Andy Morton

Analysis - SABMiller's Mexican standoff "not life threatening" for Heineken

By | 10 June 2013

Heineken is Mexicos second largest brewer

Heineken is Mexico's second largest brewer

SABMiller's long-running bid to end Mexico's exclusivity agreements is "not life threatening” for Heineken's local brewer, but could cut its volumes by about 5%, an analyst has warned.

About 20% of Heinken-owned FEMSA Cerveza's volumes in Mexico go through OXXO stores, which only stock FEMSA Cerveza beer under an exclusivity agreement. Mexico's anti-trust authorities are expected to rule on the legality of these agreements before the end of this month after a SABMiller complaint they are an unfair barrier to entry.

Bernstein analyst, Trevor Stirling, said today (10 June) that volumes will likely fall by 6% from the loss of OXXO sales and a further 2% from “fair share” to SABMiller and Mexican craft brewers.

However, gains from sales in other convenience stores currently tied up in exclusivity agreements with rival brewers would see volumes down by just 5%.

He added that in financial terms: “A possible worst case would entail an 11% fall in Mexican EBIT. But it is also conceivable that if the industry limited the re-investment of loan amortization/discounts, the profit impact could be neutral.”

Stirling said that while SABMiller would win easier access to the market if the authorities rule in its favour, Mexico still has large barriers to entry. Grupo Modelo, now owned by Anheuser-Busch InBev, controls about 55% of the market and FEMSA Cerveza about 43%.

Heineken acquired FEMSA Cerveza in 2010 in a deal worth EUR3.8bn (US$5.5bn).

Expert analysis

Global Beer Tax Tables, 2012

This report covers 58 markets and comprises a series of tables covering taxation base, historical excise rates, legal controls and a calculation of the total taxation burden on beer.

Sectors: Beer & cider, Legislation

Companies: SABMiller, Heineken, FEMSA, Modelo, InBev

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