Constellation Brands (NYSE: STZ) has issued a strongly worded statement in response to Anheuser-Busch’s (NYSE: BUD) recently filed lawsuit attempting to stop the branding of hard seltzer products with the Corona name.
During last Thursday’s Q4 earnings report call, Bill Newlands, CEO of Constellation Brands, had this to say, “Earlier this week, we filed a motion to dismiss this lawsuit, as we find these claims 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 market. We have fully complied with the terms of our sub License Agreement, and we will vigorously defend our rights under our sub License Agreement and applicable law.”
Anheuser-Busch acquired Grupo Modelo in 2013 but to remain in compliance with regulators, the company sold Grupo Modelo’s US business, including Corona, to Constellation. The company retained their rights to the brand internationally.
However, according to the lawsuit filed in February of this year, Anheuser-Busch claims Constellation breached their contract using the Corona brand to market hard seltzer, a non-beer product. Newlands insists, “The suggestion they have made is that we are not authorized to use the Corona brand name on a hard seltzer. If you read all the documentation, our view is it is totally without merit and it will go down in flames.”
Corona Hard Seltzer launched in early 2020 and has had an impressive year on the market. The brand, which has gained nearly 6% IRI market share in the US seltzer market, is currently the #4 hard seltzer in the country.
Constellation Brands backed the launch with a $40 million marketing campaign and intends to spend millions more to facilitate the marketing of new flavors. According to their Q4 earnings, Constellation Brands consistently outperformed the expectations of financial analysts. With on-premise beer sales lagging due to the pandemic, the company owes much of this success to Corona Hard Seltzer’s formidable performance over the past quarter.
Anheuser-Busch is also home to several hard seltzer lines such as Bud Light Seltzer, Natty Seltzer, BonV!V, Michelob Ultra Seltzer and most recently, Travis Scott’s CACTI. Bud Light Seltzer, in particular, has performed strongly, ranking #3 in the market, behind White Claw and Truly brands.
Bud Light Seltzer was launched in the Canadian market last week following thousands of requests from Canadian fans. The lawsuit comes as Anheuser-Busch focuses their efforts on hard seltzer production. Earlier in the year the company announced plans to invest $1 billion in their US manufacturing facilities to keep up with consumer demand for hard seltzer.
Grupo Modelo recently issued their own statements regarding the lawsuit. “We never agreed that Constellation could use our Corona name for products such as hard seltzer. Corona has a rich history and authentic Mexican heritage, and we are filing this lawsuit to protect our rights to this iconic brand,” a spokesperson for the company asserted.
Investors and fans will be watching the progression of this lawsuit carefully as the outcome has the potential to affect future performances of both brands and their parent companies.
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