Friday, February 1, 2013

Heeling Brews

Said Justice: "We doubt the propriety
Of imposing on US society
The burden to choose
From costlier brews
When opting for lower sobriety."

There's trouble brewing in the global beverage industry: the US Department of Justice has filed a lawsuit to stop the planned combination of Belgian-based behemoth Anheuser-Busch InBev SA ($ABI.BR) with Mexican giant Grupo Modelo ($GMODELOC.MX).  In what appears to be a classic anti-trust case, talks to avert the lawsuit broke down when the Justice Department decided the parties were too far apart.  AB InBev, whose 200 brands include the globally dominant Budweiser, Beck's and Stella Artois, already has 47% of the US market.  The number 2 US competitor, MillerCoors, controls much of the rest.  Grupo Modelo is a smaller US competitor; its 7% share largely rests on the popular Corona brand.  Although AB InBev already owns about half of Modelo, the Mexican brewer has been "eating Budweiser's lunch" in certain US regional markets, according to internal company memos obtained by the Feds.  For example, when Budweiser and Miller raised prices in California in 2010, Corona declined to follow suit, and took market share.

AB InBev hotly disputes the government's contention that the merger is intended to control prices, and the legal battle is expected to be long and costly.  As they say: "Here we go."

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