Mexico & USA: Grupo Modelo sues Constellation Brands over Modelo beer

The Mexican arm of Anheuser-Busch InBev has accused Constellation Brands in a lawsuit of a second breach of their deal allowing Constellation to sell Mexican beers in the United States, Reuters reported on September 1.

Grupo Modelo filed a suit in the U.S. district court of the southern district of New York on Tuesday, August 31, according to a court document, over Constellation's launch of two Modelo Reserva beers, one aged on tequila and another on bourbon barrels.

It says the first breaches U.S. and Mexican laws that strictly limit the use of the word tequila, and the second breaches Constellation's sub-licence to sell "Mexican-style beer" because bourbon has nothing to do with Mexico.

The sub-licence also does not allow this type of spirit branding, the suit says.

Constellation said Grupo Modelo's claims were without merit and that it had fully complied with the sub-licence terms.

When AB InBev took full control of Grupo Modelo in 2013, it agreed with U.S. antitrust regulators to sell Grupo Modelo's business in the United States to Constellation. The world's largest brewer retained rights to Modelo brands.

The filing says Grupo Modelo notified Constellation of the issue in June and that Constellation had refused to stop selling the product.

AB InBev, which confirmed the filing, said Mexico's Tequila Regulatory Council (CRT) had also demanded Constellation cease its use of the word tequila in marketing.

In February, Modelo filed a legal challenge in the same court over Constellation's Corona Hard Seltzer, a sparkling water with alcohol flavouring, one of several seltzer drinks that have become very popular in the United States.

The AB InBev subsidiary said the 2013 deal only allowed Constellation to apply the Corona brand name to beer.

Constellation said at the time that Modelo's claims were without merit and an attempt to restrain a strong competitor.

The new case is the latest in an increasingly litigious brewing market. In July, the CRT settled a four-year legal dispute with Heineken over the latter's tequila-flavoured beer Desperados.