Editor’s note: This story was updated August 14 at 4:12 p.m. ET to include an additional statement from Schilling Cider.
A legal dispute between two Pacific Northwest cider brands is bringing into question what defines a “recipe” and how airtight – and specific – agreements between bev-alc brands and their manufacturing partners need to be.
Schilling Cider has filed a civil complaint against Incline Cider and its parent company Compass Brands, LLC, alleging Incline breached a “recipe agreement” and shared confidential information with a competing company in an effort to move production of Incline’s brands away from Schilling’s facilities. The suit was filed July 2 in the King County Superior Court in Washington.
Schilling has been the exclusive producer of Incline’s hard ciders since the latter’s inception in 2015. Disputes between the two companies first arose in mid-June, when Incline informed Schilling it would be moving production to “a competing manufacturer and seller.”
While the initial complaint did not name that competitor, later court documents revealed it to be Great Frontier Holdings-owned Ninkasi in Eugene, Oregon.
Schilling claimed that Incline moving production of its existing brands to another facility is in violation of contracts between the two companies, including a “recipe agreement” signed in April 2019.
“As part of this business relationship, the parties signed a recipe agreement under which Incline agreed that Schilling’s recipes would not be disclosed to any third parties or used anywhere outside of Schilling’s production facilities,” Schilling shared in a press release published today.
“Additionally, if Incline ceased production at Schilling’s facility, exclusive ownership of the recipes and related intellectual property rights would revert back to Schilling Cider.”
Schilling alleges that Incline moving its production enacts a clause in the recipe agreement that transfers the ownership of all “recipes” to Schilling, for a purchase price of $1.
Incline has disputed those claims, stating that the recipe agreement is not enforceable, and alleging that Incline does not have enough knowledge of the recipes – including details on the cider base or specific ingredient measurements – to be able to share them with a third party.
“This motion is litigation gamesmanship,” Incline wrote in a July 3 opposition filing against Schilling’s motion for a temporary restraining order (TRO) and preliminary injunction. “[Incline] has the right to produce cider outside [of] Schilling’s facility and Schilling is just mad that it is exercising that right.”
Judge Nikole Hecklinger amended and granted a TRO in favor of Schilling after a July 3 virtual hearing. A later hearing was held on July 30. Hecklinger granted Schilling’s preliminary injunction on August 8, prohibiting Incline from using “the recipes” in any facility other than Schilling’s and “from disclosing the recipes to third-parties.”
The preliminary injunction also ordered Incline to “instruct all third parties in receipt of the recipes (except the United States Alcohol and Tobacco Tax and Trade Bureau [TTB]), including Great Frontier Holdings dba Ninkasi and all affiliates, to delete the recipes immediately and provide assurances that the recipes will not be used.”
“We partnered with Incline for the long haul and are deeply saddened by this outcome,” Schilling co-founder and CEO Colin Schilling said in today’s press release. “We recognize how much these ciders mean to people, and I’m so proud of the recipes we’ve created. As we move forward, we remain committed to making exceptional ciders and promise to bring back the flavors customers love.”
In the release, Schilling teased a “brand new Schilling cider line” that “will utilize the Schilling original recipes” – i.e. the recipes in contention – “and offer the same familiar taste that their customers have come to love.” The brand will launch this winter, in time for retailers’ and distributors’ 2026 planning.
“While this impacts us, Schilling remains strong and is excited to offer these recipes to the market under a new brand we own,” Colin Schilling added. “We are innovative and resilient, and committed to leading positive change within the industry.”
However, Incline has no intention of shuttering or pulling its own branded offerings, according to Incline co-founder and CEO Jordan Zehner.
Zehner told Brewbound that “Incline has a policy of not commenting on active litigation, but can confirm that it will continue to make and deliver great Incline products into the marketplace for all of our distributors, retailers and customers.”
Brewbound reached out to Ninkasi co-founder Nikos Ridge, who is also in charge of co-packing relationships at Great Frontier Holdings. Ridge declined to share details of the relationship between Incline and Ninkasi, but said via email: “We are excited to be working with [co-founders] Chris and Jordan [Zehner], we love the Incline brand and look forward to continuing to build on our partnership with them, they are a great team and I have a lot of respect for them and what they have built.”
Differing Opinions on the Definition of ‘Recipes’
Zehner and Schilling first met in 2014, igniting discussions around how Schilling could help transform Incline from a hobby into a legitimate business, according to a February report by Peaks & Pints. The companies signed a “contract manufacturing agreement” in September 2015.
Under the agreement, “Schilling would develop recipes for Incline,” and “would own these recipes,” while “Incline would sell those products under the Incline brand name,” according to Schilling’s complaint. The agreement also states that if Incline “elects to produce a recipe developed by [Schilling] at another location, the recipe may be used on a royalty rate of $0.10 per wine gallon.”
“Incline never developed or manufactured its own cider products,” Schilling wrote in the complaint. “Instead, since 2015 and through to today, each and every alcoholic cider beverage sold under the Incline brand has been derived from a recipe created and designed by Schilling.
“Further, all of Incline’s ciders sold in the marketplace since 2015 have been produced, bottled and labelled by Schilling or at Schilling’s facility.”
In 2019, Schilling and Incline entered an “alternating proprietorship agreement,” effective May 1. According to Schilling, the new agreement “did not significantly alter Schilling and Incline’s working relationship, but rather was a technical regulatory matter” that named Incline “the producer” of its own offerings.
Around the same time, the companies signed a “recipe agreement,” effective April 4. Per that agreement, “Incline shall own all recipes and formulas, past, present and future, and related intellectual property rights” produced for Incline at Schilling’s facilities, i.e. “the recipes” up for debate. Incline also agreed to not use said recipes anywhere outside Schilling’s production facilities” or disclose those recipes “to any third party.”
In its complaint, Schilling noted that Incline “had to own the recipes for its ciders” for tax purposes once the alternating proprietorship agreement was made, and that “Schilling was hesitant to transfer ownership of the recipes, formulas and intellectual property that it had developed.”
To protect Schilling’s investments, the recipe agreement included an “exclusive option” for Schilling to purchase the recipes for $1 should Incline:
- “Stop or cease producing products at Schilling’s facility utilizing the recipes;
- “Cease business operations;
- “Failure to timely cure a breach of any material provision of the alternating proprietorship agreement;
- “File or have filed against it a petition in bankruptcy or have a receiver appointed to manage its affairs;
- “Become insolvent;
- “Sell a controlling interest to a third party;
- “Or sell all or substantially all of its assets.”
Schilling alleges that Incline shared “recipes” with a third party – presumed to be Ninkasi – allowing Schilling to enact its option and regain ownership of the recipes. Schilling gave Incline $1 at an in-person meeting on June 18 to enact this option – two days after Incline informed Schilling it would be moving production.
On June 18, Schilling also issued Incline a termination notice, which would end the manufacturing agreement after 180 days, with the agreement now set to expire on December 18, 2025.
Schilling alleges Incline has already shared recipes, as Incline lowered its August production forecasts during a June meeting with Schilling’s operations team, down to about “60% to 65%” of previous expectations. Schilling noted in the complaint that “Incline’s sales are up – indicating that Incline is in process of directing another facility to beginning [sic] production of Schilling’s recipes.”
Incline’s dollar sales (+13.5%) and volume (+11.5%) are both up double-digits year-to-date (YTD) in NIQ-tracked off-premise channels, according to data shared by 3 Tier Beverages (data ending July 12). Trends have accelerated in the last four weeks, with dollar sales up 19.6% and volume increasing 17.5%.
The difference in opinions comes down to the definition of “recipes,” which was not specified in the recipe agreement.
According to the preliminary injunction, recipes means “all recipes and formulas, past,
present and future, and related intellectual property rights, as such are used to produce hard cider beverages at [Schilling’s] facility,” including “product recipes, formulations, or information that were otherwise created by [Schilling] for [Incline], including ingredient variation of plus or minus 15%, the TTB form ingredients (even if used with a different cider base than [Schilling’s]), prior iterations of the product recipes, and the product names.”
Incline asserts that it “does not have access” to the complete recipes for its offerings, including “any sets of instructions for producing our ciders, such as manufacturing steps, processes, times or temperatures.”
“I cannot say enough times that the production of Incline products outside of Schilling’s facilities will not involve ‘recipes’ that are subject to the recipe agreement,” Zehner said in a declaration filed on July 3. “I feel confident on this point, given that I have never even seen a document that would constitute one.”
Incline claims the only information it knows about the recipes is general information already available to the public or third parties, such as the TTB and Whole Foods, the latter of which requires suppliers to provide ingredients lists.
Zehner also noted that he recently took a tour, “with Schilling’s permission” of Schilling’s production facilities, and it was “as in depth of a walk-through of production processes as I have ever had,” suggesting that Incline does not know any additional information about the production process than what is available as “general knowledge.”
Because of this, Incline claims it would be impossible for the company to violate the recipe agreement.
“While Incline agreed not to use Schilling’s recipes and techniques after termination, they did not agree to cease making or selling similar ciders – nor can Schilling use the specter of unfair competition or trade secret to cause Incline to cease making cider,” the company wrote in its opposition.
They added that “Incline does intend to use its product names because Incline owns its brands and all related intellectual property, but such production will not involve the recipes that are subject to the recipe agreement.”
Incline allegedly refused Schilling’s $1 payment given on June 18, as the company “had not and was not planning on violating the recipe agreement,” and “no triggering event had occurred such that Schilling could exercise the option to purchase the recipes.”
The company also noted that Schilling offered other “options” during the June 18 meeting, which allegedly did not align with prior agreements. The first two options included:
- For the companies to “renegotiate their current agreement or negotiate for Schilling to become a 50% owner,” in exchange for $3 million;
- Or for “Incline to ‘purchase’ Incline’s recipes from Schilling for $6 million.”
Schilling allegedly did not share a basis for the evaluation of 50% of the company at $3 million, or for the recipes at $6 million, according to Incline’s filing.
If neither option was selected, Schilling would allegedly go “nuclear” or “scorched earth” and “sue Incline ‘into nonexistence,’ starting immediately and would not stop until ‘there is nothing left of Incline,’” according to Incline’s filing, citing the in-person meeting. Schilling also allegedly threatened to “run Incline out of stock,” and “build a copycat brand, work with distributors and chain grocery retailers to place the copycat product on grocery store shelves with their new brand and leave Incline with nothing,” Incline alleged.
Incline said it has “no intention” of accepting any of the above options.
“Schilling spills a lot of ink in its motion about protecting the ‘recipes’ and uses that as a ruse to warrant this motion,” Incline wrote in its July 3 filing. “The purported urgent need for this motion is belied by reality.
“Incline has assured Schilling many times over that it 1). Did not know the recipes and thus had not and would not disclose them, and 2). Does not need the recipes and does not want them.”
Update August 14 4:12 p.m. ET
Schilling Cider shared the following statement with Brewbound in response to Incline’s claims:
“Despite Incline’s claims, both the commissioner and the judge who reviewed this matter, in two separate rulings, agreed that Schilling has shown a clear legal right in the ownership, use, and disclosure of the recipes and related intellectual property rights.
“Schilling put the recipe agreement into place as a means to protect the millions of dollars it invested to develop and produce Incline’s ciders. The craft of developing recipes requires significant investment of heart and financial capital.
“The purpose of the original recipe agreement was to ensure Schilling had the exclusive right to these recipes in the future if this very scenario came to pass. With their legal action, Schilling is simply seeking to protect its rights and investments. Schilling continues to fulfill its production agreement obligations for Incline to this day. Schilling preferred to continue the business relationship and proposed numerous options to do so including simply lowering co-pack fees with no other changes. Schilling never threatened to “out of stock” Incline, but did point out that there are challenges to spinning up a large cider production operation using new recipes at a different manufacturer with different equipment.”