Olly Wehring

Comment - Wehring's Way - Anheuser-Busch InBev and Grupo Modelo: That Ought To Do It

By | 14 February 2013

It would appear that either Anheuser-Busch InBev doesn't have the stomach for a courtroom battle with the US Department of Justice (DoJ) - would anyone? - or it has had 'a bit of a chat' with the department, to see if they can iron out their differences.

The news today (14 February) that the brewer has revised its agreement with Constellation Brands about the latter's JV with Grupo Modelo in the US, should see the DoJ finally unclip the velvet rope and let A-B InBev make party.

But, how happy is the brewer with the concessions it has agreed to make?

A-B InBev has given up its ten-year call option on Constellation and Modelo's Crown Imports unit in the US. It has also agreed to sell Modelo's brewery on the Mexico/US border to Constellation for US$2.9bn. The facility, which provides 60% of Modelo's US volumes, will be expanded by Constellation over the next three years to account for 100% of volumes for the US.

Now, A-B InBev must wait by its phone; we have no idea how long for.

Much as recent speculation has suggested that the brewer would baulk at giving up the Piedras Negras brewery, A-B InBev will drive home its claim that its move for Modelo has "always been about Mexico and making Corona more global in all markets other than the US". That's the line CEO Carlos Brito used today: Watch it become a mantra because, with no control over US supply, the buy can be about little else than Mexico and the rest of the world.

Short-term, then, A-B InBev could be forgiven for sulking a little about what it has had to do. But, with its global distribution prowess and the world's keenness to play with premium, its Modelo play should eventually provide payback; just not as spectacularly as the brewer may have initially hoped.

Expert analysis

Premium beer in emerging markets – forecasts to 2016

This report looks at the moves introduced by the big four brewers to up production and increase sales of their 'premium' beer brands in emerging markets, and how they have distinguished premium from their mainstream brands. As the BRIC nations, plus many of their smaller, newly industrialising neighbours, represent huge potential for growth, this report offers unique insight and analysis for beer brand owners, marketers and strategists and will input into your strategic planning process.

Sectors: Beer & cider, Mergers & acquisitions

Companies: InBev, Modelo, Constellation

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