Comment - Crown Imports on the rocks?
Modelo has filed a lawsuit against Constellation in the US, accusing it of failing to share the load on marketing expenses for the firms' 50-50 joint venture, Crown Imports.
While Mexico-based Modelo insisted in a statement last night that it remains "fully committed" to Crown, the news has left some of us wondering what lies in store for the venture.
Analsyst group Stifel Nicolaus today lowered its rating on Constellation stock from buy to hold, specifically citing the lawsuit.
Among other things, it noted - as we have - that "suing one's business partner is generally a bad precedent for ongoing business relations".
Under the current contract agreement, Nicolaus said, Modelo cannot terminate the deal with Constellation until 2016.
At the same time, Modelo is facing arbitration proceedings with A-B InBev to determine a 50% non-controlling stake in the brewer previously held by A-B. Modelo says this stake cannot automatically pass to the new InBev-run brewer.
A further source of speculation around Modelo could be buyout talks over its Mexican rival, Femsa Cerveza. If Femsa hooks up with a multinational brewer in 2010, there will be pressure on Modelo to take a similar route in order to compete.
The next few weeks and months are certainly shaping up to be an interesting time for the Mexican brewer.
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