Corona is by far, one of the more recognizable names in the export beer category next to Heineken that stands out considerably from other beers. It is an easy drinking beer that is paired well with Mexican cuisine, beaches, picnics, parties, and backyard barbeques. Corona Extra has outsold every imported beer in 2006 and 2007 with Heineken coming in far behind at second place. It is the 4th best selling beer in the world and one of the top 10 breweries in the world. This fact may slowly descend away as other international brands increase their marketing budgets and spend more to gain the upper hand. Heineken’s president Michael Foley stated the truth when he said, “Beer is all marketing. People don’t drink beer, they drink marketing.” By taking a look at the overall situation that Grupo Modelo is faced with in the years ahead, there are some alternative choices that must be presented to the company if it wants to continue to grow and outperform its major competitors like FEMSA. One idea is for the expansion of Modelo’s marketing campaign by allocating more money to advertising. The majority of Corona advertisements seen on television are the famous “Fun in the sun” beach theme skits. Although simple, comical, and very effective, these commercials are the only well-known advertisements for Modelo beers in the U.S. Negra Modelo and Pacifico Clara are also produced by Grupo Modelo that actually score higher in taste than Corona Extra. These two beers could become potential revenue streams for Modelo if they were more widely promoted like Corona has been for the past decade. Creating awareness of different Modelo beers is a key element needed to disseminate their product for maximum exposure to a target market. Ways in which the company may want to consider expanding its marketing efforts would be broadcasting on public radio stations, satellite/internet radio, and web-based advertising in an effort to reach a broader range of the U.S. population. As of 1996, Modelo only spent $5.1 million in the U.S, compared to $15.1 million spent by Heineken, and $192 million by Anheuser-Busch. Modelo should consider focusing more on the taste of Corona, Corona Light, Pacifico Clara, Modelo Especial, and Negra Modelo beer in addition to the “Fun in the sun” theme to further enhance its image as a beer that everyone wants to drink on a regular basis. It has achieved great success in the past by differentiating itself from the classical target market of male beer drinkers between the ages of 25 and 45. This concept caught on with both male and female gendering including those who do not normally drink beer. Now is the time to rethink the overall marketing scheme of Modelo in order for it to remain at a competitive level with Heineken as the #1 export beer and top selling beer. By including other quality beers within the Modelo portfolio, the company could potentially increase its market share in the export beer industry within the U.S. and across the world.
We would like to recommend the following changes to further prepare Modelo in the challenges it faces in the future. The financial highlights of Modelo display a solid performance in sales of beer both the domestic and export markets. To further grow the product internationally,
Modelo faces enormous competition against companies like Anheuser-Busch (AB) InBev and SAB Miller that own more subsidiaries and have the capability to distribute more variety to the global population. Modelo and Anheuser-Busch teamed up and use each other as a channel to distribute their products across U.S. and Mexican border lines where one company is strong while the other is weak. But unlike Anheuser-Busch and FEMSA, Modelo does not have the diverse portfolio to support itself in times of bad economies. FEMSA strategy involves the operation of multiple business units that include Coca-Cola brand products, OXXO (the largest chain of convenience stores in Latin America), and Heineken beer. Modelo is only involved in the process of making and distributing beer domestically and internationally. Although the variety of beers does balance out and provide some security in the marketplace, the company has no other strategy to rely on in the case of catastrophe in the beer business.
If the company’s interest continues to strictly involve beer, then I would recommend a solution to diversify in other brands of beer around the world. Mergers and acquisitions are a commonplace in the global economy today and should be highly considered if Modelo has the financial strength perform such a feat. This method could open the door to many more possibilities in other beer countries where Mexican beer is not normally circulated.
Another option to consider for Modelo to help cut costs and take a greater hold of the export market in the U.S. and Europe is to consolidate their distributors or eliminate them entirely and perform the management of logistics within the company. Currently, Modelo has two distributors (Barton Beer and Gambrinus) that split the 50 U.S. states into 25 state sections. These logistical companies take care of the activities of selling beer, transporting it, custom clearance, pricing strategy, insurance, and advertising campaigns. Basically, everything is done by a 3rd party vendor except the making of the beer and final say in the decision process. It is fully understood that these companies relieve a huge burden off Modelo by taking command of the dirty work, but it also comes at a great cost. Modelo should reconsider the option of undertaking the duties of at least one, if not both of the distributors to take full control of their product.
Another way to distribute more beer with the Modelo company name on it would be in the way it is served to customers. The majority of Modelo beer is served out of bottles. This holds especially true for Corona Extra and Corona Light. Distribution is rarely, if never seen in kegs at restaurants. Even Heineken has mini-kegs in which contains 14 12-oz glasses of beer. It appears as if the novelty of drinking a Corona has worn thin even though it remains a strong player as America’s #1 import beer.