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Corona Essay

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STRAYER UNIVERSITY

Corona Beer: Modelo

Assignment 3

By: Victor Delvan Brown

02/19/2010

Professor R. Lee Viar IV

BUS599

Introduction

Grupo Modelo (GM) is a Mexican brewer company with more than 50% share in

Mexico. The Mexican beer market was the largest producer and distributor in the beer

market. The company is also an important player in the United States premium beer

segment with a market share of about 6%. Three of its brands Corona Extra, Modelo

Special and Corona Light are among the top ten highest selling imported beers in the US.

One of the most important trends in the beer market is the volume growth which has

primarily come from emerging markets. Since 2000, the compound annual growth rate

(CAGR) has been 2.8% for the global beer market. However, CAGR has seen 5.1% in Asia,

3.9% in Africa and the Middle East, and a substantial 6.2% in Eastern Europe. Grupo

Modelo has a distribution system covering over more than 122 countries, with its flagship

brand, Corona, being the fourth largest selling brand in the world.

Grupo Modelo operations comprise of mainly two areas: brewing process and sales. The

Brewing operations include five breweries located in Mexico with a total processing

capacity of more than 50 million hectoliters per year (www.gmodelo.com). The group has

several subsidiary / affiliate companies that provide support services to the core business

of producing beer. Grupo Modelo has an established distribution network in Mexican

market, which is a key factor in maintaining market shares in the domestic beer market.

The export sales of beer are coordinated through a set of representative offices around the world.

Corona, the beer brand of Mexico’s Grupo Modelo Company, is the number one imported beer

in the USA since 1977. The brand’s US importers Barton Beers and Gambrinus had played a

vital role in making Corona popular and profitable in the country. In early 2004, the changing

demographics, competition and retail consolidation posed many a challenge to Corona. However,

Carlos Fernandez, Chief Executive Officer of Grupo Modelo reorganized the company’s

marketing strategies and concentrated on the growing Hispanic market through new ads and

promotional offers to improve the sales.

Competitive Challenges

In 1977 Grupo Modelo was the number one selling import in the U.S.; surpassing the

Heineken Brand and while gaining bragging rights (Gamble, Strickland, & Thompson, 2010).

Competitive methods illegal in the United States can be illegal in another country. If you go to

one of the many franchises owned by Tony Roma in Mexico, the only beer you can purchase is

Modelo, brewed by Grupo Modelo SA, maker of the top-selling imported beer in the United

States, Corona Beer. “We used to have 28 different kinds of beer, including American Beers”

says the general manager of Tony Roma’s, “but Modelo gave us money to sell only its beer.”

A Modelo distributor paid one town to ban stores from selling any other beer in exchange for

cash, school uniforms, lighting for public parks, and free beer at city parties

www.koernersbrands.com). That kind of tie-up, illegal in the United States, is common in

restaurants, corner stores, and stadiums throughout Mexico. Such tactics, have given Madelo

and other Mexican market brewers an advantage in the U.S. market, where Corona accounts

for 40 percent of all U.S. beer imports and 11 percent of the over-all U.S. beer market compared

to just 1 percent of the Mexican market for the U.S. beer (www.linkedin.com). Ironically,

Pepsi-Cola and Coca-Cola dominate the Mexican soft drink market and have used similar

tactics to compete with one another; that is, until recent ruling that Coke is no longer allowed to

make such tie-ins because it prevent Pepsi from competing (Luhnow, 2003). Modelo has been

reluctant to sell its remaining stake to Anheuser-Busch. Busch IV wants the company to remain

independent. Modelo board of directors has 19 seats and 9 of them belong to Anheuser-Busch

and the other 10 are held by Modelo’s Controlling Shareholder’s Trust. Modelo, half owned by

Anheuser-Busch, claims it was never consulted by its U.S. partner about InBev’s offer.

International Expansion

Corona’s popularity at home, has enjoyed remarkable success abroad. The international

expansion of Grupo Modelo products spread rapidly following Corona’s immense popularity

in the United States in the early 1980s. The brand then entered Canada in the mid-1980s,

followed by the Pacific Rim, Europe, Central and South America, the Caribbean and even in

some African countries and is currently available in more than 140 countries around the world.

Corona’s worldwide success is due to its positioning as a premium import from Mexico.

FEMSA and Grupo Modelo account for nearly all of Mexico’s beer industry. “Until

recently, FEMSA had been a distant second on the duopoly that is the Mexican beer industry

(Gamble, Strickland, & Thompson, 2010).” FEMSA owned the complete distribution channel

in convenient stores. Modelo was offered an opportunity to, “create a beachhead for further

international expansion (Gamble, Strickland, & Thompson, 2010).” Modelo sought out

international revenues, FEMSA wanted to do the same but within Mexico.

Diversity in Business

Its corporate mission: “To produce, distribute and sell quality beer, at a competitive price,

optimizing resources and surpassing customer expectations, in order to contribute to the

economic and social development of Mexico.”

Grupo Modelo is setting the benchmark for global companies whose goal is international

market domination. Modelo should use diversity in their business, especially since it’s an

international brand. Some may feel as though there are many factors that contribute to their lack

of diversity. To promote diversity for Crown Imports, specifically Corona, there is a need to

have a stronger competitive effort to steal volume and share, especially now during this time in

our economy. Maximizing their efforts to distribution and promotional activities should help

with bringing more revenue from diverse consumers. Closing their performance and execution

gaps and committing to recapturing positive sales momentum across the board will help their

efforts to enter into new business venture. Smart merchandising, seamless, distribution systems,

a diversified array of products and worldwide sales force will pay off for Grupo Modelo.

Conclusion

Despite the challenging economy, consumers continue to see alcoholic beverages as an

“affordable indulgence,” according to recent research by ACNielsen. The trend towards

premium beer consumption has slowed somewhat in the recent economic downturn. “And while

consumers may be cutting back on nonessentials, like expensive vacations and designer-label

clothing, Corona remains an “affordable luxury” that offers great taste at a great value

(www.npr.org).” in emerging markets, beer has generally shown higher growth than other

Alcohol categories as consumers gradually switch from local, subsistence products towards

attractively packaged, higher-quality, commercially produced beer.

As the #1 imported beer in the U.S., Corona Extra has grown 16.25% over the last 10 years

and sells more than 130 million cases annually, even in today’s difficult economy. “Grupo

Modelo is a growth company,” and the net sales have risen over the years. If this company

Continues to grow at the rate they’ve been growing they will exceed their goals. Their marketing

strategy to export goods internationally will help to diversify their product and bring in more

revenue.

References

Gamble E., Strickland, A., & Thompson, A. (2010). Crafting and executing strategy: the quest

For competitive advantage concepts and cases. Boston: McGraw Hill.

www.crownimportsllc.com

www.findarticles.com

www.gmodelo.com

www.koernerbrends.com

www.linkedin.com

www.npr.org/templates/story/story.php?storyId=100528810

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