Anheuser-Busch Springs for Beer in Mexico : Alliances: Giant U.S. brewer buys into its southern counterpart. The $477-million deal is part of rush of cross- border activity ahead of NAFTA.

Anheuser-Busch Cos. said Monday that it has agreed to buy a 17.7% interest in the Mexican brewer that makes the popular Corona beer, becoming the second U.S. brewer this year to make a strategic alliance in preparation for the huge market to be created by the North American Free Trade Agreement.

St. Louis-based Anheuser-Busch said it will pay $477 million for its minority stake in Grupo Modelo, Mexico’s largest beer maker. The agreement also gives the American company the option to purchase up to 49% of Grupo Modelo over the next four years.

“It is difficult to stand alone in an increasingly global market,” said Modelo Chairman Juan Sanchez Navarro. “With the greater regionalization of markets because of the North American Free Trade Agreement, strategic alliances will offer advantages.”

Earlier this year, Anheuser-Busch rival Miller Brewing Co. of Milwaukee signed a $273-million marketing and distribution agreement with Molson, Canada’s leading brewer. Miller’s parent, Philip Morris Co., last year bought 10% of the beverage conglomerate that owns Mexico’s No. 2 and 3 breweries.

NAFTA, which would create a 360-million consumer market by eliminating trade barriers among the United States, Mexico and Canada, is pending approval in the legislatures of the three countries.

Meanwhile, many retailers, manufacturers and marketers of consumer goods have formed alliances seeking strategic footholds across the borders. Beer is a huge consumer product in all three nations. But Mexico, the world’s eighth-largest beer market, is the fastest-growing on the continent, with sales increasing at a rate of about 5% a year. In contrast, the U.S. beer market is virtually flat.

“American companies realize that the Mexican market is potentially rich but that they need the knowledge of a local partner,” said Jose Yordan, who follows Latin American retail, food and beverages for First Boston.

Anheuser-Busch’s purchase culminates a four-year relationship with Modelo, which imports and distributes Anheuser-Busch’s Budweiser brand in Mexico.

It also marks the beginning of a new phase in the giant American brewer’s international strategy--a move to acquire equity in foreign brewers rather than just concentrating on making Budweiser an international brand, said Jack H. Purnell, chairman of Anheuser-Busch International Inc. The corporation plans further equity positions in other breweries around the world, he said.

Modelo is an attractive acquisition, Purnell said, because both Corona and Budweiser are the leading brands in their respective domestic markets, with about 25% market shares. Modelo brands account for more than half of Mexico’s beer market. Besides the internationally known Corona and Modelo brands, sold in 56 countries, the brewery also makes six local labels, available in western and southern Mexico.

It has also grown in the last 12 years from negligible exports to dominating the foreign market for Mexican beers, accounting for 70% of all the country’s beer exports.

Max J. Kerstein, publisher of the Beverly Hills-based Beverage Bulletin, said the purchase will give Anheuser-Busch entree into the rapidly growing imported beer market in the United States.

Modelo will invest half the money from the sale in expansion, including a brewery now under construction in Zacatecas state about halfway between Mexico City and the U.S. border, said Sanchez Navarro. The remainder will be divided among the existing partners, who will continue to control the company.

To raise additional money for expansion, Modelo plans to go public soon, selling 13% of its shares on the Mexican and international stock markets, he said.

The northern Mexico market is dominated by the Cuauhtemoc and Moctezuma breweries, both owned by the Femsa Group, whose shareholders include Philip Morris. The alliance between Modelo and Anheuser-Busch will pressure Femsa to consolidate its relationship with Philip Morris or look for another partner before its rival gets too far ahead, Yordan said.