News / Americas

Mexican Beer Duopoly to Survive Competition Deal

A man cycles past a truck of Corona beer produced by Group Modelo in Mexico City July 16, 2013.
A man cycles past a truck of Corona beer produced by Group Modelo in Mexico City July 16, 2013.
Reuters
Last week's settlement to limit the arrangements by which two big brewers have sewn up Mexico's beer market, the world's sixth largest, is unlikely to open the door to substantial competition there in the near future.

After years of complaints from SABMiller, the world's second-largest brewer but barely a blip on the Mexican radar, global leader Anheuser-Busch InBev and third-ranking Heineken have agreed with regulators to curb exclusivity deals with Mexican retailers that have secured them a combined 99 percent of the market through their local units.

Seen from the mature U.S. market, where SABMiller's joint venture with MolsonCoors is strong, Mexico offers much promise - it ranks fourth in the world for profit generated and is growing at a respectable 2 percent plus per year.

The premium segment, an area of faster growth and fatter profits, is a mere 2 percent of the market now, compared with about 20 percent in the United States. And it is just over the border.

SABMiller breweries in southwestern U.S. states are already supplying Miller Genuine Draft and Miller Lite to northern Mexico, where per capita consumption is higher than the national average, and there is a greater familiarity with U.S. brands.

Yet that has given it a mere 0.3 percent of the market.

But far from hailing the deal approved with its rivals by Mexico's competition commission, SABMiller said the effect of the changes would be limited, with restaurants and 'mom and pop' shops now more accessible, but not the bars, clubs and convenience store chains.

The incumbents could concentrate exclusive agreements in the regions of Mexico they dominate - Heineken's Femsa unit in the north, and Modelo, fully owned by AB InBev since last month, in the center of the country.

“This is reinforcing the status quo of anti-competitive practices against new players,” Armando Valenzuela, SABMiller's Mexico chief, told Reuters. “It's legalizing regional monopolies.” The group may yet appeal.

Written exclusivity deals have accounted for about 30 percent of vendors, and on top there are further informal agreements, such as tying stores to a single brewer in return for a branded fridge.

Such deals are common in other developing markets, too, including those where SABMiller is strong; the London-listed brewer has 98 percent of the Colombian market, 94 percent in Peru and 90 percent in South Africa.

The biggest four brewers have bought into cozy monopolies or duopolies across the globe, making it difficult to encroach on a rival's patch.

Analysts say the changes in Mexico, including a commitment to cut exclusive supply agreements to 20 percent by 2018, should gradually change the market from one where brewers pay vendors to stock their beer to a more developed-world model where marketing spenditure is consumer-targeted through discounts and advertising.

“It's going to shift the market from push to a pull-driven, and making beer more a matter of consumer choice,” said Dirk van Vlaanderen, beverage analyst at Jefferies.

But it will take time, and in the short term, the biggest beneficiary might be AB InBev, since it could make more of an inroad into northern Mexico, currently Heineken territory, where per capita consumption is higher and U.S. brands are familiar.

Anthony Bucalo of Santander wrote in a note that AB InBev would bring in its U.S. brands Budweiser and Bud Light and, with deeper pockets and $1 billion expected from efficiency savings, it should win most “mano-a-mano” fights with Heineken.

SABMiller, lacking a distribution network or local production, will for much of the fight be just a spectator and can only hope for what it calls “pockets of growth”, even if all exclusive relationships were ended.

On the bright side, such pockets are likely to include more affluent residents in larger cities, aided by a rise of supermarkets and more developed retail chains offering greater selection.

You May Like

Obama: Alaskans Feel Signs of Climate Change

They're seeing bigger storm surges as sea ice melts, more wildfires, erosion of glaciers, shorelines More

Katrina Brought Enduring Changes to New Orleans

The city’s recovery is the result of the people and culture the city is famous for, as well as newcomers and start-up industries More

Magical Photo Slides Show Native Americans in Late 1800s

Walter McClintock spent 20 years photographing the Blackfoot Indians and their vanishing culture at the dawn of the modern age More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Colombians Flee Venezuela as Border Crisis Escalatesi
X
August 27, 2015 2:08 AM
Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Is China's Economic Data Accurate?

Some investors say China's wild stock market gyrations have been made worse by worries about the reliability of that nation's economic data. And some critics say the reports can mislead investors by painting an unrealistically-strong picture of the economy. A key China scholar says Beijing is not fudging ((manipulating)) the numbers, but that the economy is evolving quickly from smoke-stack industries to services, and the ways of tracking new economic activity are falling behind the change. V
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Shipping Containers Provide Experimental Housing

Housing prices around the San Francisco Bay area are out of reach for many people, so some young entrepreneurs, artists and tech industry workers are creating their own houses using converted shipping containers. But as VOA's Mike O’Sullivan reports from Oakland, the effort requires ingenuity and dealing with restrictive local laws.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video Technique May Eliminate Drill-and-Fill Dental Care

Many people dread visiting dentists because they're afraid of drills. Now, however, a technology developed by a British firm promises to eliminate the need for mechanical cleaning of dental cavities by speeding a natural process of tooth repair. VOA’s George Putic reports.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.
Video

Video Ages-old Ice Reveals Secrets of Climate Change

Ice caps don't just exist at the world's poles. There are also tropical ice caps, and the largest sits atop the Peruvian Andes - but it is melting, quickly, and may be gone within the next 20 years. George Putic reports scientists are now rushing to take samples to get at the valuable information about climate change locked in the ice.
Video

Video French Experiment in Integrating Roma Under Threat

Plans to destroy France’s oldest slum have sparked an outcry on the part of its Roma residents. As Lisa Bryant reports from the Paris suburb of La Courneuve, rights groups argue the community is a fledgling experiment on integrating Roma who are often outcasts in many parts of Europe.
Video

Video Kenyans Turn to Agriculture for Business

Each year Kenyan universities continue to churn out graduates for the job market despite the already existing high rate of unemployment among youth in the country. Some of these young men and women have realized that agriculture can be as rewarding as any other business or job, and they are resorting to agribusiness in large numbers as a way of tackling unemployment. Rael Ombuor reports for VOA.
Video

Video First Women Graduate Elite Army Ranger School

Two women are making history for the U.S. Army by proving they are among the toughest of the tough. VOA's Carla Babb reports from Fort Benning, Georgia as 94 men and those two women rise as graduates of the difficult Ranger school.

VOA Blogs

More Americas News

Tropical Storm Erika Dissipates; 21 Dead

Storm flags over Cuba, could regain strength over Gulf of Mexico; death toll in Dominica, Haiti is 21
More

Video Cubans Embrace New Internet Connectivity Options

Government has approved use of prepaid cards for web access; some foresee construction of better infrastructure, with towers, fiber-optic cables
More

Brazil's Rousseff Faces Growing Impeachment Threat

President’s woes increasing as she now also faces angry rival who controls the possibility of impeachment proceedings against her
More

Cancer, Transplant Patients Rail at Drug Shortages in Venezuela

Currency controls, slumping production and smuggling have caused acute shortages of medical supplies in the socialist-led nation
More

Guatemalan Prosecutors Urge President to Resign Amid Scandal

Government comptrollers' office also issued a statement saying Perez Molina should resign 'to avoid greater social unrest that could have unpredictable consequences'
More

Bolt Sprints to Double Gold in Beijing

Jamaican's victories take place on track where in 2008 he first made headlines by winning Olympic gold medals in record fashion at Bird's Nest Stadium
More