Corona There Are a Number of Trends

Corona

There are a number of trends in the global beer industry. One is consolidation, where firms are using mergers and acquisitions to enter new markets and to achieve economies of scale. For a brewer like Modelo, consolidation means that the company becomes smaller relative to the industry's top firms. Modelo has does not compete (at least with Corona) on a cost-leadership strategy, so this trend does not matter much for production economies of scale but it does matter for marketing economies of scale. Corona is also leading a trend of premium beer brands competing in the marketplace. Products such as Stella Artois, Hoegaarden, Heineken and (in international markets) Budweiser are competing with this strategy in this is one of the most important growth markets in the industry.

Modelo's international expansion was made possible through the use of strategic partnerships with distributors. These partnerships allowed Modelo to penetrate internationally markets quickly, with little initial investment. These distributors were able to get the product shelf space quickly, and are able to understand how best to position Corona in the foreign market. Thus, Corona benefited from the established routes to market and distribution infrastructure, in addition to local market expertise. This allowed the company to focus on two aspects of their business that they considered to be essential -- brewing and marketing.

In the critical U.S. market, Modelo's strategy for Corona was to use two different distributors, and split the country evenly between them. This forced each of the distributors to pay more attention to the brand, lest they lose it. Additionally, Modelo was able to leverage the knowledge base and innovation of both distributors. This delivered to Modelo greater market penetration, greater marketing innovation and more distributor support than it would have enjoyed if the company had selected a single distributor for the entire American market.

3. According to the Corona website, the brand is already sold in over 150 countries. When one considers the Muslim countries where alcohol is not available (such as Brunei or Saudi Arabia), this leaves very few untapped markets, none of which are particularly enticing. One country where Corona cannot be found -- according to the Corona website -- is Mongolia. The Mongolian market is small -- 3 million -- but the country is growing in wealth. The market is easy to enter, as the population and money in the country is concentrated in the capital of Ulanbaatar.

The market entry strategy for Mongolia should be the same as it would be for most other nations. Corona needs to find a local distributor to help market the brand. There is a national brewing group that lacks a premium brand, and there are also a number of small distributors. There are few barriers to entry, so once a distributor is chosen market entry can occur quickly. Shipping is easy -- once offloaded in China the beer can be shipped by truck up to UB.

The promotional campaign should be much the same as it would be anywhere else. The initial target customer group would be ex-pats, of which there are a few given the importance of the mining industry to the Mongolian economy. Wealthy locals would be the secondary target market. They may need some introduction to the brand, but with foreigners drinking the beer, that prestige will come quickly as it is seen as a status brand. Promotional materials should be much the same as they usually are for Corona, focusing on the beach and relaxation theme. This theme is not universal -- only foreigners will understand it -- but the message is consistent with Corona's global marketing strategy.

4. Modelo does not face challenges from InBev -- it is 50% owned by InBev. If it was competing against InBev, that competition would be interesting. InBev has been building its global market share for years, and in most markets competes in the same premium category as does Modelo. Therefore, InBev would theoretically represent a competitive threat. The response for Corona would be to maintain a strong differentiation from InBev products. This means emphasizing the beach theme and the Mexican origins of the product. Until InBev purchased Corona the company did not have a Mexican beer in its portfolio, so this point of differentiation was still valid.

The other ramification of this competition for Modelo would be to find channels of distribution that were superior to that of their major competitor. Modelo needs to ensure that Corona is the beer the distributors promote the most, rather than one of InBev's brands. The economies of scale for InBev and the volume that company sells overseas means that it often has a strong distribution network. However, in most countries there is a competing distribution network and Corona can surely add value to those companies with the strength of the Corona brand.

5. Modelo should not diversify its business. The company has an expertise in brewing, and some expertise in marketing. With respect to the latter, it is worth knowing that outside of Mexico, Corona is the company's only hit. So its marketing prowess beyond the Corona brand is suspect. In order to justify a diversification, the company would have to develop a product that complements Corona, or in some way leverages some of the company's core competencies in order to derive value.