Modelo Agrees To Reduce Its Tied House Monopoly In Mexico

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I know governments have become increasingly beholden to business interests in my lifetime, but the idealist in me is unable to just be okay with that. It’s certainly true here in the U.S., where politicians are bought and sold, and the interests of ordinary folks rarely count for much in political decisions. And that’s unlikely to change while corporations are essentially immortals with all of the rights of people and none of the consequences or responsibilities, and whose profits have been declared free speech that can be used to influence our politics. Apparently Mexico’s government is similarly business-oriented. According to a story in today’s Wall Street Journal, “Mexico’s top brewer said Thursday it reached an agreement with the country’s anti-trust authority to limit its sales exclusivity contracts with corner stores, bars and restaurants, allowing more room for craft brewers and other players in a lucrative market split by Anheuser-Busch InBev’s Grupo Modelo unit and Heineken N.V.’s Cerveceria Cuauhtemoc Moctezuma.”

In a world where people mattered, a government would tell companies what the rules are and expect them to follow them. Negotiations would be, and frankly should be, unnecessary. But that’s not the way the world works anymore, if indeed it ever did.

More from the Journal piece:

Modelo said in a statement it would cap such agreements to no more than 25% of its points of sale, with the aim of reducing that number to 20% by 2018. The brewer said it would also allow craft brewers to sell their beers in bars and restaurants where Modelo has locked in exclusive pouring terms.

The Mexican beer market, the world’s fifth-biggest according to Euromonitor, is a virtual duopoly, with Modelo brands like Corona claiming around 58% of the 67 million hectoliters of brew sold in Mexico each year, while Cerveceria Cuauhtemoc brands like Tecate account for 41%.

Around half of the beer sold in Mexico each year is channeled through small convenience stores, many of which agree to sell only one of the two brewers’ brands in exchange for branded awnings, signs or refrigerators, as well as discounts on beer purchases, credit and even assistance with local permits.

The country is Heineken’s largest market, accounting for about 16% of sales, while it represents around 13% of AB InBev’s pro forma sales, according to Credit Suisse.

Nice that Modelo will “ALLOW craft brewers to sell their beers in bars and restaurants.” How magnanimous. While the Wall Street Journal, itself as pro-business as they come, ignored the reasons for Modelo’s change of heart, Beer Business Daily reveals why they’ve agreed to soften their monopoly. It’s because the Mexican Federal Competition Commission ruled, 4-1, “that future exclusive contracts that Cuauhtemoc and Grupo Modelo have with retailers be limited in nature.” If they don’t, they could be fined up to 8% of their total income. According to Harry, currently the two biggest Mexican brewery’s “exclusive contracts with retailers account for about 85% of total volume.”

More from Beer Biz Daily:

The CFC ruled that craft brewers (such as Cerveceria Minerva and Primus) that manufacture beer in Mexico (under 100m hectos a year) should have unfettered access to restaurants, bars, and cantinas, and that big brewers’ exclusive contracts with accounts should not exceed 25% of the total outlets they do business with, which is reduced to 20% over five years. Current contracts are allowed to continue in effect without change until they expire.

I find it odd that Heineken apparently responded with a press release saying “that it will abide by the new rules and ‘standardise and simplify some of our future contracts with customers.'” How nice that they let us know they’ve agreed to follow the law. That’s what drives me crazy about the large multinational corporations with economies bigger than many nations. But at least it’s some good news for Mexico’s smaller breweries and their burgeoning craft beer scene.

Class Action Suit Alleges ABI Watering Down Bud & Michelob

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Just when you think things can’t get any stranger, beer drinkers in three states — California, Pennsylvania and New Jersey — have filed a class action suit against Anheuser-Busch InBev. The L.A. Times is reporting in Beer drinkers accuse Anheuser-Busch of watering down brews, that the lawsuit alleges the following:

Ten Anheuser-Busch products were named in the lawsuits: Budweiser, Michelob, Michelob Ultra, Bud Ice, Bud Light Platinum, Hurricane High Gravity Lager, King Cobra, Busch Ice, Natural Ice and Bud Light Lime.

Former employees at the company’s 13 breweries — including some in high-level positions — are cooperating with the plaintiffs, said San Rafael, Calif., lawyer Josh Boxer, the lead attorney in the case.

“Our information comes from former employees at Anheuser-Busch, who have informed us that as a matter of corporate practice, all of their products [mentioned in the lawsuit] are watered down,” Boxer said, according to the Associated Press. “It’s a simple cost-saving measure, and it’s very significant.”

The excess water is added just before bottling and cuts the stated alcohol content by 3% to 8%, he said.

ABI, naturally, is calling the lawsuit “groundless,” but it will be interesting to see how it all plays out.

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Cartoon by Tony Husband.

UPDATE: NBC News is also now reporting this story, in Budweiser waters down its beer, lawsuit alleges. Apparently, Bloomberg broke the story earlier today, and also the AP, the BBC and Business Day have all weighed in.

UPDATE 2: I’ve seen a lot of commentary on this story in the interwebs suggesting that since there appears to be no test results from the Plaintiffs in this case that perhaps they are simply confusing high-gravity brewing with actively lowering the final alcohol percentage, which is a reasonable assumption. But there may be another possibility. Thanks to Stan at Appellation Beer for pointing out a post from last October by Gary Spedding at his Alcohol Beverage Testing News. I’ve known Gary for a number of years. He runs a lab in Kentucky called Brewing and Distilling Analytical Services, LLC and also most years presents an orientation exercise for GABF judges the day before we start each year. It’s sort of a continuing education component of the judging experience. His presentations are always interesting and informative and, needless to say, Spedding’s expertise is unassailable.

Last October, he posted Gaining its airs and losing its graces — a Tale of Two Buds, which he wrote in response to a popular article last fall from Bloomberg Business Week entitled The Plot to Destroy America’s Beer. In addressing the suggestion in the article that Budweiser beer had changed after InBev took control of Anheuser-Busch, noted the following experiences he’d had with the beer in recent months.

Bud has been our control beer in our laboratory … for calibrating our alcohol instruments Bud goes in after calibration to see hopefully 5.00% abv. pretty much on the nose. Not so recently. Now as low as 4.94% after slipping from 4.98% earlier in the year. Losing it graces by higher airs it may be toppling from its top spot and is no longer our control beer of choice. But it is changing. A tale of two Buds (early and late) would reveal much more. Over the years the international bitterness content has declined from about 12 in the late 90’s to 7-8 today — another parameter to watch.

That original post also included a discussion of increasing oxygen levels, but Spedding had a lengthy discussion with Paul Cobet, who’s the Director of the Technical Center for ABI in St. Louis. The oxygen question is apparently now less of a concern and appears to be instrument-driven, and Gary updated that with a newer post, Regaining its Graces — Driving Oxygen Down — Good for Budweiser. So while the plaintiffs may not have tested the beer — still odd, admittedly — there is apparently some reason to think their case may hold water after all.

Two Beer Companies, 210 Beer Brands

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Today’s infographic is an interesting one, created by NPR. Entitled Two Beer Companies, 210 Brands, it shows all of the beer brands owned by Anheuser-Busch InBev and SABMiller across the globe. Below the map, there’s also a list of brands by country, color-coded by which beer giant owns or controls them. How accurate is it? Hard to say. It doesn’t appear to include line extensions, which would balloon the chart to many times its current size, but glancing at the list for the United states, it looks like it may be missing some, though to be fair I didn’t do a line by line comparison.

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Click here to see the chart full size.

A Bud Is A Bud Is A Bud

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Oh, I hate to pick on the mainstream media as they cover the world of beer, but this is too delicious not to point out. In a story about the proposed buyout of Grupo Modelo by Anheuser-Busch InBev, entitled The Great Beer Monopoly Deal May Be Back On, the Atlantic features the following photo, which I downloaded in case somebody gets wise and replaces it. And a hat tip to Tom Dalldorf for sending me the link. I guess one Bud’s as good as another. Can I assume I don’t have to draw a diagram?

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Megan Fox For Brahma Beer

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Today I saw in the UK Sun that American actor Megan Fox is doing ads for Brahma, the Brazilian Budweiser, an especially accurate association since Brahma is part of Anheuser-Busch InBev. Why do we care? We don’t, but I’m game to look at a couple of ads with Megan Fox in them. Isn’t that why advertisers chose her? Of course, it’s still a tasteless, flavorless beer.

As Mais Gostosas do Carnival (The Hottest Carnival)

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Is it just me, or does that beer have his arm around Fox? Is the beer wearing sunglasses because he doesn’t want to be seen with Megan Fox?

Convidando Megan Fox Pra Uma Brahma (Inviting Megan Fox for a Brahma)

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And here she is going off to have a picnic. According to the Sun, she’s flying down to Rio to do a commercial and pose for some more ads.

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Although humorously enough, a few years ago the hipster appeared more partial to Pabst Blue Ribbon. This was taken by paparazzi in 2009. Ah, sex and beer. What’s not to love. It seems to me, the big brewers follow a variation of the old lawyer’s adage. “When the law is on your side, argue the law. When the facts are on your side, argue the facts. When neither the facts nor the law are on your side, make an ad hominem attack.” In the brewer’s world it’s more along these lines. “When the beer tastes good, promote the beer. When the brewery has personality, promote the brewer. When the beer has neither, promote a celebrity, a cartoon, or both.”

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Nine Beers Experiencing Titanic Sales Drops

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24/7 Wall St. had an interesting look at some beers that have fallen on hard times over the last five years. Entitled Nine Beers Americans No Longer Drink, it lists some mainstream beers that have experienced some amazing drops in sales from 2006 through last year. The data is from Beer Marketer’s Insights and the list includes nine beers that have experienced more than a one-third drop in sales — and in two cases two-thirds — over that five-year time period. Here’s the list:

  1. Michelob: 72% drop in sales, 2006-2011 (ABI)
  2. Michelob Light: 66.3% drop in sales, 2006-2011 (ABI)
  3. Budweiser Select: 60.8% drop in sales, 2006-2011 (ABI)
  4. Milwaukee’s Best: 57.1% drop in sales, 2006-2011 (MillerCoors)
  5. Old Milwaukee: 52.8% drop in sales, 2006-2011 (Pabst)
  6. Miller Genuine Draft: 52.3% drop in sales, 2006-2011 (MillerCoors)
  7. Amstel Light: 47.7% drop in sales, 2006-2011 (Heineken)
  8. Miller High Life Light: 37.6% drop in sales, 2006-2011 (MillerCoors)
  9. Milwaukee’s Best Light: 35.5% drop in sales, 2006-2011 (MillerCoors)

That’s a pretty remarkable list. A few of those used to be truly successful brands. The article also details how “to combat the growing popularity of craft brews, major breweries such as Anheuser-Busch Inbev and MillerCoors have aggressively marketed their own specialty beer.” Those include such stealth beers as Blue Moon, Shock Top, et al. That’s in addition to buying up craft brands such as Goose Island or creating separate marketing arms, like Tenth and Blake.

It will be interesting to see what these companies will do next as these brands drag down the ship with such titanic sinking sales. Will they take steps to reinvigorate these brands or jettison them from their portfolios and instead concentrate on craftier brands?

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Bud Going To The Dark Side?

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Maybe it’s Deschutes’ Black Butte Porter or Guinness that’s making Anheuser-Busch InBev (ABI) come over to the dark side? But whatever the reason, ABI is apparently poised to release at least five, possibly six, new beers which, if not actually black, have significantly more color than your average ABI beer. And apparently they’re also more extreme beers — which for ABI means 6% a.b.v. (it’s all relative). The first of these, Bud Black Crown, is described as a “golden amber lager” so it would appear “Black Crown” is more of a ceremonial title than a beer descriptor. According to one label I saw, there’s apparently a website set up — www.budweiser.com/blackcrown — though so far there’s nothing set up there yet. The Black Crown came from the Budweiser Project 12, specifically the Los Angeles entry. According to AdAge, there will most likely be a big marketing push behind this release, which may include a Super Bowl ad, and — ooh boy — a specially designed bow-tie can. The Black Crown is expected to be launched in early February.

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Next up is Michelob Black Lager, a “Special Dark Lager” and advertised as a “German-style Doppelbock.” There’s not much information I could find on this one, so it’s anybody’s guess what this will be like.

6726.BlackBock_Labels_ForTTB

Then, from the Busch family comes Busch Black Light. So either they’re going after the old hippies with their black light posters or having a bit of oxymoronic fun like “jumbo shrimp” or “black gold.” This one’s also something of a head-scratcher. It, too, is 6% a.b.v. — high for a light — and also mentions being “ice-brewed.” It couldn’t be a “black light,” like a black IPA, could it? That seems way too far-fetched, doesn’t it? So what is it? I’m stumped.

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And let’s not forget the Newark, New Jersey (née Latrobe, Pennsylvania) brand Rolling Rock. They’re coming out with Rolling Rock Black Rock, an “Extra Dark,” which presumably means it’s as “extra dark” as their regular beer is “extra pale ale.”

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Lastly, there’s ABI’s German brand, Beck’s, which is brewed here in the states. Beck’s will apparently be launching two brand extensions, presumably hoping to squeeze more shelf space out of Bud-friendly retailers. The first of these is Beck’s Black Jewel. It appears that it was also be 6% a.b.v. — which I’m starting to think is a magic number — and is brewed with Liberty hops, and could possibly be a single-hop beer. No world, however, on the beer’s color.

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Lastly, this one’s more of a stretch, darkside-wise. Beck’s Sapphire looks like it will either be a single hop beer or at least feature the German hop Sapphire (a.k.a. Saphir). But it does have a dark green and black label, so who knows? It, too, will be 6% a.b.v. (so that’s four out of six). Also, I always thought sapphires were blue and my understanding is that if impurities like chromium get into the gem, then it’s called “red corundum,” or more commonly a “ruby.” So who knows what the deal is with the red sapphire?

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So why is ABI suddenly going over to the dark side with beer color, labels and in their naming strategies? Your guess is as good as mine. It’s not as if dark beers have suddenly started taking off last week. Guinness has been around for a very long time, and most craft breweries have included a porter or stout in their portfolios for decades. Although we don’t even know if these will even be black in color. It seems doubtful, more likely they’ll just be darker in relation to Bud’s other offerings, in much the same way the original pale ales weren’t really pale, just paler than the popular dark beers at the time of their introduction. Again, it’s all relative. Plus, calling beers “black” this or that just sounds cooler, especially to the hipster millennials they’re obviously targeting with these beers. Some have speculated that it’s in response to the recent success that Yuengling has enjoyed with their (slightly) darker beers, but I don’t know. It certainly will be interesting to see how this all plays out in the coming months.

Bud Light Beer Camp?

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Did anybody else see this? I was watching the Colbert Report last night, as I often do, and happened to catch a commercial for “Bud Light Beer Camp.” If I’d had a beer at the time, I might have done a spit take. As litigious as Anheuser-Busch InBev has been, is it really possible that they could not have noticed that Sierra Nevada has been running a pretty high profile beer camp now for several years? Sierra Nevada Beer Camp has to date done at least 43 beer camps (I did #41), which is how many are listed at the Beer Camp website. But since 43 was held in 2011, it’s probably closer to 50 by now. Certainly, there’s been enough of them for ABI to have noticed. [UPDATE: Since I originally posted this, a colleague sent me a note that they knew someone who did Beer Camp #67 and believe that it’s closer to 80.]

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I can just hear ABI’s lawyers, if the situation was reversed, arguing that this would create confusion in the mind of the consumer. I couldn’t find any of the commercials on YouTube, so I just photographed it on my television screen.

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Doing a Google search, all I could find was links to a few comedian’s websites talking about how they were involved in a series of “Bud Light beer camp” ads for Comedy Central. One conedian, Adam Newman, even had an embedded video, but it has been taken down. That site said it was a “six-part Bud Light ‘Beer Camp’ series” and included “other hilarious comedians Trevor Williams, Zack Poitras, Craig Rowin, and Jermaine Fowler.” He said it was “running this summer on Comedy Central.”

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A second Bud Light Beer Camp commercial ran at the end of the Colbert Report, and that one included a screen promoting the Port Paradise Music Festival, which appears to be a two-day music festival and cruise to the Bahamas that they’re sponsoring.

I assume that even with all of Sierra Nevada’s resources, they still won’t be taking ABI to court over this, though I imagine if the situation was reversed, that’s exactly what Bud would do.

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Welcome To The World ABInBevMo

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By now you’ve already seen the news that Anheuser-Busch InBev has taken another step closer to realizing their quest for world domination in the beer business. They’d already owned half of Mexican powerhouse brewer Grupo Modelo — makers of Corona, among other brands — but it was non-voting stock and they asserted very little control over them. In fact, Corona is often a competitor in the U.S., usually with non-Bud distributors. The irony, of course, is whether you bought Bud or Corona, eventually at least some of that money still made its way to ABI. The phrase “laughing all the way to the bank” springs to mind. Hard as it to believe, they already have a new website up even though the merger’s only been finalized in the last twenty-four hours. The name of the new site is Global Beer Leader. Does anybody else think that sounds ominously close to North Korea’s “dear leader?”

ABI is paying Grupo Model $20.1 billion to become ABIM, making it the second-biggest deal ever brokered in the beer world. The first was the $52 billion InBev paid to merge with Anheuser-Busch in 2008. The deal still needs government approval, and will likely be addressed and decided in the first quarter of next year.

According to the deal, Crown Imports — the current importer of Corona and other Grupo Modelo brands under the Constellation Brands umbrella — will continue to be the importer to the U.S. In fact, part of the deal includes the sale of the half of Crown Imports owned by Grupo Modelo to Constellation Brands, who had owned the other half, for $1.85 billion. That gives them 100% control over the distribution of the Modelo brands in America. ABIM head honcho Carlos Brito told Harry Schumacher this morning that they’re looking at this as a golden opportunity primarily to combine Bud and Corona outside the U.S. in the global beer market.

Adam Nason at Beer Pulse has a helpful chart showing that the merger gives ABIM control over 8 of the top 15 global beer brands, just over half.

Full details of the deal can be found at the new website Global Beer Leader.

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NOTE: This NOT their official new logo, I made this up as a parody.

A-B InBev Trademarks 40+ Airport Codes

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Here’s a strange development. Remember Anheuser-Busch InBev filed trademark applications for over a dozen telephone area codes a few months ago. Speculation ran high that they were planning on duplicating the success of their recent acquisition, Goose Island Brewing, and their 312 Urban Wheat Ale, named after the local Chicago area code, but nobody could say for sure. This past Monday, the U.S. Patent and Trademark Office granted ABI a 6-month extension to submit their mandatory “Statement of Use” forms, meaning we’ll have to wait a bit longer to discover exactly how they’re planning on using those area codes.

Pro Brewer is now reporting — though the original sources are Evan Benn on St. Louis Today and Jenn Litz at Craft Business Daily — that ABI has spent over $12,000 filing similar applications to lock-up over 40 airport codes, including “LAX (Los Angeles), SFO (San Francisco), MIA (Miami), BOS (Boston) and LGA (New York LaGuardia).” Again, no word on what the plan is for them, but it would have to be for a beer name, wouldn’t it? What else could it be? Surely not just making sure no one else uses them? ‘Cause that would be kinda evil. What’s next, famous zip codes? Two-digit state codes? There was a great joke Lily Tomlin used to tell in her stand-up act. “I love it how New York City named their streets after all the famous numbers.”