Corona Beer

Corona Beer - Assignment 3

Strategic Management - BUS 599

May 14, 2011

Corona Beer

Corona made its first appearance in the United States in 1979, and quickly became the fastest growing imported beer in the US. Based in Mexico, Corona was founded in 1925 by Grupo Modelo. They currently brew and distribute 13 different brands of beer with six brands exporting worldwide. Modelo currently operates seven breweries throughout Mexico with one currently being built in Northern Mexico with expected completion second quarter 2011 (Modelo, 2010). Corona is now found in over 170 countries and over the years, they have become:

* The #1 selling beer in Mexico;

* The #1 selling Mexican beer in the world;

* The #4 selling beer in the world.

Trends in the global beer markets

At the turn of the century, the top ten brewers accounted for over one-third of all global beer sales. Over the past decade, we have seen many consolidations which have resulted in what is known today as the top four brewers; Anheuser-Busch InBev, SABMiller, Heineken, and Carlsberg. The top 4 brewers account for almost 50 percent of beer sales volumes and up to 75 percent of the global profit pool (www.sabmiller.com, 2011). Mergers and acquisitions have continued over the past 12 months across all markets. Once the mergers slow down, organic volume growth is expected to come from developing markets along with value creation opportunities in developed markets (www.sabmiller.com, 2011).

Over the past five years, the beer category has maintained a compound average growth of 3.5 percent globally, down from 4.8 percent in 2010. This reflects two different pictures as emerging markets grew at an average rate of 6.8 percent while developed markets actually declined by 3.4 percent. The largest growth has been China, which is now known as the largest beer market. When looking forward to the year 2014, the top 15 growth markets are expected to deliver a compounded annual growth rate of three percent. China is expected to make up more than 45 percent of that growth, with the USA, Vietnam, Brazil, Ukraine, Russia, Mexico, and Peru making up the balance (www.sabmiller.com, 2011).

International expansion through strategic partnerships

Corona formed a partnership with Barton Beers Ltd when it decided to move into the American beer market. Barton Beers Ltd, at the time was the largest beer importer in the western states and was experienced in the marketing and sales of imported, premium beers (Thompson, 2010). This partnership allowed Corona to enter the American market as a premium beer. The key to Corona's success, as stated by the president of Heineken, Michael Foley, "Beer is all marketing. People don't drink beer, they drink marketing" (Thompson, 2010).

With Barton Beers Ltd assistance and their experience in marketing, the Corona brand was plastered all over the United States. Its "fun in the sun" campaign was developed to attract the audiences by presenting the idea of escape and the idea of leaving behind everyday life for one that was relaxing with Corona as the focal point. This "fun in the sun" campaign attracted the non-beer drinkers to drink beer including females which in turn catapulted Corona sales.

According to the book, Modelo expanded internationally through strategic partnerships with experienced distributors that knew the local market and gave them autonomy to market the product accordingly (Thompson, 2010). Through their expansion into the United States, and its "out of the norm" but successful marketing strategy, Corona has been able to not only sell beer, but sell the idea of relaxation. This marketing strategy is something no other has been able to accomplish, even in today's beer market. Most beer companies continue to focus on the quality and the taste of their beer, whereas Corona has set themselves apart with their "fun in the sun" strategy (Thompson, 2010).

Modelo also partnered with Gambrinus Inc. which was the largest distributor of the eastern states of the US. Each partnership was crucial to the expansion of Corona. Each distributer had its own experiences and knowledge of the demographics within their respective states. Each partnership was strong which was evidenced with the tax increase in 1991. Both distributors decided to absorb the tax increase instead of passing it on to the consumer with the assurance they would be subsidized.

Entering into new foreign markets and strategy

Modelo's mission is to grow as a multinational competitor in the beverage market, inspiring pride, passion and commitment, and generating value for our stakeholders. Alongside that, their vision is by the year 2015; earn over half of their revenue from International markets, and to consistently strengthen their leadership in the domestic market, while maintaining profitability (Modelo, 2010).

That being said, Corona has entered the United States and Canada; they are strategically placed in 25 countries throughout Latin America that include Argentina, Chile, Costa Rica and Puerto Rico. Corona is also in over 80 countries throughout Europe and Africa. You will also find Corona throughout 30 countries in Asia, as well as in Australia and New Zealand (Corona, 2010). It appears that Corona has market share in most, if not every region possible. As stated earlier in the paper, it is expected by the year 2014, China will account for the largest growth in beer consumption and sales (www.sabmiller.com, 2011).

China has many of its own breweries and Tsingtao Beer has been the best selling beer in China for eleven consecutive years (www.wikipedia.com, 2010). Corona is interested in maintaining their breweries in Mexico; therefore, they rely on their marketing to be successful in a market. I read a blog from 2006 where the China marketing manager for Corona China stated that Corona was achieving good records and boasts as the number one imported beer by market share, but that he strongly believed that it had more potential. He also realized that the brand image of Corona in China may be