Beer-Opoly Goes To Court

The names might not be familiar, but the brands are. InBev is the owner of Anheuser-Busch and includes 200 brands in play. Grupo Modelo is a Mexican brewer that owns the Corona brand and others.

InBev is already the largest purveyor of beer in the US and coupled with the second biggest producer, MillerCoors, already has the ability to control the beverage market here. But until now, the Mexican player, Grupo Modelo, had the ability to keep market share by undercutting the prices set by the others.

The US government has now filed a lawsuit to keep InBev from merging with their Mexican competition under the monopoly regulations – attempting to stop the $20 billion deal.

This isn’t just speculation. According to Reuters, in 2010, Budweiser tried to raise prices in California, a major market for the beer. When Grupo Modelo didn’t follow along, Budweiser lost significant market share. This history will support an argument against any merger under antitrust laws.

The consolidation of beverage sellers means more than just higher prices for consumers. At stake is also lucrative contracts with bar and restaurant owners. These are reminiscent of other beverage contracts – there’s a very good reason why one chain only has Coke and another only Pepsi.

Behind the scenes, beverage retailers are plied with gifts, discounts or other incentives to carry one brand over another. It also shows up in marketing. The current situation is bad enough, with two conglomerates running the show and deciding major industry standards, like advertising rules for online ads.

The website, Alcohol Justice, tracks ad strategies used by mega-alcohol, including inroads into Internet ads (the viral Clydesdale campaign from the Super Bowl is a recent example) and tricks used, like framing alcohol use as a “personal responsibility” issue instead of something needing stronger legislation.

In particular, a merger would allow cross-border marketing, and example of which are “all you can drink” Spring Break tours into Mexico, heavily sponsored by beer sellers. It’s a neat trick – get your target crowd in an environment where they can drink your product legally (Mexico) with the expectation they will carry the habit back home with them.