Corona Considerations

State laws could influence rumored A-B/Corona deal.

The biggest beer industry news of the week – and, if it comes to pass, likely the year – is the rumored move by Anheuser-Busch to start importing Corona Extra.

Beer Marketer’s Insights broke the story (and Beer Business Daily on June 13 provided a thoughtful followup), describing it as a joint venture between A-B, Modelo and Barton Beers (part of Constellation Brands.) No deal has yet been announced. If the deal comes to pass, and A-B then brings the best-selling import into its restrictive wholesaler network, that would be a strategic coup for A-B.

But, assuming such a deal could pass muster under antitrust laws, moving the Corona distribution rights into the A-B distribution network won’t be easy and could be extremely expensive.

Here’s why. A large majority of the 50 states have laws that require certain conditions to be met before terminating a distributor. And in some states – including biggies like New Jersey and Ohio – A-B or its distributors must compensate the terminated distributor.

Indeed, more than 20 states have legal hurdles for successor suppliers to move distribution rights of a brand.

The upshot: Corona Extra is a strategically significant brand for a lot of non-A-B distributors. At a minimum it will be expensive for A-B to acquire a brand of this stature – Corona Extra is the sixth largest brand in the country with 7.7 million barrels shipped in 2005, up 8.5% over 2004, according to BMI. And distributors in the various states with legal protections will likely resist attempts by A-B to move Corona into the A-B distribution network.

(Update: Link to BBD fixed)

Yet another class action dismissed

Michigan judge tosses Alston case

A Michigan judge last week dismissed a class action lawsuit filed against all of the major brewers and distillers that claims they target marketing at underage consumers to increase demand.

Ruling in the Alston case, the court stated, “Every person who walks into a store where alcohol is sold is clearly put on notice that a purchaser must be twenty-one years old to buy alcohol.”

The court also recognized that “while minors may be considered incompetent to handle the effects of intoxication, there is no presumption that minors are incompetent to watch advertising, handle the messages included therein, or that they are incompetent to understand that underage drinking is illegal.”

Over the past few years, 10 class action lawsuits have been brought against beer and spirits marketers. The Alston case becomes the sixth to be dismissed. Miller Brewing Company has been named as a defendant in seven of the cases. The Beer Institute, of which Miller is a member, has been named in all.

Decisions are awaited on cases in North Carolina and West Virginia. Another case was filed and later withdrawn by the plaintiffs. Four of the dismissals have been appealed. Motions to dismiss have yet to be decided in three cases.

“We have been relatively successful with the litigation so far, and we have strong arguments in support of further dismissals,” said Mike Jones, Miller Brewing’s general counsel and senior vice president of Corporate Social Responsibility. “But we still have a long way to go and many challenges to overcome.”