Grupo Modelo, the Mexico subsidiary of AB InBev, filed today a lawsuit against Constellation Brands (CBrands) in a U.S. district court after failing to settle the matter directly with CBrands.
Modelo accuses the defendand to have violated a sub-licensing arrangement for the Corona brand, which was granted as part of the antitrust regulations after AB InBev took full control of Grupo Modelo in 2013.
That year, Constellation acquired Grupo Modelo's US beer business from Anheuser-Busch InBev. The transaction included full ownership of Crown Imports LLC which provided Constellation with complete, independent control of all aspects of the US commercial business; a brewery in Mexico; exclusive perpetual brand license in the US to import, market and sell Corona and the Modelo brands and the freedom to develop brand extensions and innovations for the US market. Modelo retained those rights for its home market in Mexico and for all other parts of the world.
The plaintiff now argues, that the sub-license agreement only includes rights for the beer category, which means “beer, ale, porter, stout, malt beverages, and any other versions or combinations of the foregoing, including nonalcoholic versions of any of the foregoing” but not for any other products. Hence the launch of a product like Corona Hard Seltzer in February 2020 is a violation of Modelo’s brand rights.
In a first response CBrands says that it was “frankly very surprised” as it had “fully and completely” complied with the terms of the sub-license agreement.
“We find these claims, including the insinuation that Corona Hard Seltzer should not be classified as beer or a version thereof, to be completely without merit, a blatant attempt to restrain a strong and well-established competitor in a high growth segment of the U.S. beer category, and completely misaligned with general industry and legal standards,” Maggie Bowman, Senior Director of Communications - Beer Division at Constellation Brands, said in a statement.
Corona Hard Seltzer is extremely successful and has already conquered a 6% market share in the fast growing Hard Seltzer category since its launch one year ago making it the fourth-biggest brand in the segment.
It is the second time in a year that AB InBev meets in court with one of its major competitors. Last May, AB InBev succeeded over Molson Coors in battle over the use of corn syrup in its products.
In March 2019, the second largest American brewer sued Anheuser Busch, the U.S. arm of AB InBev (inside.beer, 21.3.2019), for a USD 13 million campaign which was aired during the Super Bowl (inside.beer, 5.2.2019). Allegedly consumers could get the impression that by drinking Coors Light and Miller Lite beers, two major brands of Molson Coors they were consuming high-fructose corn syrup, an artificial sweetener which is said to foster obesity. In May and again in September 2019 a district judge ruled in favor of Molson Coors and prohibited Anheuser Busch all further use of mentioning corn syrup on advertisement campaigns, on social media and on packaging without further context. Finally in May 2020, the 7th U.S. Court of Appeals overturned the ruling from September and said it was up to consumers to decide what is best.(inside.beer, 1.5.2020)