There's big money in beer brewing and in Mexico

Monday, December 23, 2013 - 8:26am

There's big money in beer brewing and in Mexico, two major companies are competing for the bigger share of that market, CNN's Nick Parker reports.

It's one of the world's biggest beer markets with a dizzying mix of domestic brands to call your favorite, " Corona, Modelo Especial, La Victoria, Tecate Light, Dos Equis, Bohemia." Yet all of these brands and more are owned by two global giants who control the market: Heineken and Anheiseur-Bush, the makers of Budweiser

They're competing for a big prize, Stefan Orlowski, Americas President, Heineken, "You have something like 1 million consumers entering legal drinking age every year."

Heineken entered Mexico's beer market in 2010 with its purchase of one of the country's biggest brewers, Nick Parker, "This is one of six factories owned by Heineken in Mexico. It makes many of the firms biggest brands including Dos Equis and Sol. Together the factories produce the equivalent of 9 billion bottle of beer every year."

Many of those are also exported to the lucrative market North of the border.

Orlowski says Dos Equis is continuing to enjoy double digit growth, thanks in part to a successful branding campaign aimed at American drinkers, pricing power is strong, "I think Mexican beer is regarded as beer of high quality. They were consistently well priced in terms of attracting a premium which is again a sign of quality and credentials."

The premium market is also growing in Mexico as a middle class emerges, but the industry is changing, a recent anti-trust measure is seeking to allow greater access to craft brewers, in a market often divided into exclusive deals with vendors.

Heineken says it will benefit from the shake up, Stefan Orlowski, "Frankly we very much welcome that. The development of craft brewers actually develops interest in the category. It's good for consumers so we see that as very positive."

This year also saw the $20 billion dollar takeover of bitter rival Grupo Modelo by Ab Inbev. Grupo Modelo declined interview requests for this story.

Analysts say the mega deal may help them extend their lead over Heineken in Mexico, Alan Alanis, JP Morgan, "They're becoming the lowest cost producer of beer in Latin America. So they have expanded margins by around 1,800 basis points in a short range of time. So the increased profitability they are getting they are reinvesting in their brands And I think that will be the main driver in market share gains."

As Mexico's economy looks set to bounce back next year after a slowdown, the battle to reap the rewards is evolving.

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