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

Lebanese Media Unite to Support Palestinians in Gaza

Joint newscast billed as Arab world’s first unified news bulletin in support of Hamas-controlled Gaza Strip More

Photogallery Australian PM Alleges ‘Coverup’ at MH17 Crash Site

Meanwhile, Russia's ambassador to Malaysia denies plane's black boxes were opened before they were handed over to Malaysian officials More

Despite Advances in AIDS Treatment, Stigma Lingers

Leading immunologist tells VOA that stigma is often what prevents those infected with disease from seeking treatment More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
IAEA: Iran Turns its Enriched Uranium Into Less Harmful Formi
X
July 22, 2014 10:26 AM
Iran has converted its stockpiles of enriched uranium into a less dangerous form that is more difficult to use for nuclear weapons, according to the United Nations’ Atomic Energy Agency. The move complies with an interim deal reached with Western powers on Iran's nuclear program last year, in exchange for easing of sanctions. Henry Ridgwell reports for VOA from London.
Video

Video IAEA: Iran Turns its Enriched Uranium Into Less Harmful Form

Iran has converted its stockpiles of enriched uranium into a less dangerous form that is more difficult to use for nuclear weapons, according to the United Nations’ Atomic Energy Agency. The move complies with an interim deal reached with Western powers on Iran's nuclear program last year, in exchange for easing of sanctions. Henry Ridgwell reports for VOA from London.
Video

Video Relic of Saint Draws Catholics Worried About Immigration Issue

A Roman Catholic saint who is a figure of devotion for those crossing the border into the United States is attracting believers concerned about the plight of undocumented immigrants. Mike O'Sullivan reports from Los Angeles, where a relic of Saint Toribio has drawn thousands to local churches.
Video

Video Ukraine Rebels Surrender MH17 Black Boxes

After days of negotiations, a senior separatist leader handed over two black boxes from an airliner downed over eastern Ukraine to Malaysian experts early Tuesday. While on Monday, the U.N. Security Council unanimously demanded that armed groups controlling the crash site allow safe and unrestricted access to the wreckage.
Video

Video In Cambodia, HIV Diagnosis Brings Deadly Shame

Although HIV/AIDS is now a treatable condition, a positive diagnosis is still a life altering experience. In Cambodia, people living with HIV are often disowned by friends, family and the community. This humiliation can be unbearable. We bring you one Cambodian woman’s struggle to overcome a life tragedy and her own HIV positive diagnosis.
Video

Video Nature of Space Exploration Enters New Age

Forty-five years ago this month, the first humans walked on the moon. It was during an era of the space race between the United States and the Soviet Union. World politics have changed since then and -- as Elizabeth Lee reports -- so has the nature of space exploration.
Video

Video Chicago’s Argonne Lab Developing Battery of the Future

In 2012, the U.S. Department of Energy’s Office of Science awarded a $120 million grant to a new technology center focused on battery development - headquartered at Argonne National Laboratory in suburban Chicago, Illinois. As VOA’s Kane Farabaugh reports, there scientists are making the next technological breakthroughs in energy storage.
Video

Video In NW Pakistan, Army Offensive Causes Massive Number of Displaced

Pakistan’s army offensive in North Waziristan has resulted in the large-scale displacement of the local population. VOA's Ayaz Gul reports from northwest Pakistan where authorities say around 80 percent of the estimated 1 million internally displaced persons [IDPs] have settled in Bannu district, while much of the remaining 20 percent are scattered in nearby cities.
Video

Video Kurdish Peshmerga Force Secures Kirkuk, Its Oil

The Kurdistan regional government has sent its Peshmerga troops into the adjacent province of Kirkuk to drive out insurgents, and to secure the area's rich oil fields. By doing this, the regional government has added a fourth province to the three it officially controls. The oil also provides revenue that could make an independent Kurdistan economically strong. VOA’s Jeffrey Young went out with the Peshmerga and filed this report.
Video

Video Malaysia Reeling: Second Air Disaster in Four Months

Malaysia is reeling from the second air disaster in four months involving the country’s flag carrier. Flight 340 vanished in March and despite an extensive search, no debris has been found. And on Thursday, Flight 17, likely hit by a surface-to-air missile, came apart over eastern Ukraine. The two incidents together have left more than 500 people dead. VOA Correspondent Steve Herman reports from Kuala Lumpur.

AppleAndroid

More Americas News

Trial Imminent for Detained Venezuelan Protest Leader Lopez

Lopez's wife, Lilian Tintori, says outside pressure needed on Venezuelan president to move case forward
More

Sex Workers Seek HIV Prevention

The Lancet publishes new series on HIV
More

Texas Gov. Perry Orders State National Guard to Border

Governor says he took extraordinary measure to help secure the border, his critics say it is a political stunt
More

Cuba Hopes for More Investment as Chinese President Arrives

Chinese President Xi Jinping begins a two-day visit to Cuba on Monday evening
More

Video Shunned by Family, Haitian Orphan Finds Supportive Home

'We deal with [HIV] stigma by ... making life as normal for kids as possible'
More

Video Addicts’ Safe Haven in Vancouver Helps Control HIV

Supervised-injection facility lowers spread of infection locally, studies show, but has critics
More