Andy Morton

In the Spotlight - Mexico's beer market probe

By | 12 July 2013

SABMiller lodged its complaint in 2010

SABMiller lodged its complaint in 2010

Just how good are Heineken and Anheuser-Busch InBev at sticking to their commitments? That's the question SABMiller will be asking itself this week after Mexico's competition authorities finally answered the brewer's long-standing plea to review its rivals' alleged monopolising of the country's beer market.

The Mexican Federal Trade Commission said yesterday (11 July) it has approved “commitments” from Heineken-owned Cuauhtémoc Moctezuma and A-B InBev's Grupo Modelo that should give SABMiller more access to a market dominated by the two groups. The commitments include more access for craft brewers to restaurants, bars and canteens that are clients of the two and limited terms on future supply agreements.

The concessions were supposed to satisfy SABMiller, which lodged its complaint with the trade commission back in 2010 looking for more than the 5% slice of the Mexican market not owned by Moctezuma and Modelo.

But while Heineken and A-B InBev hailed their commitments this week as good for competition and therefore good for everyone, SABMiller wasn't ready to celebrate just yet.

In a statement, the company's Mexico unit said the agreements don’t go far enough. A lack of competition will continue “in large measure,” Miller Trading Company said. 

SABMiller was unable to get authorities to change the framework of the beer market, instead merely receiving the commitments, some of which won't be fully in place for another five years. And even if Heineken and A-B InBev stick to their published plan - and there's no reason to believe they won't - there is much left for SABMiller to desire in the details that have been agreed.

The craft beer concessions, which are supposed to give small brewers a better chance against the might of Moctezuma and Modelo, don't cover SABMiller because it produces more than 100,000 hecto-litres a year, one of the agreement's stipulations.

What's worse for SABMiller is what has been left out of the agreement. The commitments don't touch Moctezuma and Modelo's exclusive agreements with supermarkets, which in Heineken's case accounts for about 20% of its sales through OXXO stores.

It was these agreements that SABMiller wanted changed but instead they appear to have been ring-fenced. 

SABMiller said in its statement the exclusivities “constitute anti-competitive practices with negative effect on both consumers and competitors”, and the brewer has at least one ally who agrees with them. According to Reuters, one of the trade commission's five commissioners, Miguel Flores, voted against the settlement because he wanted a stronger ruling 

Flores said: “Exclusive agreements between restaurants and bars and the dominant pair of brewers already account for 25-30% of the market. This is just formalizing the status quo. There is no change in the market.”

Analysts Credit Suisse also said the ruling was “not that harsh”, Reuters reported, though others did see some positives for SABMiller. “If you look at who’s going to make the most of the market becoming more democratic, it’ll be SABMiller,” Melissa Earlam, an analyst at UBS AG, told Bloomberg.

SABMiller may not be finished yet, however. In its statement, the brewer warned more action could be forthcoming. “We are analysing the settlement resolution and will determine our appropriate response in due course,” it said.

To see just-drinks' full coverage of the legal wrangling in Mexico, click here.

Expert analysis

Beer in Mexico

Beer in Mexico industry profile provides top-line qualitative and quantitative summary information including: market share, market size (value and volume 2007-11, and forecast to 2016). The profile also contains descriptions of the leading players including key financial metrics and analysis of competitive pressures within the market. Essential resource for top-line data and analysis covering the Mexico beer market. Includes market size and segmentation data, textual and graphical analysis of market growth trends, leading companies and macroeconomic information.

Sectors: Beer & cider, Legislation

Companies: SABMiller, Heineken, Modelo, InBev

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