After attempts to settle the matter out of court, Anheuser-Busch (NYSE: BUD) Mexican division Grupo Modelo filed Monday in Federal Court to stop Constellation Brands (NYSE: STZ) practices around selling hard seltzer.

Groupo Modelo owns rights to Corona in Mexico and other countries outside of the US, while Constellation Brands has exclusive rights to Corona sales and distribution in the 50 US states.

Groupo Modelo claims that the name Corona should not be used by Constellation Brands in association with anything except beer, according to filings in U.S. district court of the southern district of New York.

Corona Hard Seltzer Grew Rapidly

Corona Hard Seltzer was a successful US launch for Constellation in 2020, contributing to financial results and a stock price that has more than doubled. The stock is set to open near $241, a 52-week high over its low of $104.28 during the period.

Corona Hard Seltzer currently holds the #4 position among nationally distributed hard seltzer brands in the US, behind White Claw from Mark Anthony Brands, Truly from Boston Beer Co (NYSE: SAM), and Bud Light Seltzer from A-B. Corona Hard Seltzer is currently available in four flavors: Blackberry Lime, Cherry, Mango, and Tropical Lime.

Dispute Involves 2013 Agreement

The lawsuit stems from the agreement forged in 2013 between A-B, Constellation, and the US government. The US sales and distribution of Grupo Modelo was sold to Constellation Brands in 2013 to satisfy antitrust regulators. The move came as A-B purchased Grupo Modelo.

Grupo Modelo maintains that that agreement was for Corona beer, and nothing else. That means Constellation can’t sell Corona Hard Seltzer, according to the lawsuit.

Grupo Modelo filed its suit in the U.S. district court of the southern district of New York on Monday, according to a court filing. 

What’s the difference between beer and hard seltzer?

This court ruling could have significant results in the legal interpretation of differences between malt based beer and hard seltzer, which is also sometimes produced from a malt base. The definition of hard seltzer currently includes sparkling alcoholic beverages made from fermented malt or cane sugar, but also carbonated water infused with spirts and wine.

In fact, Constellation also produces Corona Refresca, a malt-based RTD, in three varieties: Coconut Lime, Guava Lime, and Passionfruit Lime.  The company has made significant investments in expanding production of products in the category at its Daleville, VA, facility, which it acquired in the purchase of Ballast Point Brewing.

The judge in this case could be asked to rule on what distinguishes a beer.

This time it’s about the beer

Anheuser-Busch’s own Super Bowl ad titled “Let’s Grab a Beer” featured people drinking hard seltzer in addition to beer.  “It’s never just about the beer.  It’s about being together,” the ad promoted.

Viewers saw everyday workers drinking Bud Light hard seltzer and Cutwater sprits RTDs. By many post-game reviewers of advertising, the spot ranked in the top ten of all commercials.

A-B Taken to Court Too

In other active litigation, A-B is operating under a temporary restraining order about its marketing practices associated with Michelob ULTRA hard seltzer. Suzie’s Brewery sued the beverage giant saying it unfairly used language in advertising that confused the public over who made the first certified organic hard seltzer.

Following the Oregon’s brewery’s victory in court, Hard Seltzer News interviewed Suzie’s CEO Chris Barhyte and that interview can be heard here.

Aiden Gentson