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

In China, Mixed Signals on Ebola Controls

How authorities are monitoring at-risk individuals remains unclear, including whether there are quarantines for Chinese health workers returning from West Africa More

Video Women Voters Anxious Ahead of US Elections

Analysts say if women are focused on national security, it could be bad news for Democrats More

Solar's Future Looks Brighter

New technology and dropping prices are contributing to a surge in solar power More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Women Voters Anxious Ahead of US Electionsi
X
October 31, 2014 4:10 AM
Public opinion polls show American voters are deeply dissatisfied with their government and anxious about threats from abroad. This is especially true for a key voting group both Republicans and Democrats are trying hard to win over: women. Analysts say if women are focused on national security, it could be bad news for Democrats, with majority control of the Senate at stake. VOA’s Cindy Saine looks at the crucial role women voters will play in deciding the elections.
Video

Video Women Voters Anxious Ahead of US Elections

Public opinion polls show American voters are deeply dissatisfied with their government and anxious about threats from abroad. This is especially true for a key voting group both Republicans and Democrats are trying hard to win over: women. Analysts say if women are focused on national security, it could be bad news for Democrats, with majority control of the Senate at stake. VOA’s Cindy Saine looks at the crucial role women voters will play in deciding the elections.
Video

Video Victorious Secularists Face Challenge to Form Government in Tunisia

Official results from Tunisia show the Islamist Ennahda party has failed to win the second free election since the so-called "Arab Spring" uprising in 2011. Ennahda, which handed power to a government of technocrats pending the elections, lost out to the secular party Nidaa Tounes. Henry Ridgwell reports from London that the relatively peaceful poll offers some hope in a volatile region.
Video

Video Africa Tells its Story Through Fashion

In Africa, Fashion Week is a riot of colors, shapes, patterns and fabrics - against the backdrop of its ongoing struggle between nature and its fast-growing urban edge. How do these ideas translate into needle and thread? VOA’s Anita Powell visited this year’s Mercedes Benz Fashion Week Africa in Johannesburg to find out.
Video

Video Smugglers Offer Cheap Passage From Turkey to Syria

Smugglers in Turkey offer a relatively cheap passage across the border into Syria. Ankara has stepped up efforts to stem the flow of foreign fighters who want to join Islamic State militants fighting for control of the Syrian border city of Kobani. But porous borders and border guards who can be bribed make illegal border crossings quite easy. Zlatica Hoke has more.
Video

Video China Political Meeting Seeks to Improve Rule of Law

China’s communist leaders will host a top level political meeting this week, called the Fourth Plenum, and for the first time in the party’s history, rule of law will be a key item on the agenda. Analysts and Chinese media reports say the meetings could see the approval of long-awaited measures aimed at giving courts more independence and include steps to enhance an already aggressive and high-reaching anti-corruption drive. VOA’s Bill Ide has more from Beijing.
Video

Video After Decades of Pressure, Luxembourg Drops Bank Secrecy Rules

European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video Kobani Refugees Welcome, Turkey Criticizes, US Airdrop

Residents of Kobani in northern Syria have welcomed the airdrop of weapons, ammunition and medicine to Kurdish militia who are resisting the seizure of their city by Islamic State militants. The Turkish government, however, has criticized the operation. VOA’s Scott Bobb reports from southeastern Turkey, across the border from Kobani.

All About America

AppleAndroid

More Americas News

Mexico Police Investigate Police Link in Shooting Deaths of US Siblings

Deaths of Erica Alvarado Rivera, her brothers and boyfriend as they traveled to visit family is third high-profile case in recent months that links security forces to extrajudicial killings
More

Lawmaker Blasts US Participation in Cuba Ebola Meeting

Mario Diaz-Balart said ALBA, which chaired the meeting, 'was created solely to oppose US interests' and US participation was 'ludicrous'
More

US Coast Guard Rescues 33 Cubans at Sea

Because the overloaded boat did not make landfall, those rescued will be returned to Cuba
More

Western Experts Increasingly Fear Lone Wolf Terror Attacks

Slaying and assault on Canada's parliament building was followed by a hatchet attack on two New York City policemen
More

Search Underway at New Site in Mexico Missing Students Case

This week marked one month since the students went missing after clashing with police in mysterious circumstances
More

Public Transport in Latin America, Asia Most Dangerous for Women

Thousands of women and gender experts were questioned to create the listing
More