MEXICO: Grupo Modelo steals march on rival - analyst

Grupo Modelo has increased its share of Mexico's beer market at the expense of its main rival, Heineken-owned FEMSA Cerveza, according to analysts at JP Morgan.

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Modelo has capitalised on leadership transition at Heineken-owned Cervecería Cuahtemoc Moctuzema, which includes FEMSA Cerveza, to grab a greater share of the country's beer sector over the last 12 months. According to JP Morgan analysts, Modelo has added two percentage points to its volume share of beer sales, taking it to an all-time high of 61%.

"The lack of management continuity at the helm of its domestic competitor has been advantageous for Grupo Modelo," said the analysts. "We expect Modelo to continue outperforming the industry," they added. 

Late last week, Modelo said that its beer volumes in Mexico rose by 7.6% for the nine months to the end of September, compared to the same period of last year. Nine-month net sales in Mexico increased more quickly, by 11.5%. The group, which is 50%-held by Anheuser-Busch InBev, is also sitting on a cash warchest of US$2bn.

By contrast, in August, Heineken reported that its beer volumes in Mexico rose by just 0.8% for the first half of 2011, "resulting in some market share loss". However, with Mexico's beer market seemingly on a steeper growth curve than in the last couple of years, Heineken will look to regroup behind a new MD in Mexico.

From December, the brewer will parachute its current MD for France, Marc Busain, into CCM. The group also launched the Heineken brand in Mexico in March this year, which may help it to gain share from Modelo in the premium sector. When Heineken agreed to acquire FEMSA Cerveza in January 2010, it reported that the Sol lager brewer had a 43% volume share of Mexico's beer market.

If Heineken is going to win back share, then it may have to do so amid slowing economic growth. JP Morgan estimates that Mexico's economy will only expand by 2.5% in 2012, versus its previous forecast of 4.5% growth, made three months ago.

However, Mexico is one of the most profitable beer markets in the world. Alongside Brazil and the US, it accounts for a third of global beer industry profits. According to projections by Mintel's Global Market Navigator, published last year, Mexico's beer market is set to increase in value by an average of at least 6% per year up to 2014.

Heineken said in its recent half-year statement that, despite slow volume growth, higher pricing and cost savings lifted its profits in Mexico.  

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