Grupo Modelo, the Mexican unit of Anheuser-Busch InBev, sued Constellation Brands saying it improperly used the Corona brand on hard seltzer. ABI claims when it granted a perpetual license to CBrands to use the Corona name, the grant applied only to beer, not to other products.
If it prevails, ABI will have pulled a pretty neat stunt: It will be able to cash in on CBrands’ marketing efforts over the past eight years to build its hard seltzer business. ABI’s lawsuit claims that it’s licensing of the Corona trade mark as part of an antitrust settlement applied only to beer, not to any other beverage.
Constellation expressed surprise, said Modelo’s claims were without merit, were an attempt to restrain a strong competitor and that it has “fully and completely” complied with the licensing agreement and would vigorously defend against the suit.
The suit claims that CBrands had attempted to introduce a commercially viable hard seltzer into the U.S. market but failed. “In February 2020, Constellation launched Corona Hard Seltzer to rectify that failure. But Constellation cannot use the Corona trademarks for Corona Hard Seltzer because it is outside the sublicense’s express limitation to ‘Beer,’ ” the suit says, adding:
“Corona Hard Seltzer is not a beer, ale, porter, stout or malt beverage, of a version or combination of any of those beverages, nor is it a non-alcoholic version of a beer, ale, porter, stout or malt beverage.”
CBrands spent more than $40 million on media to launch Corona Hard Seltzer. “Yet in all of that advertising, Constellation never once called it a beer, instead identifying its new product as a ‘spike sparkling water’,” the suit says. It quotes Constellation’s president/ceo, Bill Newslands, as saying consumers view hard seltzer as “something different. The retailer is viewing it as something different.”
Corona Hard Seltzer is the fourth-largest hard seltzer brand in the U.S.. , following Mark Anthony Brands’ White Claw, Boston Beer’s Truly and Anheuser-Busch’s Bud Light Seltzer. “That success merely underscores the value of the Corona brand,” ABI’s lawsuit claims.
It goes on to assert that CBrands “did not acquire and does not have unlimited rights to innovate using the Corona trademarks. It may innovate and bring to market any product it likes, but if it is to bear a licensed Modelo trademark, the innovation must be within the scope of the trademark.”
It described Constellations introduction of Svedka Spiked Seltzer as a “flop,” and noted CBrands stopped selling it in August 2019. “Constellaton chose to use the Corona Marks for is next attempts at innovation– first with a seltzer look-alike, a flavored malt beverage called Corona Refresca — and then finally with Corona Hard Seltzer.
ABI’s lawsuit goes on to claim the launch of Corona Hard Seltzer was a sneak attack; that, unlike the launch of Corona Refresca, CBRands didn’t discuss the planned launch and didn’t provide Modelo with the recipe. Constellation knew Corona Hard Seltzer isn’t “beer” — it’s “a flavored seltzer made with ‘alcohol from sugar’, ABI says — and therefore was not permitted under the sublicense.