Ms. Gigi Smith
Strategic Management – BUS 599
November 14th, 2010
This case analysis presents a synopsis of Corona Beer (Modelo) current strategy and its position within the competitive beer industry. The key question being addressed is whether Modelo would be able to maintain its status as one of the market leaders in beer production and distribution as competition in the industry increases. This paper presents an analysis of the trends within the global beer market, analysis of the foreign market of Modelo, competitor analysis, and by identifying the strategic challenges being faced and various options and recommendations to address them.
Identify and discuss the trends in the global beer markets.
The trend towards premium beer consumption has slowed somewhat in the recent economic downturn. However, down-trading is limited and there are notable instances of consumers continuing to trade up, both into beer and, within the category, into premium products. The beer industry has also seen a trend towards consumers trading up to attractive, local, premium and more expensive beers. Since 1997 Corona has become the number one imported beer in the US, substituting Heineken who had held the number one spot in the beer industry since 1933. (Thompson, Strickland, & Gamble, 2010) With Corona expanding their company internationally into the United States and Canada, Grupo Modelo has already responded to the potential threats that may come because of the unpredictable Mexican economic system and their political environments. During the past five years, on a pure alcohol-equivalent basis, beer has increased its share of total alcohol consumption by more than 200 basis points (bps) to 41.1%. In 2008 the trend slowed somewhat and beer’s year-on-year share of total alcohol consumption remained flat. In emerging markets, beer has generally shown higher growth than other alcohol categories as consumers gradually switch from local, generally high-alcohol, subsistence products towards attractively packaged, higher-quality, commercially produced beer. Over the past five years, the beer industry has seen a trend towards consumers trading up to more expensive beers. As a result, premium beer has gained more than 40 bps and now constitutes 17.9% of total beer sales. For mainstream beer consumers, particularly in emerging markets, the most common trade-up proposition is to attractive, local, premium brands. Beer has increased its share of total alcohol consumption every year but in 2008 the trend of Corona slowed down. In emerging markets beer has shown higher growth than other alcohol categories as consumers switch local to commercially produced beer. Beer drinking is on the rise and the market of beer drinkers has changed from being predominantly a male product to females now drinking socially too. Over the past five years, the beer category has maintained a compound annual growth rate of 4.8% globally. (Thompson, Strickland, & Gamble, 2010) Discuss how Modelo’s international expansion was made possible through strategic partnerships with experienced distributors in local markets.
The global financial crisis continues to cause a considerable slowdown in most countries. Governments around the world are trying to contain the crisis but many suggest that the expansion is not over. When Corona first entered the American beer market as a distributor Modelo’s choice to align itself with Barton Beers was its largest beer importer in the 25 western states and has experience in marketing and sales of imported, premium beers. In 1986, to continue its growth within the United States and to supply the eastern states, Modelo decided to select a second distributor Gambrinus Inc. Modelo agreement with distributors was that each importer would be responsible for essentially all activates involving sale of the beer and production. (Thompson, Strickland, &...