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13-07-2013, 10:11
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We in the UK have such a range of beers to choose from that we could easily drink a different beer every day of the year quite easily if we were so inclined to. *With over 1000 breweries offering well over 5000 different beers of all types, we could continue with this quest for over 15 years without risk of repeat. *However try this in Mexico and you would struggle to finish the fortnight without repeat.
The Mexican beer market makes pretty much every other country in the world look like a free trade haven. *The bar and restaurant beer supply is dominated by two companies,Grupo Modelo (http://en.wikipedia.org/wiki/Grupo_Modelo#Brands) (owned by AB InBev) who produce Corona among others claim 58% of the total beer market, while Cerveceria Cuauhtemoc Moctezuma (http://en.wikipedia.org/wiki/Cuauht%C3%A9moc_Moctezuma_Brewery#Beers) (owned by Heineken) who’s brands include Sol and Dos Equis claim 41%, this leaves a measly 1 to 2% (http://www.reuters.com/article/2013/07/11/mexico-beer-idUSL1N0FH0PL20130711) for independents and imported brands.
Mexico is no small fish when it comes to drinking, it is the 5th biggest beer market in the world and over 11,790,000,000 pints of beer are sold each year there. **This Central American market is vitally important to both the brewing giants who own the major concerns there. *InBev gets 13% of its global sales in the country each year, which Heineken rely on it even more with it accounting for 19% of world sales according to Credit Suisse.
The country is very self-reliant on domestic brands, in recent analysis, it exported a fifth (http://en.wikipedia.org/wiki/File:Beer_Exports_by_Country_Treemap.png) of the nation’s beer production, but only imported 1% of the beer sold in the country, making it the biggest exporter of beer in the world as a share of production ahead of Germany and Netherlands. *Comparing this with the UK, we exported 5% of the British production while importing 6.6% of the beer sold.
Approximately half of this beer is sold in small family owned shops, with only 15% being sold in bars and restaurants and other retail outlets making up the difference. *In comparison, the UK sells 52% (http://www.just-drinks.com/news/on-trade-beer-sales-still-the-majority-figures_id108114.aspx) of the beer purchased through pubs, bars and restaurants, this figure is down from 68% in 2002. *Most of these outlets (both on and off trade) in Mexico have exclusivity deals to one of these two companies, the small “mom and pop” shops supplied with signage, fridges and discounts for locking out the competition, while the on trade locations are the equivalent of being a tied house with no guest beer option in UK terms while receiving similar incentives.
The Mexican competition commission wants to change (http://online.wsj.com/article/BT-CO-20130711-707081.html?mod=googlenews_wsj) all this. *After a complaint from SAB Miller (the second biggest beer producer in the world who brew Miller, Grolsh and Peroni and have some sour grapes one thinks) along with a group of small domestic brewers in 2010, it has spent 3 years looking into this. They have now ruled that the beer market needs to be more competitive and that exclusivity deals should only apply to 20% of outlets (shops and licensed premises) in five years time. *If they fail to comply it could cost the big two Mexican producers 8% of their annual sales in fines, which could cost Modelo over $312 million US dollars in fines based on last years sales, over a third of their operating profit.
The cartel which the big two brewers have been operating has been going on for a over a decade at least, but since 2008, the purchase of the two biggest Mexican operators by the two respective global brewing giants has increased such lock out deals with outlets as InBev and Heineken squeeze as much money as possible out of their investments. *Going back to 2004, a large restaurant chain was paid to stop offering the 28 beers they previously sold and exclusively offer Modelo beers only. *The amount on offer in discounts and incentives made it a no brainer from a business point of view.
The small bar owners are the ones who will benefit from this most and they can offer a choice to their customers and in the words of one business owner “The monopoly that Grupo Modelo and Cuauhtemoc have is really screwed up,” *However the domaination is so entrenched in the Mexican beers market that other operators are only expected to gain 10% of the overall market after 10 years, a drop in the ocean overall. *Choice is a wonderful thing…..we enjoy it more than most with our beer, go exercise that right


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