Red+White looking to move on from Riedel dispute

25 September, 2017 by Ayoung

Red+White, a division of national wholesale distributing company Casama, has recently settled a contract dispute with glassware company RSN Australia and is now looking to put that behind them and move forward with its Plumm glassware brand.

In 1994, Casama established an importing business called Ambient Australia, which became the first exclusive importer of Riedel glassware into Australia from 1 July 1994.

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Frank Kraps, Chairman, explained to TheShout: “There were four contracts with Riedel spanning over the 22 years. The first three were entered into with Riedel Tiroler Glashutte GMBH in Austria and the last contract was with RSN Australia.

“Casama, under the trading division Ambient, managed distribution to all sales channels for Riedel in Australia during the first two contracts from 1/7/1994 to 30/6/2009. The sales channels consisted of licensed and non-licensed retailers, chain stores, restaurants, wineries and corporate accounts.”

In July 2007, Riedel established its own Australian subsidiary called Riedel Glassworks Australia Pty Ltd (which is known as RSN Australia Pty Ltd). RSN represented the Riedel brand as well as Nachtmann and Spiegelau (which the Riedel family purchased in 2004).

As a result of this Australian subsidiary being established Riedel gave notice to Ambient that the next contract (which commenced on 1 July 2009) would be without the distribution rights to the non-licensed sales channel.

Ambient was disappointed by this decision as it had established a skilled and competent sales team. At that time, it was communicated to Riedel that a replacement glassware brand would be sourced to replace the lost revenue and hopefully give Ambient a life after 2009. A joint venture arrangement with Riedel was discussed, however this did not eventuate as Ambient’s skills were as a sales and marketing agent and not a manufacturer.

The contract that commenced on 1 July 2009 with Riedel was with Casama trading as Red+White. Red+White has a portfolio of prestigious wine brands and primarily distributes to licensed premises.

On commencement of the next contract, 1 July 2012, RSN took back the winery channel and on 1 January 2014 the sales to the licensed chain stores which included Woolworths and Coles.

Red+White was left with the on-premise (restaurants) and independent licensed retail channels, which was approximately 35 per cent of the total distribution previously managed under the Ambient model.

“In spite of losing the majority of sales channels, Red+White over the last six years, continued to grow its on-premise licensed business for Riedel by over 10 per cent each year,” Kraps said.

In June 2016, the long-standing relationship between the two companies came to a close when the then five-year contract ended. Although there had been some new contract discussions unfortunately at the end of June, the contract ended so the relationship was terminated.

“One of the reasons RSN gave for the contract ceasing was that we had a glassware range in another division of Casama, Mezzanine Wine Distribution.

“Our response was that there was not a conflict as the two divisions operated autonomously and RSN and Casama had agreed in the contract that a few regional areas where there would be a shared resource or commission agent covering both divisions. Riedel performance was not compromised in those few regional areas.”

This is where the relationship then turned sour, a process which Kraps said was extremely disappointing given the 22-year relationship and the work that the company had put into building the brand in Australia.

When the contract ended, there were terms that stated RSN had to buy back the stock on hand and pay a termination payment that was measured as a percentage of the average of the last three years’ purchases.

There were then two disputes that followed. Firstly, RSN wanted to charge a 15 per cent restocking fee for the stock sent back to them and the second major dispute was that RSN did not want to pay the full value of the termination fee as per the contract.

Despite efforts to resolve the dispute, RSN commenced legal proceedings that led to a two day Supreme Court trial in NSW before Justice J. Ball. The decision was handed down in December 2016 whereby RSN was not entitled to a restocking fee, as that was not contemplated in the contract. Justice Ball also ruled that Casama was entitled to the termination fee having met the purchasing criteria.

RSN repaid the restocking fee and paid the termination fee however, they then disputed the court costs. Therefore, Casama had to go back to the Supreme Court and the same Judge ruled that Casama was entitled to 85 per cent of its court costs, which is standard in the NSW jurisdiction.

“It was a very disappointing end to the relationship that we had with Riedel because we had met our obligations over the many years that we’d worked with them, and then at the end RSN baulked on their contractual obligations.

“With the valuable assistance of our lawyers, Millens, we got what we were owed contractually in the end. However RSN’s attitude left a really sour taste especially as a trial requires significant time, resources and commercial risk which was totally unnecessary.”

Now with the dispute behind them, Kraps told TheShout that it is time to look forward.

“We required a glassware brand to fill the void in Red+White and since Red+White and Mezzanine have different wine portfolios and each has a diverse customer base, it made sense that the Plumm brand would be included in both divisions. Being Australian owned has resonated well with the market and we are very confident that we can further build Plumm and make it a really successful glassware brand in all markets and sales channels around the country.”

Casama is pleased that despite no longer distributing Riedel in Red+White in FY17, Plumm has had significant growth over the last financial year and the projected future for Plumm both in Australia and overseas is rosy.