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.
TEXT SIZE - +
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

Analysts Warn of Regional Proxy Conflict in Afghanistan

Analysts warn if Kabul’s neighbors do not start to cooperate, competing desires for influence could deteriorate into a bloody proxy war in the country More

Saudi Intelligence Chief Replaced

Bandar bin Sultan came under criticism for supporting al Qaida, prompting King Abdallah to wrest Syria operations away from him in February, handing them to Interior Minister Prince Mohammed bin Nayef More

Poetry Magazine editor Don Share talks what makes a good poem with VOA's David Byrd

What makes a good poem? And is poetry as viable an art form as it once was? To find out, VOA's David Byrd spoke to Don Share, the editor of Poetry Magazine. More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Google Buys Drone Companyi
|| 0:00:00
...
 
🔇
X
George Putic
April 15, 2014
In its latest purchase of high-tech companies, Google has acquired a manufacturer of solar-powered drones that can stay in the air almost indefinitely, relaying broadband Internet connection to remote areas. It is seen as yet another step in the U.S. based Web giant’s bid to bring Internet to the whole world. VOA’s George Putic reports.
Video

Video Google Buys Drone Company

In its latest purchase of high-tech companies, Google has acquired a manufacturer of solar-powered drones that can stay in the air almost indefinitely, relaying broadband Internet connection to remote areas. It is seen as yet another step in the U.S. based Web giant’s bid to bring Internet to the whole world. VOA’s George Putic reports.
Video

Video Ray Bonneville Sings the Blues and More on New CD

Singer/songwriter Ray Bonneville has released a new CD called “Easy Gone” with music that reflects his musical and personal journey from French-speaking Canada to his current home in Austin,Texas. The eclectic artist’s fan base extends from Texas to various parts of North America and Europe. VOA’s Greg Flakus reports from Austin.
Video

Video Millions Labor in Pakistan's Informal Economy

The World Bank says that in Pakistan, roughly 70 percent work in the so-called informal sector, a part of the economy that is unregulated and untaxed. VOA's Sharon Behn reports from Islamabad on how the informal sector impact's the Pakistani economy.
Video

Video Passover Celebrates Liberation from Bondage

Jewish people around the world are celebrating Passover, a commemoration of their liberation from slavery in Egypt more than 3,300 years ago. According to scripture, God helped the Jews, led by Moses, escape bondage in Egypt and cross the Red Sea into the desert. Zlatica Hoke reports that the story of the Jewish Exodus resonates with other people trying to escape slave-like conditions.
Video

Video Police Pursue Hate Crime Charges Against Kansas Shooting Suspect

Prosecutors are sifting through the evidence in the wake of Sunday’s shootings in a suburb of Kansas City, Missouri that left three people dead. A suspect in the shootings taken into custody is a white supremacist. As VOA’s Kane Farabaugh reports, he was well-known to law enforcement agencies and human rights groups alike.
Video

Video In Eastern Ukraine, Pro-unity Activists Emerge from Shadows

Amid the pro-Russian uprisings in eastern Ukraine, there is a large body of activists who support Ukrainian unity and reject Russian intervention. Their activities have remained largely underground, but they are preparing to take on their pro-Moscow opponents, as Henry Ridgwell reports from the eastern city of Donetsk.
Video

Video Basket Maker’s Skills Have World Reach

A prestigious craft show in the U.S. capital offers one-of-a-kind creations by more than 120 artists working in a variety of media. As VOA’s Julie Taboh reports from Washington, one artist lucky enough to be selected says sharing her skills with women overseas is just as significant.
Video

Video UN Report Urges Speedier Action to Avoid Climate Disaster

A new United Nations report says the world must switch from fossil fuels to cleaner energy sources to control the effects of climate change. The Intergovernmental Panel on Climate Change released the report (Sunday) following a meeting of scientists and government representatives in Berlin. The comprehensive review follows two recent IPCC reports that detail the certainty of climate change, its impacts and in this most recent report what to do about it. VOA’s Rosanne Skirble has the details.
AppleAndroid

More Americas News

As Fires Die Down, Chileans Return to Ravaged Valparaiso

Many of victims in the city, part gritty port and part colorful retreat, were poor people in houses perched high on the city's remote hills
More

Kidnapped Venezuelan Journalist Freed

Globovision television journalist Nairobi Pinto was freed in city of Cua, 8 days after being kidnapped near her home in Caracas
More

Canada Taxpayer Data Stolen in Heartbleed Breach

Private information of about 900 people stolen from nation's computer systems as result of vulnerabilities
More

Photogallery At Least 12 Killed in Chile Fire

President declares state of emergency as firefighters battle blaze in port city of Valparaiso
More

36 Killed in Fiery Mexico Bus Crash

Four people reportedly injured in fire which erupted after the vehicle crashed into a broken down truck
More

Huge Fire Burns in Chile's Historic Port City

Firefighters struggle to contain blaze in Valparaiso, which so far has killed 16 people and destroyed 500 homes
More