Five Forces Analysis7
Table 1-1: Key Financial Ratios17
Graph 1-1: Perceptual Map18
Chart 1-1: World’s Beer Consumption in Liters19
Grupo Modelo S.A. de C.V. (Modelo) is Mexico’s largest beer producer and distributor. Corona Extra, one of its main brands, is the world’s fourth best selling beer brand in 2006. Corona’s success is based on the unique and distinctive marketing campaign “fun in the sun” which focused on selling “escape from everyday life to a life of relaxation”. Marketing was directed to a broad market including traditional non-beer drinkers. The beer industry is facing strong competition from rivals selling similar products. Global consolidations have put a great deal of pressure on Modelo’s market resulting in a loss of market share for Modelo both domestically and internationally. A SWOT analysis shows that the company has strong brand recognition, an outstanding marketing campaign, and good distribution capabilities in the U.S. market. The financial analysis indicates that the company is in a strong financial position and will be able to finance future expansions. Key success factors indicate that an innovative marketing campaign and a well known brand, along with a strong network of distributors are necessary to compete in both the domestic and global marketplace. Alternatives were evaluated based on the ability to increase Modelo’s global market share. Various strategies were considered which included maintaining the status quo, increasing the marketing budget, developing strategic alliances, opening breweries outside of Mexico, and merging with rival firms. Expansion through strategic alliances, the chosen alternative, will allow Modelo to strengthen its market share and benefit from the diverse experiences, skills, and technological expertise of strategic partners. A team of Modelo representatives will be required for the next year to research, propose, and implement new partnerships in various countries. A detailed action plan is available at the end of this report.
Modelo is a Mexican Brewery which was founded in 1922. A brewer of Modelo and Corona beer, it initially targeted the domestic Mexican market and focused on improving distribution methods and production facilities within Mexico. In 1994 Corona was listed on the Mexican Stock exchange and Anheuser-Busch acquired 17.7% equity in the company with an option to increase ownership to 50.2%. Modelo distributes its product by entering into distribution contracts with local companies that are familiar with the local market. Modelo entered the U.S. beer market in 1979 with Corona. Corona was distributed by Amalgamated Distillery Products Inc. (later renamed Barton Beers Ltd.). It entered the market as a “fun in the sun” beer and focused on selling the idea of “escape from the everyday life to a life of relaxation”. In 1986 Modelo began to use Gambrinus Inc., a second distributor in the U.S. market. Each U.S. distributor had its own region, but competed to win greater market share. Each distributor is responsible for all activities involving the sale of beer including transportation of the beer, insurance, customs clearance, pricing strategy and advertising campaigns. Modelo allows distributors to make all decisions, but maintains final say on anything that involves the branding of its product. Since 1997 Corona has been the best selling import beer in the U.S. In 2004 Corona had a 56% share of the domestic Mexican market and had outsold Heineken in the U.S. by 50%. By 2006 Corona Extra was ranked...