Distributors Sue Fiji Over Contract Dispute

Fiji Water is facing a lawsuit from three former distributors claiming the imported water brand violated agreements in shifting to a self-distribution model last year.

In a complaint filed in Superior Court of California, Los Angeles County on September 11, three distributors — North Carolina-based Carolina Beverage Corp. and Dixie Riverside and Alligator Beverage, both headquartered in Georgia — claim Fiji broke their respective contracts by forcing retailers in their sales territories to stop accepting product deliveries and making no attempt to negotiate terms to service those accounts, which included Walmart, Publix, Target, CVS and others.

The plaintiffs are suing for breach of contract, breach of covenant of good faith and fair dealing, concealment, false promise and unfair trade practices. They are seeking compensatory damages, punitive damages, attorneys’ fees and costs of suit and all other relief as allowed by law.

The complaint centers around events following Fiji’s July 2018 announcement of its exit from its distribution partnership with Keurig Dr Pepper (KDP), effective October 1, 2018. According to the complaint, KDP represented 70% of the brand’s total U.S. distribution at the time, with the remaining balance composed of other third-party distributors, including the three plaintiffs.

Carolina Beverage entered a distribution agreement with Fiji in January 2009, signing for a five-year term that automatically renewed for an additional term at its conclusion; the agreement was set to expire on January 2, 2019. Dixie Riverside and Alligator each signed contracts for identical terms in December 2008, both of which were due to expire on December 23, 2019. Each contained a stipulation allowing Fiji to terminate the deal at any time and for any reason upon 30 days’ written notice to its partners.

The agreements gave the respective DSD houses exclusive distribution rights within designated territories, with an exception: Fiji reserved the right to sell to certain national chains in those areas, but only after first discussing the opportunity with the distributor and attempting to negotiate terms “on which both parties can participate in the National Account’s or the Local Outlet’s business in the Sales Territory.”

In a press release announcing the termination of its KDP agreement, former Fiji president Elizabeth Stephenson said the company would “continue to work with many of its other trusted distribution partners in non-KDP territories and specialty channels, who remain closely aligned to FIJI Water’s goals and objectives.”

According to court documents, in the run-up to the October 1 deadline, senior Fiji executives indicated to representatives of Carolina Beverage that the two parties would continue with “business as usual” and that the water brand was interested in working on a new contract for 2019. Dixie Riverside and Alligator were similarly verbally assured that there would be “no changes” to the distributors’ respective sales territories, the complaint alleges.

The plaintiffs claim, however, that during that time Fiji was simultaneously encouraging retailers within their sales territories — including Publix, Walmart, Sam’s Club, Walgreens and others — to begin taking product deliveries directly. Fiji did not attempt to negotiate terms that would allow the plaintiffs to continue servicing those accounts, and furthermore, the complaint alleges that water brand caused customers to change their vendors codes and remove them as approved vendors from their respective databases. The result, they allege, was several cases in which customers turned away delivery trucks.

“FIJI intended to deceive Carolina Beverage by concealing the fact that it was working to steal Carolina Beverage’s customers by forcing the customers to take delivery of product directly from FIJI,” the complaint states.

When the distributors raised their concerns to Fiji in September 2018, the complaint states, the company responded with false and misleading statements by claiming that the change in model was because those customers “will no longer accept DSD from third party distributors,” despite the fact that the three distributors continued to deliver non-Fiji food and beverage products to those same customers.

Carolina Beverage, Dixie Riverside and Alligator alleged that the breach in contract has caused damages in excess of $25,000 each, plus interest. A trial date has been set for January 21, 2021.

Fiji’s parent company, The Wonderful Company, declined to comment on this story.