FOREIGN MARKET ENTRY AND DIVERSIFICATION
Case Corona Beer
The United States of America saw in 1979 the establishment of the Corona Beer Company. With the US history, records show that since this aforementioned time, this company still continues to produce beer that is imported by many countries all over the world, which also is the reason for it, international popularity. The year was 1926, where in Mexico, its largest brewery produced quality products and this company was Grupo Modelo. This organization were producing and operating using all of their 7 state-of-the-art brewing facilities which is spread all over the country. Their product, Corona Beer, is sold and exported to over 150 countries all over the world reaching every continent. (Corona, 2010) This brewery has recently capture 51% of the market they cater to and countries that import their products have already reached 56. The reason behind the success of the company and its product was because of the rise in demand for beer in all of their markets. But, their sales had greatly reduced in 2008, which can be attributed to the lack of demand by their customers for the Corona Beer because new products were getting their attention and many of them prefer these products to it. Beer consumption has not wavered since that time, but customer preference has shifted to other products, which greatly affected Corona Beer. Just recently, women have joined in the market for selling of beer products because they now see it as a way to socialize with other people. In general, a 4.8% growth is being experienced in the whole world. The trend for high-priced beer and the locally available good beer has already been identified. The Corona beer when it comes to the total sales has surpassed Heineken if we base it on the US imported beer figures. It is quite an achievement since Heineken has stayed a top of all imported beers since the year 1993. With the success they are experiencing, they continue to trek into the international market and establishing a reputation by setting up their own chain of stores in Canada. Moreover, their Mexican mother company, Grupo Modelo, has prepared itself to any challenge that they may face with their economy as well as political issues that shall come up.
Beside the US, Grupo Modelo now considers China and Australia as potential countries that would have a high demand for the beer products they are offering. In fact, the beer consumption records of this country show that China consumes more beer products when compared to the US, which is because their total population is over a billion people, and that means a lot of people, can drink beer. Along this line, Australia is popular for their culture that loves drinking beer. Therefore, Grupo Modelo, shall have an easier time when they want to put up a market in this country since many Australians love beer and that it actually fits the way they live. The company must maintain the distribution strategy they are using when they try to establish markets for both of these countries, so that they can maximize the progress of their stores and products when they enter their market. The distributors they’ve designated for their products should penetrate the local market well through good distribution strategies. Furthermore, a strategy like this one has made a major contribution in making beer a popular beverage all over the world and making a great contribution to culture and economics. Monopoly when it comes to the production of beer would be hard to do since barriers to entry aren’t really present in this type of market with cheap tariffs (which would be considered the major reason for the success of beer products back in 2002), and many of the partnerships that companies have established in this industry. The success they experiences has made a major contribution to the economy of Mexico. (Walden & White, 1999) One other strategy that was effective for Grupo Modelo would be the bond they’ve established with the distributors they have an agreement with because they allowed them to do what they want in terms of promoting Corona in the country. This company’s financial stability is excellent which means that sustainability would be their and that they can continue to operate for a long time even with new projects they invent. It is good to remember this because it will help them continue to grow at a fast pace. Besides these facts, their fully established brand in one market can be used to enter another market. The quality of their product is well known as well as the taste it gives to customers. The financial management scheme was to control their supply chain with a vertical approach and continue to implement quality control that is really strict. Over the years, this company still continues to partner with Anheuser-Busch which is a company also based in Mexico and they handle the distribution duties for their products.
Using the best distributors for their product distribution was a good move, however, it was enhanced by their ability to follow channels that are very strategic for their product distribution, which helped them expand to reach other markets outside the country as well. The demand for beer reached it peak in September 2008 and this continued until the year ended. (SABMiller, 2010) The maturity level they are right now maintains the stability for their operations and sales efforts since it has given them the financial leverage to continue to be sustainable. With the US market they have, the distribution company they got was a Chicago-based company, Barton Beers Ld, and they are a major distributor on 25 states in this country mostly on the west side. They developed a marketing campaign and called it “fun in the sun” which was one of the most successful ones for their product. But, even if they have major distributor, they still went on and hired another one and it is Gambrinus Inc. This distributor had a hand on the other 25 states and that is why Grupo Modelo chose them. Sales and marketing were the major tasks they’ve handed out to the distributors that they chose, as well as, branding, but, they didn’t include producing the product themselves. But, decisions that would affect the whole company was still at the hands of Grupo Modelo. A rise in the taxes back in 1991 contributed to the reason why these distributors agreed to have a partnership with Grupo Modelo.
For the past years, the success and expansion of Grupo Modelo continues because they are continuing to have a high growth in sales. But, it doesn’t mean they didn’t face any challenge along the way and for this company it happened in 2007, where inflation rates and dropping sales affected them. They were competing well with both local and international companies and they were one of 2 well-renowned brands in the world. (Thompson, 2010) An example would be the 12% income rise experienced by InBev despite taxes not reducing. (Just-Drinks, 2010) Additionally, InBev purchased Anheuser- Busch and it gave them their 50.2% share that they took from Grupo Modelo. But, Modelo answered by controlling most of the Mexican markets in the country.
A diversification decision for this company would be really hard to do. First of all, they have the option to expand their product line and start to product products that aren’t alcoholic. It would penetrate the segment that is not fond of drinking alcoholic drinks. The trend today is the alcoholic beverages that have flavor and those that are a bit lighter than what is normal beer and they can try to adapt to this trend as well. Modelo can still continue to have a partnership with the newly purchased Anheuser-Busch of InBev. Both companies can try to have reciprocal efforts in this partnership since Anheuser-Busch does most of the branding and marketing activities they do. It has proven to be effective for both companies if we talk about both the US and Mexican market and it bring a lot of benefits for them. With this merger with InBev, they can develop ways that would bring them advantages in their participation in the market. (Brown, Roath, Pheann, 2009) In any partnership, the strategy that needs to be employed should be based on their own opportunity to grow by partnering with the companies they want to partner with.
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SABMiller.com. (2010). Retrieved from http://sabmiller.com
Thompson, A.A., Strickland, A.J., & Gamble, J.E. (2010). Crafting and executing
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Walden, D, & White, W. (1989). Nafta and the malt beverage industry. Retrieved from