Introduction
Although Heineken is the most distinguishable beer Company globally, Corona remains its closest competitor in the exported beer category. Corona beer is simple and is widely taken in Mexico backyard barbecues, parties, beaches as well as picnics. In 2006 and 2007, the beer became distinguishable in Mexico outdoing Heineken. Worldwide, its sales are ranked fourth. Globally, its breweries are ranked among the first ten. In the current beer business, marketing plays an essential role in ensuring maximum sales for any beer. Grupo Modelo being in this industry must weigh various strategies in order to outdo its key competitors key among them FEMSA and InBev.
Identify and discuss the trends in the global beer markets
Beer consumption began in the 14th century. Since then, the global beer market has taken a distinguishable trend. In the early years, the industry was mainly conducted at the nation’s boundaries. The industry was mainly localized. However, the recent 20 years, beginning in the 1990s, have witnessed a major revolution in the industry. This revolution has concentrated on the move to expand the industry beyond a nation’s boundary. It began in North America and Western Europe. Other countries in Latin America, Eastern Europe, and Asia copied this trend and began expanding their companies globally. This trend has gradually been diffused to other countries; while in 1998, the 10 largest brewers had a 34% share market of the global beer market, by 2008 the percentage had risen to 59%.
A major revolution in the global market was witnessed in 2008 through company acquisition. Newcastle was acquired by Heineken, Carlsberg acquired Scottish and Anheuser-Busch was acquired by InBev. The industry has witnessed key trends. Firstly, the growth rate has increased in subsequent years. An analysis of the growth rate in the past five years shows a 3.5% increase in sales. This growth has been mainly in the world’s largest beer market China, Eastern Europe, and Africa. The industry has witnessed a major acquisition and key consolidations that have reduced the dominant brewers to four from ten: SABMiller, Carlsberg which accounts for half of the total global sales and three-quarters of the global profit, Heineken and Anheuser-Busch. Another trend has been the increase in premium brand sales. Consumers have become aware of authenticity and are purchasing premium brands more than the other brands. Globally, marketing has increased. This has exposed more young people to top beer information and consequently, there has been an increase in the number of young consumers of alcohol in the industry. Health concerns have driven a large share of the market towards the purchase of quality. People are concentrating on more refined beers that don’t expose them to health concerns.
Discuss how Modelo’s international expansion was possible through strategic partnerships with experienced distributors in local markets
Modelo operations as a brewer began in 1925. Initially, its strategy was focused on the market in Mexico and the area of neighboring Mexico. In 1979, Modelo made its first move to expand beyond Mexico. This move was a move to enter the United States through its beer business. It entered the US market through its top-selling brand Corona. In its entry, the company used a distillery that was amalgamated. This distillery became Barton Beers Ltd. The move was a clever strategy that led to the successful entry of the US market. Barton beer was well known in the US market. In addition, Barton Beers had a high level of experience that enabled the effective marketing of the beer. The company had made its name in more than 20 states of the United States. Using its clever strategy, the company emulated Corona’s “Fun in the sun” phrase in the US that led to further success.
Corona went ahead to partner with Anheuser Busch in Signing a contract that became mutually beneficial for both companies. The terms of the agreement were highly successful for both companies. Modelo became the only Mexican exporter and importer for Busch beers. In exchange, Anheuser Busch had a chance to produce beer for the Mexican market through producers in Los Angeles, Texas, California, and Texas. This strategy was well thought and led to definite sales. The company had grown in its sales in the US and became the leader in beer importation to the US by 1997. Its partner brewers in the US consequently rose to the top 10. Also, Modelo Company enormously benefited from its agreements with NAFTA. This agreement enabled the company to have a strong start in North America and still penetrate the Mexican market. The NAFTA cooperation enabled Modelo to gain immunity from barriers of trade in the region.
Identify and discuss the next foreign market that Modelo should enter and discuss the strategy it should use to enter the market
Corona’s strategy in entering the United State was carefully crafted and enabled the company to rise to the leader in the beer market from Mexico to the United States. The company also rose to fourth place in beer sales globally. Just like any other business, the company witnessed key challenges. The company had effectively grabbed a key share of the United State market through effective marketing. But on the other hand, the company was being challenged by its competitors. Competitors increased their monetary allocation in marketing and sales to compete in the US market. Consequently, Corona sales started declining in the US. A key move that can help Corona reverse its declining trend in the US market and enable it to shift back to the top can be a merge with leaders such as Coors, Heineken, and InBev.
In penetrating China market, Modelo partnered with Anheuser Busch in 2006. This was a strategic move because China offers a large share of the global market. However, a cleverer move should be to concentrate on strategy rather than on which country to enter. The strategy should be to partner with companies that have already acquired customer loyalty in the countries being penetrated rather than the strategy adopted by partnering with companies for importing.
Diversity of products can be a very effective strategy for the company. The company should direct more of its energy in creating more brands of the malted beverage that will increase its niche just like its competitors e.g. Budweiser. Being a global company, innovation must be highly directed in countries with an increasing trend in beer consumption such as China, India, Eastern Europe, and Africa. The current brands should be modified so that they are country-specific. Each country has its own needs and taste and the brands should be crafted to become more country-specific. Modelo is also the producer of Pacifica Clara and Negra Modelo. These two other beers are more tasteful than Corona. However, Pacifica Clara and Negra Modelo receive less marketing and promotion than corona. In order to increase its foreign market revenue, the company can engage more of its promotion in these other brands. On the other hand, increasing its advertising through radio, satellite and the internet can be very effective in increasing sales. More creative slogans other than the well known “fun in the sun” can be very effective in increasing the effects of advertisement in the foreign market such as the US.
In addition, penetrating the unexplored market of Cambodia will play an enormous role in creating a market for the company. The best strategy to use to win the Cambodia market will be to enter into a partnership with companies that have already gained a market in the beer industry of Cambodia such as Cambodia Brewery Cam brew.
Discuss the challenges that Modelo faces from its competitor InBev, and how it might respond strategically to the industry giant
Modelo is already at the top. The major challenge becomes how the company will maintain its top position. Though the company has effectively used advertisement, competitors have continued to increase their advertisement budgets. A key strategy that Modelo can adopt to deal with InBev is to embark on an acquisition strategy. The company should acquire smaller companies in the industry in order to expand. This strategy will help- the company in expanding its revenues as well as in maintaining its market position as an industry leader. Another major challenge that the company is facing is the challenge of image. Since the company is Mexican, many people associate it with the upheavals and instability of the country of origin. A key strategy that can help the company in dealing with the image challenge can be to embark on a PR campaign. A PR campaign will hell help the company in getting to the root of the problem and strategizing on an effective education campaign to change the negative image to become positive.
Discuss whether or not Modelo should diversify in business, what business it should enter into(if any), and why
Diversification will help Modelo expand its sales enormously. For a start, its competitors have embarked on a diversification strategy of incorporating new taste in their existing brands. By diversifying, the Company will counteract the competitors’ strategy. On the other hand, being a global company, diversification will play a big role while creating country-specific brands. Brands that are tailored to the specific needs of the country will help acquire a greater share of the foreign market. Also, diversity in terms of packaging can be effective in dealing with the image challenge in foreign countries.