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Constellation Brands stock plummets on news of DOJ antitust lawsuit in A-B InBev – Modelo deal

Constellation’s shares fell $7.42, or 19 percent, Thursday to $31.75. Since the Modelo deal was announced last year, Constellation’s stock has soared, going from under $20 a share to more than $30. U.S.-traded shares of Anheuser-Busch InBev SA fell 5.9 percent on Thursday to $88.63.

The stock actually dove nearly 30% immediately after the news hit.

More >> Democrat and Chronicle.

 

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Constellation Brands’ statement on DOJ antitrust lawsuit re: A-B InBev – Modelo deal

a-b inbev modelo corona merger

Press Release:

Constellation Brands, Inc. (CBI), (NYSE: STZ and STZ.B) issued the following statement today in response to the U.S. Department of Justice’s (DOJ) action concerning the proposed Anheuser-Busch InBev-Grupo Modelo transaction.

Constellation Brands is disappointed with the DOJ decision. The proposed transaction would further establish Crown Imports as a more independent and competitive entity and solidify its position as a major player in the U.S. beer industry. We will provide further comment when appropriate.

Given today’s development, we no longer expect the deal to close during the first calendar quarter of 2013 but we ultimately look forward to an expeditious resolution.

About Constellation Brands

Constellation Brands is the world’s leading premium wine company that achieves success through an unmatched knowledge of wine consumers, storied brands that suit varied lives and tastes, and more than 4,400 talented employees worldwide. With a broad portfolio of widely admired premium products across the wine, beer and spirits categories, Constellation’s brand portfolio includes Robert Mondavi, Clos du Bois, Kim Crawford, Inniskillin, Franciscan Estate, Mark West, Ruffino, Simi, Estancia, Corona Extra, Black Velvet Canadian Whisky and SVEDKA Vodka.

Constellation Brands (NYSE: STZ and STZ.B) is a S&P 500 Index and Fortune 1000® company with more than 100 brands in our portfolio, sales in about 100 countries and operations in approximately 40 facilities. The company believes that industry leadership involves a commitment to our brands, to the trade, to the land, to investors and to different people around the world who turn to our products when celebrating big moments or enjoying quiet ones. We express this commitment through our vision: to elevate life with every glass raised. To learn more about Constellation, visit the company’s website at www.cbrands.com.

Uinta Brewing hopes to launch cans of four brands beginning in March

uinta beer cans

Press Release:

(Salt Lake City, UT) – Amid the completion of their new 34,000 sq. ft. facility, Uinta Brewing Company welcomed a state-of-the-art canning line and a 600 bbl brite tank. These pieces are the first of the brewing equipment to take residence in Uinta’s new building, which sits immediately south of Uinta’s existing facility.

The new canning line, manufactured in Germany by Krones AG, is able to fill and seal 400 cans per minute. To introduce its new form of packaging, Uinta will can four mainstay brews: Cutthroat Pale Ale, Hop Notch IPA, Wyld Organic Pale Ale, and Baba Organic Black Lager. Canning these will not take from the brands’ traditional packaging outfit, they will continue to be available in the proprietary Compass Bottle, the novel design Uinta adopted as part of its major 2011 aesthetic revamp. The Uinta team, comprised of outdoor enthusiasts, was eager to add a package that pairs well with exploration. Cans will allow Uinta product to join consumers on outdoor adventures, a reality that aligned with the heart of Uinta.

Uinta’s can art was designed to integrate smoothly into the current packaging. Aside from some creative modifications, to help the bottle-to can transition, the apple doesn’t fall far from the tree. And each can, like each bottle, is adorned with Uinta’s trademark compass, ensuring that you’ll never get lost with a Uinta beer in hand.
With the installation and commissioning of the canning line scheduled for late February, Uinta hopes to get these cans rolling out in early March, 2013.

UINTA BREWING CO-Uinta Brewing Company embarked upon its mission of brewing world class, full-flavored, craft-brewed beer in 1993. Uinta Brewing is named after an east-west mountain range located in northeastern Utah. Many of Uinta’s beer names are inspired by Utah’s diverse landscapes or have historical significance. Uinta has broadened its market and can be found in 24 states from coast-to-coast, and has even ventured to other countries around the world. Uinta is committed to brewing world-class beer using the best practices and ingredients.

Deschutes Brewery hires two more sales managers

Deschutes Brewery logoPress Release:

(Bend, OR) – Deschutes Brewery has hired Craig Marshall as its new South Central zone sales manager and Gavin Stoub as its new Illinois market sales manager. Marshall, who is based in Phoenix, AZ, will oversee sales activities and team members in Arizona, Colorado, Texas, Utah and New Mexico. Stoub, who is based in the Chicago area, will manage distributor and account relationships within the state of Illinois.

In his position as zone manager, Marshall will be overseeing the sales managers in each of the states within his region. He will be providing strategic direction for sales while also building relationships and providing customer service to on and off-premise accounts. Marshall most recently served as a national account manager for AmeriGas for the western half of the United States, and has also held sales management positions for companies like the Craft Brewers Alliance, United States Beverage, Coors Brewing Company and Arizona Beverage Distributing Company. He holds a degree in business from Arizona State University.

As market sales manager for Illinois, Stoub will be working closely with distributor Wirtz Beverage in managing Deschutes Brewery brands, including establishing performance goals. He will be responsible for providing customer service and customer education on Deschutes Brewery beers to accounts, and running promotional events in the region. Stoub most recently served as a market manager for Goose Island Beer Company, and also has a strong background in the restaurant business. He holds a bachelor’s degree in business from Eastern Illinois University.

About Deschutes Brewery
Founded in 1988 as a brew pub in downtown Bend, Oregon, Deschutes Brewery is known for such brands as Black Butte Porter, its flagship brew and the nation’s number one selling craft porter, and the popular Mirror Pond Pale Ale. In addition to its original Bend pub, the brewery opened a second pub in Portland’s Pearl District in 2008. The company’s main brewing facility is located in Bend’s Old Mill District and produces over 250,000 barrels of beer annually for distribution in 20 states and two provinces. To find out more, visit www.DeschutesBrewery.com.

Breckenridge Brewery announces new $20 million brewery, reports 30% growth in 2012

breckenridge brewery new location

(Denver, CO) – Breckenridge Brewery announced on late Thursday afternoon some details around its new brewery that it will open next year. More below…

For the third straight year, Breckenridge Brewery of Colorado posted better than 20% growth with 2012 results reaching 30%. This success brings with it some challenges for the regional brewery as it is quickly reaching capacity at its Denver production brewery. Today the brewery announced that 12 beautiful acres along the South Platte River in Littleton, just south of Denver, will be its new home. The property stretches between South Santa Fe Drive and the Mary Carter Greenway Trail (also known as the Platte River Trail), a trail system enjoyed by bikers, walkers, and explorers of all ages.

Plans for the new, world-class brewery include several rustic buildings arranged across the landscape, much like might seen on a successful farm. The plans also include a hops field as foreground adjacent to South Santa Fe Drive. The farmhouse building will offer the freshest beer and food in a comfortable environment with indoor/outdoor seating, brewery tours, a general store and growler-to-go station, and a sunny beer garden.

“Our brewery was born and raised in Colorado,” shares Todd Usry, brewmaster and director of brewing. “We have our Colorado mountain home [in Breckenridge], and soon, a Colorado country spread along the river. Our Denver brewing operations opened in 1992, so it’s tough to leave Denver, but we’ll still have our two thriving restaurants there.”

Breckenridge Brewery is the 41st largest craft brewery in the United States. Its relocation to Littleton will expand the beer tourism movement that is steadily growing in Denver and Boulder. “Colorado’s Front Range craft beer community continues to attract attention on local, national and international levels,” says Steve Kurowski, marketing director for the Colorado Brewers Guild. “Craft beer in Colorado is beyond trendy; it’s a legitimate economic engine that keeps growing and creating jobs. Most importantly, it is respectful to its neighbors.”

The new facility will bring 60 jobs to Littleton, quickly growing to approximately 75 by the end of the first year of production. Breckenridge Brewery plans to break ground in the fall of 2013, brewing its first batch and opening to patrons in the fall of 2014.

COOL INFO ABOUT THE NEW BREWERY:

Building/Property information:
• Architecture is respectful of local history and the rural architectural design used elsewhere in Littleton
• Brewery/cellar/warehouse building square footage: 76,000 square feet
• Included in brewery plans is a 2,000-square-foot barrel-aging cellar
• 100-barrel Steineker brewhouse
• Krones bottling line, KHS kegging line, and Wild Goose Engineering canning line
• Initial brewing capacity: roughly 120,000+ barrels
• 6,000-8,000 square-foot farmhouse
• Property: 12 acres stretching from South Santa Fe Drive to the Mary Carter Greenway Trail along the South Platte River

Efficiencies:
• An energy recovery system to reduce emissions, condense steam, and store energy to heat water for the brewing process
• Solar tubes for natural lighting in the brewery and warehouse, with many windows for additional natural lighting
• Systems to recycle/reclaim as much water as possible throughout the brewery
• Collaboration with Xcel Energy to include additional efficiencies in the planning and construction phases of the project

Craft Brew Alliance hits lower end of revised depletions guidance, more optimistic on 2013

craft brew alliance logo

Note before you read the results below…the company set 2012 depletions guidance of high-single digits to low-double digits toward the beginning of the year and revised that guidance to 8-10% in August. The number the company hit at the end of the year was 6%.

Press Release:

(Portland, OR) – Craft Brew Alliance, Inc. (“CBA”) (Nasdaq: BREW), an independent craft brewing company, announced plans for strong 2013 growth and shared preliminary 2012 financial results. CBA’s successful strategic focus on building a national portfolio strategy over the last three years has positioned the Company to expect strong sales and profit growth in 2013 and take advantage of the dynamic craft segment to achieve long-term value for its shareholders.

Highlights of preliminary 2012 results include:
A strong close to 2012 highlighted by 10% growth in depletions for the fourth quarter
Full year preliminary top- and bottom-line results in line with guidance provided during the last quarterly update:
Sales growth of 13%, reflecting the continued strength of the Kona, Redhook and Omission brands as well as continued repositioning of the Widmer Brothers brand
Depletion growth of 6%
Shipment growth of nearly 8% reflecting start up of new initiatives such as the launch of the Omission brand and international export
Gross margin rate of 29.6%, a reduction of 70 basis points from 2011, reflecting pressure from distribution costs and grain prices, partially offset by brewery productivity and positive product mix
Selling, general and administrative expense (“SG&A”) of $44.9 million, an increase of $5.1 million from 2011, reflecting continued investments in brand development and sales capabilities
Diluted earnings per share (“EPS”) of $0.13 versus 2011 EPS of $0.51; 2011 EPS included the one-time gain on sale of equity interest in Fulton Street Brewery of $0.34 per share
Capital expenditures of approximately $8.8 million, reflecting continued investments in capacity, efficiency and quality initiatives

“In 2013, we expect meaningful growth in both revenue and earnings resulting from the overall strength of our portfolio strategy, operating expense leverage and SG&A leverage,” said Terry Michaelson, CBA’s CEO. “We are energized to enter the next phase of our portfolio strategy focused on leveraging our recent investments, brand momentum and breadth, and geographic expansion to deliver improved sales and profit growth, consistent with our phased approach to strengthening our model which ultimately will deliver long-term value growth.”

We believe our brand strategy is the most promising it has been in CBA’s history. We expect strong growth tempered by unprecedented competition. Expectations for 2013 include (i) confidence in the continued growth in sales of Kona and Redhook, and clear positioning of Widmer Brothers offerings; (ii) expansion into new geographic markets for Kona and international expansion for all brand families; (iii) updates to packaging across all brand families, as well as introduction of unique can and bottle offerings; (iv) refined messaging on Omission beers, promoting the beer as specially crafted to remove gluten; and (v) continued development of cross brand packages bringing the power of our portfolio to consumers in real and compelling ways.

Craft Brew Issues 2013 Financial Outlook and 2012 Preliminary Results

As in 2012, we are providing full-year guidance for 2013. We anticipate significant differences in 2013 quarterly performance as compared to 2012 because of both normal changes to program and new product timing, as well as uneven 2012 quarterly performance as a result of the implementation of new supply chain processes and systems that will drive improved supply chain control during 2013.

Depletion growth estimate of 7% to 11%, reflecting the continued strength of the Kona, Redhook and Omission brands and further stabilization of the Widmer Brothers brand

Average price increases of approximately 1% to 2%

Contract brewing revenue expectations for 2013 are approximately half of 2012 as a result of the termination of the Goose Island contract brewing arrangement

Gross margin rate of 28.5% to 30.5%, reflecting pressure from distribution and packaging component costs, partially offset by improved brewery productivity

SG&A expense ranging from $47 million to $49 million, reflecting leverage from the foundation built by more aggressive spending in prior years

Capital expenditures of approximately $11 million to $13 million, continuing our investments in capacity and efficiency improvements, quality initiatives and restaurant and retail

Forward-Looking Statements

Statements made in this press release that state the Company’s or management’s intentions, hopes, beliefs, expectations or predictions of the future, including depletions and sales growth, the level or effect of SG&A expense, the amount of capital spending, and the benefits or improvements to be realized from strategic initiatives and capital projects, are forward-looking statements. It is important to note that the Company’s actual results could differ materially from those projected in such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company’s SEC filings, including, but not limited to, the Company’s report on Form 10-K for the year ended December 31, 2011. Copies of these documents may be found on the Company’s website, www.craftbrew.com, or obtained by contacting the Company or the SEC.

About Craft Brew Alliance

CBA is an independent, publicly traded craft brewing company that was formed through the merger of leading Pacific Northwest craft brewers – Widmer Brothers Brewing and Redhook Ale Brewery – in 2008. With an eye toward preserving and growing one-of-a-kind craft beers and brands, CBA was joined by Kona Brewing Company in 2010. Craft Brew Alliance launched Omission beer in 2012.

When Kurt & Rob Widmer founded Widmer Brothers Brewing in 1984, they didn’t confine their brewing exploration to strict style guidelines. To this day, Widmer Brothers continues to create craft beers with a unique and unconventional twist on traditional styles that are award winning and please a wide range of craft beer lovers. Redhook began in a Seattle transmission shop in 1981 and those colorful roots are reflected in the brand’s personality to this day. The eminently drinkable beers consistently win awards and please crowds across the United States. Kona Brewing was founded in 1994 by the father and son team of Cameron Healy and Spoon Khalsa, who dreamed of crafting fresh, local-island brews with spirit, passion and quality. As the largest craft brewery in Hawaii, Kona personifies the laid-back, passionate lifestyle and environmental respect of the Hawaiian people and culture. Omission beer is the first craft beer brand in the United States focused exclusively on brewing great tasting craft beers with traditional beer ingredients, including malted barley, that are specially crafted to remove gluten.

surly furious cans crop

Surly Brewing awarded another $450k to put toward cleanup of potential new Minneapolis location

When asked about the recent cleanup grants awarded for the Minneapolis site, Surly told Twin Cities Business on Wednesday via e-mail: “After submitting the necessary applications and paperwork last year, we’ve received word that the majority of our requests have been approved. This is a big step in the process and will allow Surly to move forward in the next steps to potentially acquire and redevelop the site.” 

More >> Twin Cities Business.

 

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Diamond Knot 666 Aged Ale to be released on Saturday

diamond knot 666 aged alePress Release:

(Mukilteo, WA) – Diamond Knot­ brewers, like so many others, have traditions, habits, idiosyncrasies, rituals; you name it. One perennial tenet of Diamond Knot’s production brewery is metal. Sure, there’s lots of stainless, but what they’re talking about is floor-shaking, ear-piercing, guitar-shredding heavy metal. Whether it’s cookie-monster Black Metal or Progressive Metal with its 18-minute-long songs, visitors are guaranteed to hear some hard stuff when they walk into the production brewery.

Iron Maiden is perhaps best known for their explorations into the darkness of “The Number of the Beast.” Ozzy Osbourne has most certainly gone there, as well. In the end, it’s really just a number: six-hundred sixty-six.

As Diamond Knot’s brewers approached the 666th batch of beer brewed at the production brewery, they decided that it was imperative to do something fun, silly and devilishly delicious by incorporating “666” into every possible aspect of this beer. Thus was born the “Number of the Yeast”.

-A 66.6 minute mash
-666 grams of first-wort hops
-A 66.6 minute boil
-Two 666-gram aroma hop additions
-Fermented at 66.6 degrees Fahrenheit
-Only 66.6 cases were packaged (okay, it was 66-2/3, only because we can’t make 0.6 cases)

The Malts: Gambrinus Pale, Flaked Barley Gambrinus Munich Light, Crystal 80L, Gambrinus Vienna, Chocolate Malt

The Hops: Galena, Chinook

O.G. 18.6 Plato (1.074)
F.G. 3.2 Plato (1.013)

Watch www.diamondknot.com for a limited list of retail locations. Sales of Diamond Knot 666 begin Feb. 2, 2013, when the beer has been aged for exactly 666 days.

a-b inbev modelo corona merger

More on US DOJ’s antitrust lawsuit to stop A-B InBev / Modelo deal

"Today, Modelo aggressively competes head-to-head with ABI in the United States." So begins the Department of Justice’s lawsuit, which seeks an injunction to stop the ABI – Modelo deal, which would in turn put the kibosh on the ABI – Constellation deal. The deal is the biggest to be opposed by the Justice Department since 2011, when it sued to block AT&T’s proposed $39 billion takeover of T-Mobile USA.

More >> Beer Business Daily.

 

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More on Redd’s Apple Ale’s nationwide launch this week

Redds Apple Ale

Press Release:

(Albany, GA) – Redd’s Apple Ale is daring the nation to branch out by announcing its national launch.

Launched in summer 2012, Redd’s Apple Ale debuted in Alabama, Arkansas, Florida, Georgia, Louisiana, Maine, Mississippi, Missouri, Oklahoma and Texas. Buoyed by its early success, February 1st, 2013 marks the nationwide availability of Redd’s Apple Ale.

Redd’s Apple Ale is an apple flavored golden ale with low malty and bitterness cues. With a crisp clean finish that allows the natural apple flavor to come through, this ale is for those times when you are looking to try something different.

“Redd’s Apple Ale is all about inspiring beer drinkers to dare to branch out,” said Andrew Zrike, brand manager of Redd’s Apple Ale. “With its crisp, sweet and refreshing taste, we dare consumers to reach for a Redd’s as an alternative to their everyday beers. We are excited and proud to share Redd’s Apple Ale with beer drinkers across the country.”

Redd’s Apple Ale’s launch will be supported by a national marketing campaign which includes advertising during the Super Bowl on February 3rd in select markets in the Great Lakes and Southeast regions. In addition, Redd’s advertising will also be seen and heard on ESPN as the official sponsor of ESPN Radio’s Super Week on shows like Mike & Mike, The Herd and The Scott Van Pelt Show; as well as across ESPN’s TV assets, such as NFL Countdown, NFL Live and NFL Super Bowl Kickoff.

Redd’s Apple Ale will be available in 6 and 12-pack bottles, 12-pack cans and 16 ounce single serve cans. Redd’s is 5 percent alcohol by volume and only 165 calories per 12 ounce serving. Learn more about and find out where Redd’s Apple Ale is available by visiting www.reddsappleale.com, www.facebook.com/reddsappleale and Twitter #branchout.

Bell’s Brewery among one dozen commissioned to brew Ashley’s 30th Anniversary beers

bells logo

Press Release:

(Ann Arbor, MI) – 2013 marks 30 years since the founding of Ashley’s Pub, Michigan’s premier multi-tap beer bar and a beloved gathering place for generations of University of Michigan students and alumni, Ann Arbor townies, and “beer tourists” from around the state, country, and world.

To celebrate this milestone, Ashley’s has commissioned 12 leading breweries to craft unique commemorative 30th anniversary beers, to be released throughout the year at exclusive events at both Ashley’s locations in Ann Arbor and Westland. In February, Ashley’s is partnering with another of Michigan’s most well known craft beer institutions, Bell’s Brewery of Kalamazoo.

Also founded in 1983 (as a homebrew supply shop), Bell’s has had a close relationship with Ashley’s since it converted to a brewery in 1985 and founder Larry Bell personally delivered his beers to Ashley’s out of his van. To honor this longstanding and mutually beneficial relationship, Bell’s has taken the extraordinary step of brewing Ashley’s 30th Anniversary Ale, the inaugural commemorative beer to be released only at Ashley’s in Ann Arbor and Westland this Friday, February 1, at 3 p.m., with a special 6 p.m. celebratory toast in Ann Arbor.

According to Marketing Director Laura Bell, Bell’s was eager to help Ashley’s mark this milestone.

“Larry was like ‘let’s do it.’ He was really excited about being able to do that,” she said. “We don’t do very many beers like (this), so it takes a really special reason for us to make a commemorative beer for some of our favorite friends.”

Bell describes the beer, a brown ale brewed from a recipe created by Larry Bell himself, as “a very malt-forward beer with almost no aroma hops. It’s got this wonderful, complex, malty, bready, dark characteristic to it. It’s very different than what the popular trends are today.”

Surly Overrated West Coast IPA label approved for 16 oz. cans

Surly Overrated West Coast IPA

UPDATE: Some are wondering whether this beer is the same as Bandwagon IPA, a beer exclusive to Target Field, home of the Minnesota Twins. According to Brewmaster, Todd Haug, this beer is more or less different from Bandwagon IPA with a brand-new hop for the brewery.

(Minneapolis, MN) – On Thursday, label approval came in for Surly Overrated West Coast IPA. On rare occasion, labels that get approved may never make it to market but it is the exception rather than the rule. So, there is a good chance that Surly has a new 16 oz. can coming out in the future though details are unavailable at the moment. Below is the label copy…

It’s been said, “It’s easier to brew an extremely hoppy beer than an extremely balanced beer.” And you know us, we are always looking for the easy way out, so we jumped on the West Coast IPA Bandwagon and brewed this dry and hoppy ale. “Surly’s a little bit of a one-trick pony, they just brew gimmick beers,” and maybe we are OVERRATED, but at the end of the day, it’s just a beer. If you like it, great, so do we. If you only liked us when we were small, then leave this one on the shelf. Let one of the fanboys grab it.

We dug around for a source to what appears to be a chip on Surly’s shoulder but couldn’t come up with the quote on the label.

But there was this Beer Advocate review by member, BeerLover…

[...] i dont wonder with “surly’s “Our Sh!t dont stink, we are better than every1 else’s) attitude if this is not just a marketing trick/ploy/gimmick to make their already high in demand beers even more crazed over [...]

And this one by JamesMN

[...] I tend to think that Surly is a little overrated (due mostly to the high price point and the “we’re better than you” attitude). [...]

Who knows…maybe your comments may someday upset a brewery into releasing a new beer.

A-B InBev’s statement on U.S. Department of Justice’s antitrust lawsuit in Modelo deal

a-b inbev modelo corona mergerNews just came out the U.S. Department of Justice is going to battle with A-B InBev over its proposed purchase of Grupo Modelo. A-B InBev just released a statement (below)…

The U.S. Department of Justice’s action seeking to block the proposed combination between AB InBev (Euronext: ABI; NYSE: BUD) and Grupo Modelo is inconsistent with the law, the facts and the reality of the market place. On 29 June 2012, the companies announced an agreement under which AB InBev will acquire the remaining stake in Grupo Modelo that it does not already own. We remain confident in our position, and we intend to vigorously contest the DOJ’s action in federal court. Given today’s development, we no longer expect the deal to close during the first quarter of 2013. We will comment further once we have reviewed the DOJ filing.

Justice Department files antitrust lawsuit challenging A-B Inbev / Grupo Modelo deal

a-b inbev logo

Press Release:

(Washington, DC) – The Department of Justice filed a civil antitrust lawsuit today challenging Anheuser-Busch InBev’s (ABI) proposed acquisition of total ownership and control of Grupo Modelo. The department said that the $20.1 billion transaction would substantially lessen competition in the market for beer in the United States as a whole and in 26 metropolitan areas across the United States, resulting in consumers paying more for beer and having fewer new products from which to choose.

Americans spent at least $80 billion on beer last year. According to the department, ABI’s Bud Light is the best selling beer in the United States and Modelo’s Corona Extra is the best-selling import. Because of the size of the beer market in the United States, even a small increase in the price of beer could result in billions of dollars of harm to American consumers, the department said.

The department’s lawsuit, filed in the U.S. District Court for the District of Columbia, seeks to prevent the companies from merging and to preserve the existing head-to-head competition between the firms that the transaction would eliminate.

“ The department is taking this action to stop a merger between major beer brewers because it would result in less competition and higher beer prices for American consumers,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “If ABI fully owned and controlled Modelo, ABI would be able to increase beer prices to American consumers. This lawsuit seeks to prevent ABI from eliminating Modelo as an important competitive force in the beer industry.”

ABI and Modelo–the largest and third largest beer firms, respectively–together control about 46 percent of annual sales in the United States. MillerCoors, the second largest beer firm, accounts for about 29 percent of nationwide sales. Beer is generally grouped into four distinct segments by industry participants–sub-premium, premium, premium plus and high-end. The sub-premium segment includes: Busch (owned by ABI); and Keystone (owned by MillerCoors). The premium segment includes: Bud Light; Coors Light; and MillerLite. The premium plus segment includes: Michelob (owned by ABI); and Modelo Especial (owned by Modelo). The high-end segment includes: imports such as Corona (owned by Modelo) and Heineken; and a variety of craft beers.

According to the department’s complaint, the U.S. beer market is already highly concentrated, and prices are increased by strategic interactions among the largest brewers, including ABI and MillerCoors. ABI generally acts as the price leader, implementing annual price increases in the sub-premium, premium and premium plus segments of the U.S. beer industry. MillerCoors and other brewers have typically joined the ABI price increases, while Modelo has not. By pricing aggressively, Modelo–through its importer, Crown Imports–puts pressure on ABI to maintain or lower prices, especially in certain parts of the country. As a result, Modelo has become a particularly important competitor in the U.S. market.

The complaint quotes internal company documents demonstrating both ABI’s determination to maintain its upward price leadership in the U.S. beer industry and Modelo’s present-day position as a significant competitive threat to ABI:

ABI has implemented a “conduct plan,” whereby ABI hopes to establish “the highest level of [price] followership” by its large rivals by being as “consistent,” “simple” and “transparent” as possible;

ABI believes that its conduct plan provides the highest possibility of “sustaining a price increase” and “ensuring competition does not believe they can take share through pricing”;

By contrast, Modelo’s pricing strategy in the United States is known as the “momentum plan” and aims to narrow the “price gap” between Modelo’s imports and domestic premium beers, such as ABI’s Bud Light, stealing market share from ABI by enticing consumers to “trade up” to Modelo beer; and

ABI executives acknowledge that Modelo has “put increasing pressure” on ABI competitively, and that Modelo’s strategy is at odds with ABI’s well-established practice of leading prices upward with the expectation that its competitors will follow.

The complaint also discusses ABI’s efforts to target Corona. ABI considered Corona to be a significant threat, and launched Bud Light Lime in 2008 to compete with Corona. ABI went as far as to mimic Corona’s distinctive clear bottle. Ultimately, instead of trying to compete head-to-head with its own product, Bud Light Lime, ABI is thwarting competition by buying Modelo.

The department alleges that ABI’s acquisition of total ownership and control of Modelo would eliminate the existing competition between ABI and Modelo, further concentrating the beer industry, enhancing ABI’s market power and facilitating coordinated pricing between ABI and the remaining large players. Consumers would, as a result, see higher prices and less innovation.

The department’s complaint also alleges that ABI and Modelo efforts to remedy the anticompetitive aspects of their transaction are inadequate. The complaint states that ABI has agreed to sell Modelo’s existing 50 percent interest in Crown to its Crown joint venture partner, Constellation. ABI would also enter into an exclusive agreement to supply Constellation with Modelo beer to import into the United States, although ABI can terminate this supply agreement after 10 years and would retain the Modelo brands and its brewing and bottling facilities.

“The companies’ attempt to fix this anticompetitive deal through t he sale of Modelo’s existing interest in Crown and a temporary supply agreement is not sufficient to prevent consumer harm from ABI’s acquisition of its competitor, Modelo,” said Baer.

The complaint states that the combined effect of the proposed acquisition of Modelo and the proposed fix is to eliminate from the marketplace a sophisticated brewing firm with a long history of success and replace it with an importer which will own no brands or brewing facilities and be totally dependent on ABI for its supply of Corona and other Modelo brands. The documents in the case show that as Crown’s CEO wrote to his employees after the acquisition was announced: “our #1 competitor will now be our supplier…it is not currently or will not, going forward, be ‘business as usual.’” The department’s complaint said that not only will competition be harmed by the loss of Modelo as a competitor, but by removing an independent brewer–Modelo–from the market, strategically coordinated pricing will become easier in the future.

ABI is a Belgian corporation with its principal place of business in Leuven, Belgium. In 2011, ABI had revenues of approximately $39 billion. ABI currently has a 43 percent voting interest and a 50.35 percent economic interest in Modelo. ABI has stated in its annual reports filed with the Securities and Exchange Commission that it does not have voting or other effective control of Modelo. Through the proposed acquisition, ABI would acquire control of, and the remaining economic interest in Modelo.

Modelo is a Mexican corporation with its principal place of business in Mexico City. In 2011, Modelo had revenues of approximately $7 billion.