Sector Cervecero En Mexico

International Competitiveness

Universidad Iberoamericana

SECTOR: Beer in Mexico

Jorge Taylor

Sebastian Velazquez

Index

Introduction: Purpose of the investigation…………………………………………..3

History: Grupo Modelo and Cuauhtemoc Moctezuma…………………………..4

Location……………………………………………………………………………………………….5

How much is this industry worth???...................................................................6

Creation of jobs……………………………………………………………………………………8

Competitive strategies…………………………………………………………………………8

Inputs………………………………………………………………………………………………….9

Conclution………………………………………………………………………………………….11

Bibliography………………………………………………………………………………………12

Introduction: Purpose of the investigation

The main purpose of this investigation is to learn about the alcoholic beverage sector in Mexico, specifically about beer, being the most important and sold across the country. The two main beer breweries in Mexico are internationally known and are leaders in the global market. This represents a huge income to the country as well as job creation for many Mexicans.

In Mexico, most of the beer is produced by two large conglomerates, the first one is Cervecería Modelo/Grupo Modelo and the other one is Cervecería Cuauhtémoc-Moctezuma/FEMSA. These two companies control almost 90% of the total beer market in the country. This industry is one of the most prevalent in the country, with over 63% of the population buying one brand or another. Beer is also a major export for the country, with most going to the United States, but it is available in over 150 countries in the world.

Just after the war for independence in Mexico ended, breweries started to pop up in Mexico because people realized it was a good way to earn some money, up to the point that in 1918 there were almost 40 different breweries across the country. After some years, most of them disappeared or became very small and couldn’t compete with the two big ones that we know in the present.

In this investigation we will describe everything related to the beer sector in Mexico and the impact it has both nationally and internationally, as well as explaining the impact it has in different economic, logistic and strategic sectors of global competitiveness.

History: Grupo Modelo and Cuauhtemoc Moctezuma

In 1925, Grupo Modelo was launched in Mexico City with only two beers: Corona and Negra Modelo. In just 3 years the company had recorded an amazing 8 million bottles sold in the country. By 1933, Grupo Modelo decided to expand its horizons and that is when they first exported their products to the United States. In the next 20 years, Grupo Modelo bought out about 10 different micro breweries to make them part of their big company and expand their line of products and their distribution systems. The first canned beer was introduced by Grupo Modelo in 1966. By 1985, the brand Corona was known all around the world because there were exports to Japan, Australia, New Zealand and some of the most important countries in Europe, besides the United States which got the product years earlier. Around that same year, Corona it ranked the second best beer in the US and also the one with the most imports in the country. About 5 or 6 years later, Corona was being exported to almost every beer-consuming country in the world, and by 1994, Grupo Modelo managed to go public in the stock market. Nowadays, Corona is the biggest and most recognized beer brand worldwide. Also, Mexico proudly owns the most modern brewery in the whole world, located in Coahuila.

Cuauhtémoc Moctezuma Brewery Group is the most traditional in Mexico: it operates six plants spread out across the country and has around 18,000 employees. This company was founded in 1890 and has kept growing ever since.

This brewery owns the most varied portfolio of beer in the country. Together with Heineken, the brewer with greater presence in the world, Cuauhtémoc Moctezuma forms one of the largest groups in its industry in terms of volume and profitability. In 2010, Cuauhtémoc Moctezuma strategically joined Heineken, making Mexico the largest market globally in terms of volume for the Dutch company.

Location

The next map shows where the breweries and factories of both these companies are located across the country as well as the ones that are currently under construction or in plans of being started soon.

As we can see, both companies are currently building a new brewery just next to the border to the United States, because of the very lucrative market that the country offers.

A 2005 report from the national beer industry claims that the average annual consumption of beer in Mexico is 50 liters per adult, a figure that has not changed significantly in the last 20 years. The equivalent figure in Germany is 123 liters a person, so there is still considerable potential for growth. Mexico’s breweries provide about 80,000 jobs directly and a further 800,000 indirectly.

How much is this industry worth???

Total beer sales each year in Mexico are worth 6 billion dollars, equivalent to 1.6% of the GDP. The value of sales has risen a lot lately, at about 5% a year, this is mainly because of the increase in exports. Mexico has become the world’s second largest beer exporter, after the Netherlands.

The USA is by far the main export market for Mexican beer. Five of the 25 most popular brands in the USA are Grupo Modelo beers: Corona, Modelo Especial, Corona Light, Pacífico and Negra Modelo. This has helped Grupo Modelo become the world’s sixth largest brewer. Modelo’s Corona beer became the #1 imported beer in the USA in 1997. One of Modelo’s fastest growing export markets is China, where it has rapidly become the second most popular imported beer.

Beer market value in Mexico rose by 5.4% in 2009. It was expected to rise by 8% in 2010 and then by between 6% and 7.5% annually up to 2014, which should help Mexico sustain its position as one of the most profitable beer markets in the world for many more years. It is expected that the price to the market will rise a bit these years so the companies will be more profitable but the volume of production will decrease a little. Volume sales fell for the first time in at least five years in 2009, going under by 0.5% to 6.317 billion liters. The market is expected to expand by 5.5% in volume this year and then by 3.5% or 4% each year up until 2014. Per capita beer consumption is set to reach 66 liters in the country by 2014. It was 57 liters last year.

There are a lot of investors in both of these companies, but especially people are interested by Grupo Modelo’s stock market share, and that is why they want to get a piece of the action. Here is a table with the price per share of Grupo Modelo since 1998.

We can see that it is amazing how the share price has grown up in just a few years and the net return that share holders are having in this successful company.

Creation of jobs

The job with the Mexican beer industry is approximately sixty thousand people, however, this potential working population expands and that links to nearly two million other jobs, where services include, food preparation, dinning and recreation and leisure.

Competitive strategies

Innovation

The brewing industry is solidly structured in each of the areas that comprise it. It has an efficient management plants, distributors and agencies, with a specialized technical area; technology to manage all processes, commercially managed well supported on sustained growth, and a highly trained human resources.

Technology innovation

In this area, the beer industry implemented a number of technological advances that allowed him to achieve a competitive advantage and a new reposition in the sector.

According to Porter, a technological innovation, must "... affect the cost or differentiation both in its own right, technology affects competitive advantage through change or influence the other guides cost or exclusivity." , an example of technological innovation was the introduction of the aluminum by Cerveceria Cuauhtemoc (1954).

In this way the company received many benefits, such as; generated value to the buyer by a new presentation on the product, diversified its product lines and most importantly the cost advantage that was obtained, since the preparation of this new product, it could eliminate costs that generated the purchase of glass bottles and bottle caps making.

This had its effect on the industry, according to Porter "... a technological change may also alter the amount of capital required to compete in an industry ...” This was reflected by the attractiveness of the sector, it can be said that increased entry barriers for the new raiders.

This type of innovation can affect or make effects on the clients or in the product differentiation.

An important innovation was cast by Cerveceria Cuauhtemoc by introducing colored bottle TRANSPARANBAR * 1953 the main function was to prevent the entry of light that affect the quality of the beer. In this way they obtained a segmentation product because the client has the option to buy more.

Another example was in 1960 when it launched the “CAGUAMA” with capacity of almost one liter providing economic benefits and convenience for the consumer

Inputs

The beer industry directly or indirectly suitable for the development of industries that provide the raw materials for its operation. These branches came to rival with the own beer industry, such as glass, malt, cardboard, foil, the specialty printing, and cooling. Furthermore, it stimulated the development of agricultural activities or subsidiaries related to it, such as the cultivation of malting barley thereby avoid the import.

The beer industry almost achieved self-sufficiency to intensify its vertical development, which was one of its notable features, the brewing companies control almost every phase of the production process, from the planting of barley as raw material for the production of malt, to manufacture packaging, labels, cartons and other intermediate products achieving a match between the suppliers and the company and also increasing the benefits of both, optimizing the performance of activities, improving coordination, thereby addressing the vertical links of its value chain. The beer industry increase the control of the market by combining several independent production companies savings in production costs. This allowed the security in the supply of raw materials. This combination could be done by aggregation, consolidation and integration.

Conclution

The main factors that contributed to the decision by the entrepreneurs to position their factories brewers were:

1. Roads.

2. Access to raw materials.

3. Proximity to markets.

The company implemented new presentations of their product as canned beer, “CAGUAMA”, abresolo system, quitapón, etc. as a way of differentiation, managed to an impact on the consumer. Similarly, practices such as the use of crushed ice in points of sale were oriented to enhance or maintain the value of the product.

During the study period there was a constant growth of the beer industry not only because the above strategies, but also to the economic model: import substitution. Another important factor that stimulated the growth of the industry was the promulgation in 1963 of the health regulations of alcohol, which stipulated that drinks with low alcohol, like beer, could be, sell freely, making them a product accessible to the population.

Mexico is a major producer of beer in the world. 50 percent of the World production is concentrated in China with 18.5%, United States 17.7%, Germany 8% and Brazil with 5 percent. UK, Japan and Mexico have an average share of 4 percent each.

Bibliography

• http://en.wikipedia.org/wiki/Grupo_Modelo

• http://www.gmodelo.com.mx/index.jsp

• http://www.gmodelo.com.mx/informacion_bursatil.jsp

• http://www.gmodelo.com.mx/quienes_somos.jsp

• http://www.just-drinks.com/news/

• http://geo-mexico.com/wp-content/uploads/2010/08/mexico-breweries.jpg

• http://www.cuamoc.com/

• http://www.cuamoc.com/es/esencia-cuauhtemoc-moctezuma/esencia-cuauhtemoc-moctezuma

• http://en.wikipedia.org/wiki/Cuauhtémoc_Moctezuma_Brewery

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