fate of our brand and employee livelihood was compromised, and we are asking White Labs to take responsibility for the quality of their product and stand behind their guarantee.”

For its part, White Labs is denying Left Hand’s claims.

“There is no specific proof on where the contamination originated from, as each White Labs culture undergoes a rigorous testing process from start to finish, which includes 61 quality checkpoints throughout the propagation cycle,” the yeast supplier said via a statement. “Additionally, every batch of yeast is tested to confirm it is contamination free prior to shipping. We cannot provide further comment due to the ongoing litigation.”

According to the lawsuit, Left Hand had exclusively used White Labs’ yeast to brew several beers — including Milk Stout Nitro, Extrovert IPA and Warrior Fresh Hop IPA — until early 2017. The craft brewer said it first received a consumer complaint of abnormally high pressure in bottles of its Milk Stout Nitro products in early July 2016 and later discovered off flavors in its Extrovert IPA.

That forced Left Hand to recall affected product in 37 states. The company said it destroyed $2 million worth of Milk Stout Nitro, Extrovert IPA and Warrior Fresh Hop IPA as well as “several thousand more barrels of unpackaged inventory.”

In order to root out the source of the contamination, Left Hand said it ceased production and shut down its brewery for more than two weeks between September and October 2016, the lawsuit states. After several rounds of lab analysis, Left Hand claims in its lawsuit that it discovered saccharomyces cerevisiae variant diastaticus, which is known to cause secondary fermentation in beer production, contamination in White Labs’ yeast.

“Based on its thorough and wide-ranging investigation, and confirmed by multiple test results, Left Hand determined that White Labs’ yeast products were the source of the diastaticuscontamination,” the lawsuit said. “Left Hand has since changed yeast vendors and has not experienced any diastaticus contamination since.”

In the aftermath of the recall, Left Hand claims its company has “incurred significant financial losses and damages,” including a loss of market share. Additionally, sales of flagship Milk Stout Nitro, which the company said accounts for about half of its sales, have “significantly decreased after contaminated yeast product supplied by White Labs caused secondary fermentation in beers brewed using that yeast,” according to the lawsuit.

In a statement released to media outlets, Left Hand claimed that “White Labs has done nothing to address the issue” to date.

Meanwhile, in order to prevent future incidents of contamination, Left Hand said it convenes a sensory panel for every batch of Milk Stout Nitro. The company has also began filtering batches that pass sensory tests prior to packaging.