Craft Beer Alliance, the parent company of Kona Brewing was continued in 2017 on its use of the Hawaii-themed mark for beer produced on the mainland. The company moved to be satisfied with nearly $ 5 million.
Expansion is expensive, so when many breweries want to expand, they outsource production to an existing facility elsewhere.
This was the strategy used by Kona Brewing Company. As the business grew, it began to move some of its production to the West Coast.
According to Andy Baker, who has worked in Hawaii’s brewing industry for 35 years, it’s generally cheaper to bring a smaller amount of finished product to the islands than to import all the raw materials needed.
“The containers coming into Hawaii are now full of crates full of beer, which are shipped 40% less than your raw material containers,” Baker said.
How can full bottles be shipped for less than empty ones? Baker says freight companies’ prices are based on the quantity of each product shipped. Thus, on a unit basis, a smaller number of full bottles may be less expensive than a large quantity of empty bottles.
This did not deter other local brewers. Maui Brewing Company produces all its beer on the valley island and has positioned himself as the largest local beer producer to brew all of its beer in Hawaii.
But, outsourcing to a contract brewer is by no means a rare tactic according to Bart watson, Chief Economist of the Brewers Association.
“Breweries are trying to find ways to continue to grow and be competitive without going broke and without taking on all this debt and risk of building a new brewery,” Watson said.
The lawsuit alleged that Kona Brewing Company misled consumers into believing that bottled and canned beer came from Hawaii.
This is not the first time that a beer producer has been sued over where he brews. In 2013, Anheuser Busch, the producer of Beck’s, was continued after continuing to market the pilsner as a German beer, despite relocating production to St. Louis, Missouri.
In offering the Kona Brewing $ 4.8 million settlement, the Craft Brew Alliance did not admit any wrongdoing, but expressed a desire to “move forward and avoid unnecessary distraction” from the litigation.
If the settlement receives court approval, consumers who have purchased Kona beer since February 28, 2013 will be eligible for refunds of $ 1.25 to $ 2.75 on four, six, 12, and 24 packs. Kona, with a maximum of $ 20 per household with receipts and $ 10 without receipts.
CBA plans to expand beer production in Hawaii with a new brewing facility.