At one point, it looked like Anheuser-Busch InBev might control 46 percent of the beer industry in the United States, monopolizing the market as if it were really the only king of beers. Last summer, AB InBev (the biggest beer baron in the world, currently a publicly traded company based in Leuven, Belgium) announced it was looking to buy the 50 percent of Grupo Modelo that it didn’t already own (a Mexican beer conglomerate, home to famous American imports like Corona and Pacifico).
Red flag consumer? White flag craft brewer? Luckily, in January, the U.S. government filed a lawsuit to block the merger of these two giant beer companies, saying the deal would limit competition and lead to higher prices for American consumers. Unfortunately, that’s probably not going to matter: Big beer has released the hounds, lawyers and financial sharks.
Background: Grupo Modelo has a joint venture with Constellation Brands (an S&P 500 Index and a Fortune 1000 company that is the world leader in premium wine). Through its Crown Imports LLC joint venture with Grupo Modelo, Constellation distributes and markets many leading imported beers across the United States, including Corona Extra, the no. 1 imported beer in America. Grupo Modelo had already agreed to sell its half of the joint venture with Constellation Brands in an effort to avoid antitrust concerns. The companies said Thursday that Constellation would pay $1.8 billion to take complete ownership of Crown. What’s the bigger win here? AB InBev agreed to give up its option to buy the rights to distribute Modelo brands in the United States.
Yesterday, according to a news release, Anheuser-Busch InBev and Constellation Brands Inc. announced a revised agreement that establishes Crown Imports as the no. 3 producer and marketer of beer in the U.S. through a complete divestiture of Grupo Modelo’s U.S. business. The transaction establishes Crown as a fully owned entity of Constellation and provides Constellation with independent brewing operations, Modelo’s full profit stream from all U.S. sales and rights to distribute the Grupo Modelo brands in the United States (beer like Modelo, Pacifico and Corona Extra and Corona Light).
As part of AB InBev’s acquisition of the 50 percent of Grupo Modelo it does not already own, AB InBev has agreed to sell Compañía Cervecera de Coahuila, Grupo Modelo’s state-of-the-art brewery in Piedras Negras, Mexico, and grant perpetual brand licenses to Constellation for USD 2.9 billion, subject to a post-closing adjustment. Legal experts and industry analysts say AB InBev will eventually get its way – one way or another – so feel free to sound off your opinion in the comments below. How will this affect the craft brewing industry?