A federal jury has found that Constellation Brands’ production of products such as Corona Hard Seltzer and Modelo Ranch Water does not violate the company’s licensing agreement with Anheuser-Busch InBev (A-B).
“We are pleased with the outcome of this trial and remain committed to continuing to operate in accordance with the terms of our sublicense agreement as we work with our distributor and retailer partners to build brands consumers love,” a Constellation spokesperson told Brewbound.
Meanwhile, a spokesperson for A-B’s Grupo Modelo said the company is “disappointed with today’s verdict and are evaluating all options.”
According to Beer Marketer’s Insights, which was the first to break the news of the verdict, the eight-person jury deliberated for about an hour before delivering their results.
A-B filed the lawsuit against Constellation on behalf of its Mexican subsidiary, Grupo Modelo, in February 2021. In its complaint, the world’s largest beer manufacturer alleged that Constellation was “misusing and misappropriating” the trademarks it licenses from A-B by producing Corona Hard Seltzer, which it argued was not a beer.
During the two-year legal battle, both companies have invoked the definition of beer and whether or not it has grown to expand products such as hard seltzers since the licensing agreement was signed in 2013. The agreement – which followed A-B’s 2012 acquisition of Grupo Modelo, which required A-B to divest of the company’s portfolio in the U.S. to gain Department of Justice approval – defines beer as “beer, ale, porter, stout, malt beverages, and any other versions or combinations of the foregoing, including non-alcoholic versions of any of the foregoing.”
Since the lawsuit was filed, Constellation has refused to back down from its stance that such products do not violate the agreement, and launched Modelo Ranch Water last year. Constellation also added two new flavors to Corona Hard Seltzer’s berry variety pack, which it asked distributors to prioritize during its Gold Network Summit in Las Vegas last week.
Meanwhile, concurrent with the trial was the launch of a new A-B marketing campaign to combat the finding that a majority (54%) of drinkers believe that Bud Light Seltzer contains beer. The campaign touts that Bud Light Seltzer is “100% hard seltzer, 0% beer,” according to a press release. Its tactics include a TV commercial titled “Truckin’ Bubbles” and a card game called Misconceptions that asks players to determine fact from fiction.
Corona Hard Seltzer and A-B’s own Bud Light Hard Seltzer, both hard seltzer line extensions of popular beer brands, rolled out in early 2020. Both brands have recorded declines in dollar sales and volume since their launches.
The Bud Light Seltzer brand family holds 6.4% share of the hard seltzer segment, according to 52-week NielsenIQ xAOC+C off-premise data shared by financial services firm Jefferies. For its part, Corona Hard Seltzer held 1.7% of the seltzer market, the firm shared. Both Bud Light Seltzer and Corona Hard Seltzer have shed share in the most recent periods, declining 5.3% and 1.1% share, respectively, in the four-week period ending February 25.
Corona Hard Seltzer was not Constellation’s first foray into the beyond-beer space. In 2019, Constellation debuted Corona Refresca, a flavored malt beverage (FMB), and communicated with A-B throughout the product’s 18-month development process. Representatives for A-B said the same communication did not occur during Corona Hard Seltzer’s development, according to Beer Marketer’s Insights.