THE GIST
On March 25, a jury unanimously decided in favor of Stone Brewing in its lawsuit against Keystone Light brewer MolsonCoors over the “stone” trademark, awarding the San Diego-based brewery $56 million in damages. That’s less than the $256 million Stone had sought, likely a result of the jury rejecting the notion that MolsonCoors “willfully” infringed on the copyright. While a literal victory for Stone, the lawsuit laid bare just how dire that brewery’s financial predicament is—a bind that even $56 million can’t remedy.
According to Stone CEO Maria Stipp’s testimony during the three-week trial, the company owes investment firm VMG/Hillhouse $434 million. It was first reported in 2016 that VMG invested $89.5 million in Stone to support undisclosed projects and growth, and it’s unclear how the overall number continued to climb. The investment came during a period of ambitious growth for Stone, which opened facilities in Richmond, Virginia; Berlin; and Napa Valley in recent years, and has since shuttered the outposts in Germany and Napa. Stone was scheduled to repay the sum by June 2023, but Stipp says the firm has given Stone an unspecified amount of additional time to come up with the cash. As a result of this burden, Stipp testified, Stone had considered selling its company. This testimony was first reported by Courthouse News.
Under Stipp’s leadership, Stone has attempted nothing less than a complete reorientation over the past two years, focusing on Buenaveza Salt & Lime Lager in an effort to create a “more welcoming” Stone portfolio and attitude. Yet Stone sales continue to struggle. The brewery’s dollar sales in chain retail stores tracked by IRI fell -16.5% in the 52-week period ending March 20 compared to -8% for the craft category and -4.6% for beer overall. The $83.7 million Stone sold in chain retail last year is the company’s worst performance in those stores since 2016.
In a statement, MolsonCoors says it is evaluating its options for appeal.
WHY IT MATTERS
While Stone takes a victory lap following the jury’s decision, it will soon need to address the critical challenges it faces in light of its investors’ deadline next year. Chief among those is stabilizing the brewery’s flagship product.
For 25 years, Stone championed bold, bitter West Coast IPAs, leading with Stone IPA. Last year’s pivot to Buenaveza—exactly the type of easy-drinking Lager that Stone cofounder Greg Koch historically derided as a “fizzy yellow facsimile of beer”—has not brought the brewery the sales gains needed to make up for steep declines in sales of Stone IPA.
Sales of Stone IPA in chain retail totaled $16.7 million last year, just 58% of their high water mark of $28.8 million in 2017.
Meanwhile, in its first full year of sales in 2021, Buenaveza sold just under $4.5 million in chain retail, a quarter of what Stone IPA made during the same period.
With its longtime-flagship IPA in decline, Buenaveza hasn’t yet proven it can offset those losses. Through March 20, Buenaveza has yet to crack one million in chain retail sales and sits just behind Tangerine Express IPA as the fifth best-selling Stone beer in chain retail.
In testimony and evidence presented during the trial, Stone attributed these losses to consumer confusion about Stone and Keystone Light. The latter redesigned its packaging in 2017 to separate the words “key” and “stone” on its cans. In its testimony, Molson Coors asserted that it had used “stones” to refer to cans of Keystone Light since the mid-1990s, and that it has referred to 30-packs of Keystone beers as “30 stones” for decades.
Stone IPA did see its sales slip every year since 2017, though it’s impossible to say whether those losses are mostly attributable to consumer confusion, as Stone alleges. Keystone Light’s sales in chain retail have also been in decline for three straight years. It’s likely that changing consumer tastes, greater competition in the beer aisle, and the rising popularity of other IPAs played a role in lowering Stone’s sales. For example, New Belgium’s Voodoo Ranger IPA and Sierra Nevada’s Hazy Little Thing IPA launched in 2017 and 2018, respectively, and in the intervening years became two of the top-selling brand families in craft beer.
In her testimony, Stipp acknowledged that price increases for Stone IPA had not stanched sales losses. Evidence presented by Molson Coors attorneys during trial also included internal Stone documents in which the company cited difficulties for Stone IPA as far back as 2016.
“We tried price, a marketing campaign, incentives—everything we could think of to do to change from negative to positive and it’s not making a difference,” Stipp testified, according to Courthouse News. “I’m frankly not sure what else we can do.”
Unvarnished, often unflattering, assessments like these abounded during the trial. (Lawyers for Molson Coors caused a stir when, in highlighting the different market segments for Keystone and Stone beers, they revealed that half of Keystone Light drinkers are unemployed.)
Stone’s lawyers successfully argued their case to the jury, but in doing so, they showed just how serious an uphill battle the company faces over the next year or two. The brewery must quickly find a sales foothold if it has any hope of repaying the $464 million it owes investors, or it must find a buyer. This is a continuation of a stretch of difficult years for the brewery, which—since early 2019—have included layoffs, taproom closures, the sale of its ambitious Berlin brewery, and the departure of former CEO Dominic Engels, whom Stipp replaced.
In its statement, Stone describes the jury’s decision in David vs. Goliath terms, calling it a “victory for every craft brewery” and “our legions of fans, friends and supporters who believe in the good that craft beer brings.” It served the brewery well to appear like the underdog, bullied by the much-larger Molson Coors. After this verdict, though, Stone needs to prove that it still knows how to sell beer like the craft titan it once was.
Words by Kate Bernot