Olly Wehring

Comment - Wehring's Way: Grupo Modelo & Anheuser-Busch InBev: It's All About Respect

By | 26 June 2012

For many observers, yesterday's speculation linking Anheuser-Busch InBev to a move for control of Grupo Modelo has come a bit sooner than expected. But, it has always been expected.

The relationship between the two has spent the last four years in the doldrums. As well as stepping down from Anheuser-Busch's board four years ago, Modelo's CEO, Carlos Fernandez, has presided over the Mexican brewer as it has spurned A-B InBev's distribution presence in the UK and Japan, in China and in Australia.

It couldn't be much clearer, then, that Modelo hasn't been the biggest fan of A-B InBev in recent years. A shame, then, that A-B InBev holds a 50.2% non-controlling stake in the Mexican brewer.

It would appear that the animosity stems from the perception of a lack of respect for Modelo. That perception appears to stem from a fishing trip in the early-1990s. According to David Kesmodel of the Wall Street Journal, when the then-head of Anheuser-Busch, August Busch III, invited executives from Modelo to join him fishing off the Mexican coast, a "cultural schism" took shape.

"Busch III hooked a huge marlin," Kesmodel wrote. "As Busch III fought the massive fish, he was told he had a phone call – important business back in the US. Instead of reeling, Busch III took the call. He handed the rod to a bewildered Valentin Diez, a senior Modelo executive and major shareholder."

Deciding that he needed to head back to the US immediately, Busch III cancelled the rest of the trip, leaving the Modelo folk perturbed about the company's importance to the US brewer.

Fast forward to 2008, and A-B went one step further in the wrong direction.

The US, company, which by now owned 50.2% of Modelo, was in the middle of fighting off takeover advances from Inbev. A day later - a day! - reports surfaced that A-B was in talks with Modelo regarding a possible merger: A combined Anheuser/Modelo business would have been too big for InBev to buy.

That Modelo concluded shortly afterwards that it was being used as little more than a pawn led to Fernandez's departure from A-B's board a week later.

When A-B InBev released a statement yesterday, regarding the latest wave of speculation, I saw the first glimpse of an attempt by the behemoth to flatter Modelo.

"There is a long history of partnership between A-B InBev and Grupo Modelo," the statement concluded. "A-B InBev has great admiration for the Modelo business and its brands."

This alone may not be enough to wipe out Modelo's 'poor cousin' feeling. But, it's a start.

Sectors: Beer & cider, Mergers & acquisitions

Companies: Modelo, InBev

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Comment - Wehring's Way: Grupo Modelo & Anheuser-Busch InBev: It's All About Respect

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