Corona Modelo Has Grown From

Corona

Modelo has grown from a domestic Mexican brewer into a global beer giant. This rapid growth trajectory began when the company began exporting to the United States in 1996, with a highly successful marketing strategy. Since then, Modelo has expanded distribution of Corona around the world, becoming one of the world's largest brewing companies in the process.

There are three major trends in global beer markets today. The first is globalization. The first global beer was Guinness, which began selling throughout the British Empire, but since then very few beer brands have been marketed around the world. After the WWII, Heineken and Carlsberg entered the global arena, followed in the 1960s by Skol (Haddock, 1999). In recent years, however, a wide range of brews have gone global including Budweiser, Stella Artois, Tuborg, Hoegaarden and even larger specialty brands such as Chimay and Paulaner have a broad worldwide presence.

The second major trend in the global beer industry is consolidation. Major brewers have been merging with one another for over a decade. They are doing this to obtain economies of scale in production and distribution, to gain entry to foreign markets and to gain leverage with wholesalers and retailers in the wake of shrinking volumes in the U.S. And Western Europe (Singer & Kesmodel, 2007).

The third major trend is the shift in consumption from traditional markets to emerging markets. Consumption of industrial beer in the U.S. And Western Europe is on a long-term declining trend. China has now overtaken the United States as the largest national beer market in the world, with rapidly rising per capita consumption (Access Asia, 2010).

Modelo has gained access to international markets through distribution partnerships. In the U.S., the firm took on two distributors, so that they two would engage in competition with each other. Also, by having two large distributors each with half the country, Modelo was able to gain immediate access to the national market. The company has also focused overseas expansion on production in Mexico to gain production economies of scale, combined with deals with large national distributors. As a result, when Corona enters a market, they do so with national distribution from an experienced distributor with a roster of solid brands and import beer expertise. This allows Modelo to flatten the marketing learning curve and avoid difficulties in distribution and in gaining market access.

Corona currently sells its beer in 150 different countries. In most of these, however, the brand is positioned as a super-premium import product aimed at the expat market or the luxury domestic market. Thus, Corona's market presence in most of the 150 countries is relatively tiny compared to its presence in North American markets. Many of the remaining unserved nations are either Muslim or are tiny island nations of no economic consequence. In 2009, Modelo reached an agreement with Carlsberg to distribute in Russia, the Ukraine and the five Central Asian countries (Datamonitor, 2009).

Corona's global footprint leaves few relevant markets untapped. One of the few remaining countries where Corona is not available that has potential is Cambodia. The market has potential with the economic development of Phnom Penh and the nearly two million foreign visitors per year to the Angkor temple complex. To enter the Cambodian market, Corona should follow its traditional international expansion pattern of securing a strong local distributor. There are two main beer companies in Cambodia. One is Cambrew, owned by Carlsberg and the other is Cambodia Brewery, which is owned by Asia-Pacific Breweries, a Heineken subsidiary (Ratebeer.com, 2010). Of these two, it is recommended that Corona pursue a distribution agreement with Carlsberg for three reasons. The first is that most of Carlsberg's brands in the country are local brands, so Corona would not directly compete against them. Carlsberg also have the largest stable of brands in the country, and nationwide blanket distribution. Lastly, Corona has experience in dealing with Carlsberg, with whom it has distribution agreements Russia, Central Asia, Turkey and a number of other countries around the world.

Corona faces intense competition from InBev (now a-B InBev after its merger with Anheuser-Busch). InBev has a different model for international expansion, comprised of purchasing breweries all over the world. This secures the company local production and distribution. It has the potential to shut Corona out of its distribution chains, reducing Corona's ability to compete in some markets. In addition, two of a-B InBev's global brands -- Budweiser and Stella Artois -- compete directly with Corona is most markets as imported superpremium beers.

There are three tactics that Modelo can employ in order to compete against a-B InBev. The first is to shore up its distribution channels. If one of the major risks is that it might lose these channels to a rival, Modelo needs to tie up long-term contracts with other international brewing companies that also have a vested interest in warding off a-B InBev.

The second tactic that Modelo should employ is that the company should focus on its own advertising campaigns. Corona is a strong brand in its own right, and Modelo has built significant expertise in brand-building over the past 25 years of international operation. The company needs to leverage that strength in order to out-advertise its rivals. Other firms will compete, but Corona has demonstrated that its campaigns resonate with consumers all over the world. It should not change what it does now as that would put its future success at risk.

The third tactic Modelo should employ is to build the strength of its other brands. a-B InBev has two global powerhouse brands and multiple complementary brands as well, both local and international. They do this to leverage economies of scale in distribution. Modelo needs to do this as well, by building some of their other brands -- Modelo, Negro Modelo or Pacifico -- into global brands capable of complementing Corona in overseas markets. Adding another brand would allow Modelo to position multiple brands directly against those of their main competitors. Modelo has the leverage to get its other brands into foreign countries, now it just needs to find the right advertising hook to build those brands and become a true global brewing giant.