Anheuser-Busch's lawsuit against Corona hard seltzer will 'go down in flames': Constellation Brands CEO

Constellation Brands (STZ) is taking the gloves off and hitting back at Anheuser-Busch (BUD) after it filed a lawsuit trying to stop the use of the name Corona being used on a new line of hard seltzer.

"We believe it's without merit [the lawsuit]. We filed a motion to dismiss this week. It will probably take a few months for that to get ruled on. But we are totally within our sub-license agreement. This certainly looks like an attempt to damage somebody that is doing a lot of damage in the marketplace by having a lot of success," Constellation Brands CEO Bill Newlands told Yahoo Finance Live.

Added Newlands, "The suggestion they have made is that we are not authorized to use the Corona brand name on a hard seltzer. If you read all the documentation, our view is it is totally without merit and it will go down in flames."

Close-up of packages of Corona brand hard seltzer, an alcoholic seltzer water drink, on store shelves in San Ramon, California, July, 2020. (Photo by Smith Collection/Gado/Getty Images) (Smith Collection/Gado via Getty Images)

At stake is the future of Corona hard seltzer. Constellation Brands launched Corona hard seltzer last year and has quickly gained 3% market share, according to data from Guggenheim analyst Lauren Grandet. The company has recently launched new flavors and plans to spend millions this year to market the brand in the red-hot hard seltzer space.

But Anheuser-Busch is trying to squash those efforts just as it tries to gain traction with the new Bud Light hard seltzer.

The Mexican arm of Anheuser-Busch filed a lawsuit in mid-February claiming breach of contract on the use of Corona on a non-beer product.

As part of Anheuser-Busch's acquisition of Grupo Modelo in 2013, it sold Grupo Modelo's U.S. business to Constellation Brands to satisfy regulators. That includes the Corona brand. Anheuser-Busch kept the rights to Corona and other Modelo-owned brands in Mexico and other international locations.

“We created the Corona brand in Mexico City over 90 years ago and have carefully cultivated it since that time. In 2013, we authorized Constellation to use our “Corona” name and trademark in the United States for the sale of Mexican cerveza. Constellation’s newest product in the US – Corona Hard Seltzer – improperly uses our Corona name for a spiked sparkling water featuring flavors like cherry and blackberry lime. We never agreed that Constellation could use our Corona name for products such as hard seltzer. Corona has a rich history and authentic Mexican heritage, and we are filing this lawsuit to protect our rights to this iconic brand," a spokesperson for Grupo Modelo told Yahoo Finance in an emailed statement.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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