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

Karzai's Legacy: Missed Opportunities?

Afghanistan's president leaves behind a much different nation than the one he inherited, yet his legacy from 13 years in power is getting mixed reviews More

Video Secret Service Chief Under Fire for White House Security Breach

Julia Pierson faces tough questions from lawmakers after recent intrusion at White House, says: 'It is clear that our security plan was not executed properly' More

Frustrated, Liberian Students Want Ebola Fight Role

Thousands have volunteered to go to counties, rural villages to talk to people in their language about deadly virus More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Malaysia Struggles to Stop People Joining Jihadi
X
Mahi Ramakrishnan
September 30, 2014 2:16 PM
Malaysian authorities say militant groups like the so-called "Islamic State" have used social media to entice at least three dozen Malaysian Muslims to fight in what they call "jihad" in Syria and Iraq. As Mahi Ramkrishnan reports from Kuala Lumpur, counterterrorism police are deeply worried about what could happen when these militants return home.
Video

Video Malaysia Struggles to Stop People Joining Jihad

Malaysian authorities say militant groups like the so-called "Islamic State" have used social media to entice at least three dozen Malaysian Muslims to fight in what they call "jihad" in Syria and Iraq. As Mahi Ramkrishnan reports from Kuala Lumpur, counterterrorism police are deeply worried about what could happen when these militants return home.
Video

Video Could US Have Done More to Stop Rise of Islamic State?

President Obama says airstrikes against Islamic State militants in Syria will likely continue for some time because, in his words, "there is a cancer that has grown for too long." So what if President Obama had acted sooner in Syria to arm more-moderate opponents of both the Islamic State and the Syrian government? VOA State Department Correspondent Scott Stearns reports from the United Nations.
Video

Video Treasure Hunters Seek 'Hidden Treasure' in Central Kenya

Could a cave in a small village in central Kenya be the site of buried treasure? A rumor of riches, left behind by colonialists, has some residents dreaming of wealth, while others see it as a dangerous hoax. VOA's Gabe Joselow has the story.
Video

Video Iran's Rouhani Skeptical on Syria Strikes

Iranian President Hassan Rouhani expressed skepticism Friday that U.S.-led airstrikes in Iraq and Syria could crush Islamic State militants. From New York, VOA’s Margaret Besheer reports the president was also hopeful that questions about Iran’s nuclear program could be resolved soon.
Video

Video US House Speaker: Congress Should Debate Authorization Against IS

As wave after wave of U.S. airstrikes target Islamic State militants, the speaker of the Republican-controlled House of Representatives says he would be willing to call Congress back into session to debate a formal, broad authorization for the use of military force. VOA’s Michael Bowman reports from Washington, where legislators left town 10 days ago for a seven-week recess.
Video

Video Ebola Patients Find No Treatment at Sierra Leone Holding Center

At a holding facility in Makeni, central Sierra Leone, dozens of sick people sit on the floor in an empty university building. They wait in filthy conditions. It's a 16-hour drive by ambulance to Kailahun Ebola treatment center. Adam Bailes was there and reports on what he says are some of the worst situations he has seen since the beginning of this Ebola outbreak. And he says it appears case numbers may already be far worse than authorities acknowledge.
Video

Video Identifying Bodies Found in Texas Border Region

Thousands of immigrants have died after crossing the border from Mexico into remote areas of the southwestern United States in recent years. Local officials in south Texas alone have found hundreds of unidentified bodies and buried them in mass graves in local cemeteries. Now an anthropologist and her students at Baylor University have been exhuming bodies and looking for clues to identify them. VOA’s Greg Flakus has more from Waco, Texas.
Video

Video Ebola Robs Liberians of Chance to Say Good-Bye to Loved Ones

In Liberia, where Ebola has killed more than 1,500 people, authorities have worked hard to convince people to allow specialized burial teams to take away dead bodies. But these safety measures, while necessary, make it hard for people to say good bye to their loved ones. VOA's Anne Look reports on the tragedy from Liberia.
Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.

AppleAndroid

More Americas News

Poll: Record Number of Mexicans Crime Victims in 2013

While government data shows murder rate has fallen in past 2 years, crimes such as kidnapping and extortion, which affect wider swath of the population, rise
More

OAS Asks Members to Take In Guantanamo Detainees

Organization of American States issues appeal for member countries to take in detainees from US military prison
More

Recession Looms Over Venezuela, Official Data Under Wraps

Empty store shelves, closed factory gates and idled construction projects tell their own story
More

US Judge Holds Argentina in Contempt Over Bond Payment Plan

In rare move, District Judge Thomas Griesa says country taking 'illegal' steps to evade his orders in longstanding dispute with hedge funds over defaulted debt
More

Brazil's Rousseff Extends Lead Over Silva in Elections

President Dilma Rousseff's expected victory margin over closest rival Marina Silva has surged to 9 percentage points
More

8 Killed in Peru Quake

The victims of the 4.9-magnitude tremor were all from the mountainous community of Misca, where many homes collapsed in the quake
More