Corona importer loses big in beer industry dustup

Constellation Brands' stock plummets after the Department of Justice blocks Anheuser-Busch InBev from buying Grupo Modelo.

By Jason Notte Jan 31, 2013 1:58PM
You know how gamblers on Super Bowl Sunday get really angry at a team for not covering the spread and costing them money? That's kind of how wine and beer company Constellation Brands (STZ) is feeling about the Justice Department's lawsuit against beer giant Anheuser-Busch InBev (BUD).


Last summer, A-B made a $20.1 billion deal to increase its 50% stake in Mexican brewer Grupo Modelo and take control of its Corona, Modelo and Pacifico brands.

The deal caught the eye of the Department of Justice largely because A-B already holds a 46% share of the U.S. beer market, according to Beer Marketer's Insights. Throw in the 5.7% share held by Crown Imports, the Constellation-Modelo joint partnership that imports and markets Modelo brands in the U.S., and A-B would be selling one out of every two beers Americans drink.


According to the Wall Street Journal, the Department of Justice filed suit on Thursday to prevent the deal from going down, saying it "would result in less competition and higher beer prices for American consumers." That undid Constellation's plan to buy Modelo's 50% stake in Crown Imports for $1.85 billion and become the sole exporter of Modelo products. That, in turn, sent Constellation stock plummeting more than 24% and forced Nasdaq to temporarily halt trading because of the volatility.Image: Beer ( Corbis)


That's a shame for Constellation, but it's also a sign that the Justice Department didn't like the smell of this deal one bit. A-B and Constellation's argument was that Modelo's sale of its stake in Crown Imports gives Constellation the U.S. market share for any Modelo, Corona and Pacifico products sold in the U.S. Never mind that A-B would own Modelo and use its extensive distribution system to send it all over the country: Constellation would be the necessary middle man and take that unwieldy burden off A-B's shoulders while doubling its revenue in the process.


Even though Mexico's antitrust group OK'd the deal, the DOJ still wasn't buying it. Taking A-B out of the equation for a moment, Crown Imports' 5.7% U.S. market share is nearly equal to that of the entire craft beer industry combined, according to industry group the Brewers Association. It's larger than the 4% U.S. presence of European megabrewer Heinkeken and five times that of Guinness owner Diageo (DEO).


A-B has vowed to continue its battle in court, but the damage to Constellation has already been done. Constellation's plans for 2013 hinged on A-B's deal for Modelo being completed in the first quarter. Without it, Constellation's 2013 looks not only half-empty, but skunked.


More on moneyNOW

139Comments
Jan 31, 2013 4:23PM
avatar
it's okay for the fuel companies to merge and then bump everyones prices whenever there
is a thunderstorm in the atlantic, or utilities to merge and ask for higher prices, or for cable
and internet providers to use their monopoly powers in each city to gouge their customers,
but a beer company merger could be bad for the economy. i guess they didn't make the right
campaign donations during the elections. what a rip-off for the consumers. but we are safe
from the big beer monopolies. a giant load of crap is what it is !!!

Jan 31, 2013 4:23PM
avatar
The feds just ok'd the sale of a hi tech battery manufacturer to China that our taxes bailed out, and now they're worried about beer? We are really screwed people.
Jan 31, 2013 4:07PM
avatar

Anyone who is against this doesnt understand that the DOJ is preventing a monopoly. That is within its purview.

 

Making sure the market stays open for smaller breweries is what best for everyone.

Jan 31, 2013 4:02PM
avatar
All the lobbyists in this country are related to all the politicians.  That's why we need a one term policy.  This has become a thieving family affair in Washington D.C.  They put their noses where they don't belong!
Jan 31, 2013 4:48PM
avatar
There is no such thing as "JUSTICE DEPT"...ther is no justice until Holder is in jail for gun running.
Jan 31, 2013 4:31PM
avatar

Looks like they forgot to buy the right congressman! They will get it right next time remember NAFTA!

Jan 31, 2013 4:31PM
avatar
Government has put itself into every aspect of our lives, and we don't need it.  Its not the place of government to insure 'fairness'.  Build a better mousetrap and the world will beat a path to your door, provided that the government lets you.  As Reagan said, ' government is not the solution to problems, it is the problem'. 
Jan 31, 2013 5:43PM
avatar

Washington is worried about our beer, they should be concerned about the recent spike in gas prices why isn't anyone focusing more attention on that? $.39 spike since Jan 1st come on that's a monopoly.

Jan 31, 2013 3:50PM
avatar
Is there any question why lobbying is such a problem?  If the government would stay out of businesses' business, there would be no reason to try to exert influence.  And the government does such a great job at regulating business anyway.  Obama is laying off his Jobs Council - everyone is getting fired.  Their job is done.  They have ruined the economy as our permanent underclass grows more dependent on the government (permanent liberal voters) with fewer and fewer to pay for all the free handouts the left promises.
Jan 31, 2013 3:56PM
avatar
Wow, really... they'll block commodities from merging when there are a lot of small businesses expanding and taking market share from the big guys.  But not in important industries where all that is left are big players because of not blocking monopolies.
Jan 31, 2013 4:10PM
avatar

I prefer cask conditioned ale found in US micro breweries and in England. My opinion

of american beer is similar to having sex in a canoe, f-----g close to water.

Jan 31, 2013 3:54PM
avatar
But it's ok for teachers to hold the education system hostage, and a couple dozen longshoremen to cause 5.7 B a day in losses while on strike...
Jan 31, 2013 4:44PM
Jan 31, 2013 4:41PM
avatar
So instead of selling ten crappy beers, now they will sell 15 crappy beers.  Sheesh, thought we had bigger fish to fry?
Jan 31, 2013 4:45PM
avatar

Bud bought Rolling Rock, stopped making it in Latrobe and basically killed the brand. They might be doing the same thing to Corona not expanding its distribution.

Jan 31, 2013 4:41PM
avatar
Brew your own beer. It's WAY better than anything A-B sells.
Jan 31, 2013 4:29PM
avatar
I don't believe it...  A-B beer sucks!
Jan 31, 2013 4:45PM
avatar
side step the government, make youre own beer, Mr. Beer anyone?
Jan 31, 2013 4:19PM
avatar
What a shame the King of beer is going to have to settle on being Queen or maybe the Joker is more in line.
Jan 31, 2013 5:22PM
avatar
Yes we should worry about a cartel cornering the beer market. Thank goodness the oil companies..uh....er....oops, nevermind.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

Trending NOW

What’s this?

MARKET UPDATE

[BRIEFING.COM] The stock market finished the Tuesday session on an upbeat note with small caps pacing the rally. The Russell 2000 advanced 0.8%, while the S&P 500 added 0.5% with eight sectors ending in the green.

Although geopolitical concerns factored into the modest retreat on Monday, the worries were cast aside today after separatist forces in eastern Ukraine handed over black boxes from MH17 to Malaysian authorities and Secretary of State John Kerry began working on brokering a ... More

MSN MONEY'S