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Claiming Unfair Treatment, Buffett’s McLane Sues To Enter Texas

June 28, 2016

McLane Co., the mammoth food and drinks distributor owned by Warren Buffett’s Berkshire Hathaway, has filed a federal lawsuit in Austin claiming that the Texas Alcoholic Beverage Commission (TABC) is unfairly barring it from distributing beverage alcohol in the Lone Star State.

McLane’s lawsuit, filed in conjunction with the Texas Association of Business, takes aim at the TABC’s so-called “one share” rule—under which the agency aims to protect the three-tier system by prohibiting alcohol producers, distributors and retailers from holding as little as one overlapping ownership share in another tier of the business. Because McLane parent Berkshire Hathaway owns a 2% stake in Walmart—which retails beverage alcohol in Texas—the TABC has refused to grant it a distribution license in the state.

McLane argues that the TABC is taking its three-tier protection to extremes, noting that other states allow companies to own interests across tiers provided that they only control or influence business activities in one of those tiers. Moreover, the lawsuit alleges that the TABC is applying the one share rule unevenly, asserting that “in the last year, over 40 manufacturers, distributors and retailers with overlapping ownership had over 2,500 permits approved or renewed by the TABC.” According to the lawsuit, the TABC has granted “alcohol permits and licenses to numerous other companies, such as Core-Mark, Cost Plus of Texas, Molson Coors, Brown Forman Corp., and many others, who are similarly situated to McLane.”

McLane, which does $48 billion in sales annually, has steadily increased its drinks industry activities in recent years, and now distributes beverage alcohol in Colorado, Florida, Georgia, North Carolina and Tennessee. Contacted by SND, the TABC said it couldn’t comment on the pending litigation.

Currently Republic National Distributing Co. leads the Texas wine and spirits wholesale market with projected 2016 revenues of $2.15 billion, according to Impact. Glazer’s Companies of Texas (soon to be part of the new Southern Glazer’s) ranks second with a projected 2016 total of $1.85 billion. If McLane eventually succeeds in its quest for a license, it could potentially ignite a new era of intense competition within the state’s middle tier. —Daniel Marsteller

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