No surprise there. Almost everybody knew that Gambrinus’ contract with Grupo Modelo had a termination provision while Barton’s had automatic renewal, as long as legendary beerman Bill Hackett was holding the reins. But apparently Gambrinus president Carlos Alvarez was the last to know, as Grupo Modelo sleazily assured Gambrinus it had the same contract as Barton, according to details from the arbitration ruling between Modelo and Gambrinus, which ruled in Modelo’s favor. According to source, while the arbitration panel agreed with Gambrinus that Modelo lied to them and sometimes didn’t act in good faith, they ruled this fact wasn’t germane to this case. Barton had negotiated for the automatic renewal provision in 1996 while Gambrinus only got a review process after five years with Modelo-and this is key-getting the option to terminate for any reason or no reason.
TOUGH NEGOTIATORS. Mexicans are legendary negotiators, but so are Chicagoans. Barton is again driving a hard bargain with Grupo Modelo, and vice versa, for the rights to the entire country of the fastest growing portfolio of brands in the beer industry. From what we’ve heard, which isn’t much, is that Modelo wants to extract loads of blood from a big and growing turnip, and Barton (as a division of a publicly held company, Constellation Brands), can only give so much and still show a straight face to shareholders.
But Grupo Modelo also has shareholders to appease. Modelo chief Carlos Fernandez said to BBD in a statement, “The arbitral award will allow us to seek the best available options with the aim of enhancing the value of our export business and create more value for our shareholders.”
STALEMATE? We could conceivably see a situation where Modelo, through their fully-owned U.S. subsidiary, Procermex, imports the Eastern rights to Corona for awhile until/if Barton and Modelo can reach an agreement, with both sides playing a long game of chicken. Procermex certainly has been building out some capabilities, with added staff and informational resources in San Antonio. But Modelo is motivated to negotiate a nationwide deal, or a joint-venture, with Barton under leaner gross margin terms for Barton, and more importantly we suspect, with an easier termination provision. This is likely a major sticking point with Barton. If they are to invest behind Corona, they want to make darn sure they won’t lose the brands because new management at Modelo/Procermex decides they don’t like Richard Sands’ hairstyle.
SIDEBAR. Sounds familiar doesn’t it? Just like distributors who wish to protect themselves with franchise law provisions.
Still, they all have plenty of time to work it out, so don’t stress out about it too much. Gambrinus can hold unto the brands until the end of the year.
MILLER POINTS TO WSJ PIECE IN PRINT AD. Not surprisingly, Miller has used the recent front-page article in the Wall Street Journal, which focused on small changes in Bud and Bud Light, to make marketing hay in the mainstream press.
On Friday, Miller ran a full page ad in USA Today with the copy: “‘Read my lips, no new taxes.’ ‘I did not have sexual relations with that woman.’ ‘The recipes for Budweiser and Bud Light have not changed.’” The first two quotes are famous fibs by former presidents, and the third is a quote from A-B brewmaster Doug Muleman from a November press release.
The smaller copy at the bottom then refers to the quote in the Journal by August Busch III about using more hops to add “amplitude and hop flavor” in Bud.
Miller also ran another full-pager in the same paper touting their World Beer Cup victory in Seattle two weeks ago.
As we reported last week in BBD, A-B hasn’t blatantly lied about changing their beers, and the Journal piece covers how they cryogenically freeze their beers “to make damn sure we would have the same beer 20 years down the road,” as August III succinctly put it. A-B brewmaster Doug Muhleman has said that they are always using different types of hops, and brewing process differences at different breweries in the system, which can create imperceptible changes in beers over the years, or “creep” as he calls it, but the basic formula hasn’t changed.
Miller calls all this “noodling” in their ad, and in a press release that coincided with the USA Today ad, points to the Journal piece, (so I’m quoting from a release which quotes from an article which quotes former brewmasters…don’t you love the press?):
“Anheuser concedes Budweiser has changed over the years. It quietly tinkered with its formula to make the beer less bitter and pungent, say several former brewmasters.” And more recently, “Anheuser didn’t talk publicly about it, but the brewer also recently made changes in its brewing process to correct for over-lightening.”
No matter what you believe, Miller certainly doesn’t miss a strategic opportunity with their PR and marketing efforts to badger A-B in the public eye. A-B calls it desperation. Miller calls it their “Able Challenger” strategy. Ah, but what’s in a name, to quote Shakespeare, who was quoting Romeo, who was probably quoting somebody else entirely.
SIDEBAR: To see the USA Today Miller ad, click this link:
http://www.beernet.com/images/usatodaymiller.jpg
TOMORROW, We get an international brewer’s interesting perspective on the Costco ruling, and what he thinks it means to 3-tier longterm.
Plus, happy May Day: tell me how the recent immigration hysteria has affected your business, both in terms of employee walk-outs on May Day and what it means to beer sales. Ping me confidentially at hs@beernet.com
