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Mexico Food and Drink Report Q4 2008
Business Monitor International, Oct 2008, Pages: 75
Mexico Food Drink Report provides independent forecasts and competitive intelligence on Mexico's food and drink industry.
The Mexican brewing sector looks set for a shake up following the takeover of Anheuser-Busch by international brewing company InBev. As Anheuser-Busch owns a 50% stake of Mexico’s largest brewery, Grupo Modelo, this acquisition will surely have consequences for the dynamic but highly competitive Mexican market. Offering high per capita beer consumption and strong growth, Mexico is an attractive market for the world’s major brewers but so far the market has remained largely under the control of two domestic firms: Grupo Modelo and Femsa Cerveza. However, the arrival of InBev could upset this balance and lead to a period of consolidation.
Set to be the world’s largest brewer, the newly formed Anheuser-Busch InBev will be looking to maximise the return from its Mexican assets. Relations between Anheuser-Busch and Grupo Modelo had been decidedly frosty but the arrival of InBev, with its wealth of experience operating in Latin America, is likely to present a number of opportunities that Grupo Modelo should be keen to exploit.
These are likely to include the expansion of Grupo Modelo’s brands in other Latin American markets such as Brazil, and the arrival of InBev’s premium Latin American, North American and European brands onto the Mexican market. In addition, InBev’s highly sophisticated marketing, brewing and cost management techniques should boost Grupo Modelo’s profitably and may help the firm increase its domestic market share. This could force the country’s second largest brewer, Femsa Cerveza, to examine its options. In the first half of 2008 Femsa Cerveza has been outperforming Grupo Modelo.
In both Mexico and the US, which is the second largest market for Mexican beer, Femsa Cerveza has been stealing market share from Grupo Modelo. This is partly because Femsa Cerveza has coped better with the rising cost of raw materials, such as malt and hops, and has not had to increase its prices as sharply.
However, under the stewardship of InBev, this is unlikely to remain the case. Although a major player when viewed domestically, Femsa Cerveza will be dwarfed by InBev Corporation. This scale disadvantage could prompt Femsa Cerveza to seek a partner of its own or could even pave the way for a full sale. All of the international brewers would be interested in acquiring the high growth Mexican firm but the front runners are likely to be companies that already have major operations in the US and Latin America. This includes SABMiller and Molson Coors which have both recently been linked with a possible bid for the Mexican firm.
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