Grupo Modelo in the Global Beer Market

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Table of Contents

Trends in the global market beer
Mondelo’s international expansion
Next foreign market for Mondelo to enter
Challenges facing Modelo
Modelo’s diversification
References

Trends in the global market beer

The global market trends has faced substantial changes over the past three decades with giants like Heineken being edged out by upcoming new brands such as Corona Extra from Grupo Modelo.

The two key strategies that clearly alter global beer market are strategic alliances with strategic partners and global marketing strategies that are unique and quickly identifiable.

The two Mexican companies Modelo and FEMSA were forced to form strategic alliances with international distributors with sound knowledge on local market and because of the fact that they enjoyed less international restrictions especially because of the North American Free Trade Agreement (NAFTA).

Modelo chose Anheuser-Busch while FEMSA opted for Heineken. These strategic alliances were especially important in terms of market penetration since less cost was incurred.

The strategic marketing images of “fun in the sun” and strategies employed by Modelo played a pivotal role in its international growth toppling market leaders such as Heineken in the United States.

On the other hand FEMSA faced a rather difficult time while Heineken marketing strategies caused its significant market loss to Modelo. This was because Modelo focused less on human image for marketing but rather focused on the experience enhanced by its products.

It actually created a myth “fun in the sun” which swept the U.S. market like never before. Its mergers with Gambrinus Inc and Barton Beers also reduced the cost of distribution, marketing, insurance and advertising.

The current global marketing has rather shifted to strategic alliance partnership to enhance global market dominance as evident in the case of InBev and Anheuser-Busch possible alliance.

Such an approach has shaped the brewing industry towards global strategic partnership to create a behemoth capable of taking advantage of economies of scale and other strategic benefits to enhance their market presence and future sustainability.

Mondelo’s international expansion

International market entry for Modelo was particularly strategic because the international market nature and the restriction faced by foreign companies while exporting their products across borders.

This was specifically experienced in the United States where North American Free Trade Agreement (NAFTA) limited foreign companies from accessing the market.

It was because of these restrictions that forced Modelo to form strategic alliances with local distributors that could ease the expense incurred as a result of the restrictions. Modelo first chose Anheuser-Busch because it enjoyed the NAFTA environment.

This initial step was particularly important for Modelo to enhance its international coverage especially with its economically strong neighbour the U.S.

In order to further increase their international strength internationally, Modelo entered into new contracts with local distributors with local market knowledge to further their creative campaign strategy of “fun in the sun”. Modelo also maintained an active role in the decision making process regarding its products.

Modelo aligned itself with Barton Beers a large importer of beer with more than 25 countries internationally and also experienced in marketing of imported beers. It was through Barton Beers that the image of “fun in the sun” gained a substantial ground. Because of the continuing growth in the U.S. market, Modelo decided to add another major distributor, Gambrinus Inc. Modelo was advantaged because the company was headed by former Modelo executive.

Modelo gained from these two distributors because they helped to ease cost related to transportation, insurance, customer and even advertising among other international expenses.

Modelo however maintained an active role with respect to the brands image and thus ensuring the brands increased performance internationally.

To further strategically coordinate its international distributors, Modelo tasked Procennex Inc as a subsidiary mandated the task of coordinating and supervising the activities of the two distributors.

Next foreign market for Mondelo to enter

The next strategic market that Modelo should enter is the European and Asian market. The rationale for this is because Heineken has succeeded in these regions. In Europe Ireland and Germany are potential countries while in Asian, China is strategic market opportunity.

Modelo has a number of strategic advantages that it has gained from its U.S. market exploitation; the key advantage is its marketing image “fun in the sun” which has gained popularity as opposed to Heineken strategic plan that is focused on its qualities.

Modelo should enter these Key international with an open mind considering that the strategies used in U.S. may not be efficient especially in China.

It is however strategic for Modelo to consider the same approach of selecting an experienced distributor that is well acquainted with the local market in Europe and Asia. This will ease the trade restrictions that are especially significant in China and thus reducing the cost of market penetration in the country.

Another important aspect that Modelo should ensure is the uniqueness that it demonstrated in the market penetration both locally and in the United States.

In the modern marketing strategies, it is imperative to ensure that the products being sold and unique and remarkable for the consumers to be able to instantly recognize the brand and differentiate it from other brands.

Constant and strategic marketing strategies that align with the local market should also be enhanced in order to ensure that these strategies are successful in the target local market. Few modifications may therefore be necessary with advice from the local distributors in order for Modelo to penetrate the market significantly.

Challenges facing Modelo

The possible alliance between InBev and Anheuser-Busch will likely create unimaginable behemoth in the brewing industry, a situation that will dwarf giants like Modelo and Carlsberg and Heineken among others.

Such a strategic alliance will not only play an important role in cost saving through economies of scale but also provide a strong competition to almost all the brewing industries in the world.

Such a step announced by the InBev executive has forced other industry stake-holders to rethink their strategies in order to be sustainable amidst a strong competition from the colossus merger.

The immediate strategic response that Modelo should take is to create a consolidated merger with other stakeholders in the beer industry. Such a merger will be a response to the steps taken by InBev (Ellet, 2007).

The most immediate alliances should thus be started with mid-tiers such as Anheuser, Molson Coors and Heineken among others.

The steps taken by InBev will limit the options of these mid-tiers and thus important for Modelo and other to consider an immediate response strategic alliance in order to ensure their sustainability (Hughes, 2005).

Modelo’s diversification

The most immediate action that Modelo should ensure is not to diversify into other businesses but rather enhance its global presence in terms of market ownership of the beer industry. The rational for this reasoning is because a company ought to be sustainable in order to think of other diversification elements.

If Modelo for instance diversifies into other market niches, its primary source of income may be relaxed and thus allowing competitors to reduce the company’s market share.

It is however strategic for Modelo to diversify into other market niches such as wines production, this should however happen only when the company has acquired a substantial global market share in country’s outside the US and Mexico.

Since the Modelo brand is already established and even a market leader in the United States market, the brand should help the company acquire more international market niches instead of pre-mature diversification (Thompson, 2010).

The other rationale for objecting pre-mature business diversification is the overall risks of another business venture. Modelo will have to drain its resources and risks market variations in a new market niche yet its core competencies are doing extremely well established.

Its 7.8 % revenues from international market will be reduced by the cost of starting new operations and thus weakening its financial status when its competitors such as InBev are forming strategic alliances to capture global market.

These alliances are significant in terms of reducing cost of new market penetration. Modelo should also seek strategic international alliance in order to keep at pace with the global leaders if it is to be sustainable in the beer industry.

References

Ellet, W. (2007). The case study book: How to read, discuss, and write persuasively about cases. Boston: Harvard Business School Publishing.

Hughes, R., & Beatty, K. (2005). Becoming a strategic leader: Your role in your organization’s enduring success. San Francisco: John Wiley & Sons.

Thompson, A. A., Strickland, A.J., & Gamble, J.E. (2010). Crafting and executing strategy. New York, NY: McGraw-Hill-Irwin.

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