Grupo Modelo Ppt2003

Justin Scott NewberryMGT 422

Mexican Economy and MarketsDr. Di Gregorio

Deals primarily in export, import, and domestic beer market in Mexico

Founded officially in 1922 by Pablo Diez Fernández First brewery opened in 1925 (Cervecería Modelo) Started with the brands Corona and Modelo By 1960, they had acquired their 4th additional

brewery (total of 5) By 1997, they had their 7th brewery in Mexico 2007 – Began construction of 8th brewery (in Nava,

Coahuila) Headquarters in Mexico City In 1991, changed name from Cervecería

Modelo to Grupo Modelo

Anheuser-Busch owns 50% non-controlling interest in Grupo Modelo As of June 2008, considering acquiring other 50% for

controlling interest (Wall Street Journal)

Although many grupos are organized and controlled by the founding family generation after generation, Grupo Modelo has had a different history

Although it appears Grupo Modelo has followed this trend of passing of control through generations, it hasn’t Founder had no offspring upon retirement, passed

controlling shares to salaried managers “The founder’s nieces hold the post of president of

the board, and his son is now the CEO. This son married the daughter of one of the salaried managers to whom part of the shares had been transferred…” (Hoshino 2003:156)

Grupo Modelo fell back into the hands of the founding family

Production/Distribution Activities and Brands 12 Brands (Barrilito, Montejo, Modelo Especial,

Victoria, Estrella, Negra Modelo, Corona Extra, Pacífico, León, Tropical Light, Modelo Light, Corona Light) – 5 of which are exported to over 159 countries

Also has a strategic alliance with Nestle Waters producing and distributing bottled water (Santa María, Nestle Pureza Vital)

Import/Distribution Activities and Brands Exclusive right to distribution of Budweiser, Bud Light, and

O’Doul’s, 180 Energy Drink (Anheuser-Busch) in Mexico Also imports Tsingtao (China) and Carlsberg (Denmark),

Pellegrino water Like traditional Mexican grupos, Grupo Modelo has a

diversified network of subsidiaries 6 Service subsidiaries 1 Bottling/ lid company 1 Machinery manufacturing company 3 Malting facilities

5 Logistics companies 10 International companies 5 Associates 32 Agencies and distributors 7 Breweries 4 Commercial companies

As of the end of 2007, Grupo Modelo had 38,402 employees

Went public in 1994 Traded in the Mexican Stock Exchange under

GMODELOC, in the OTC (over-the-counter securities) markets (U.S.) under GPMCY, and in the Latibex (Spain) under XGMD

Ranked 21st in the annual Expansion 500 (2007) 8th largest net income on the list (15,269,000,000

pesos) 6th largest nominal increase in net income on the list

for 2006-2007 (3,957,300,000 pesos) Ranked as 37th most profitable operation in Mexico

Between 2003-2007, grew exports by 34.85% Between 2003-2007, grew net sales by 53.54% Ever since initial public offering, performance

has been strong Initially offered 13% of shares to public Stock’s price rose all through the 90’s, even during

recessions and devaluations (1994 and 1998) This was due to virtually no debt and high quantities of

dollars and other hard currencies (extensive international trade vs. exclusive trade in Mexican market with falling peso)

In 1998, Grupo Modelo’s shares rose 24% while the rest of the market fell by 24%

“To establish the leadership Model in the global beverages and consumer products market”

Boasts a 63% share of domestic, export market in Mexico

Principal competitors: FEMSA Cerveza (2nd largest [Tecate, Dos Equis,

Sol]) FEMSA (Coca-cola, water, juice, other bottled

beverage distribution) vs. Grupo Modelo (authorized Nestle water production and distribution, Pellegrino importation, 180 Energy Drink [Made by Anheuser-Busch])

SABMiller (Beer [Miller, Miller Light, MGD64], Coca-Cola, other juices/bottled beverages)

Strengths•Anheuser-Busch gives exclusive right to distribute its products

•gives Grupo Modelo a knowledgeable, experienced partner in the beer industry

•Additional alliance with Carlsberg (Denmark)•Long, established presence in the market (Advertising slogan in the 1940s : “Y veinte millones de mexicanos no pueden estar equivocados…”)•Large market share•Production facilities throughout Mexico

Weaknesses•Like many grupos, too much company diversification can lead to a loss of core competencies

•Loss of product quality, loss of focus on what customers actually want

Opportunities•With significant tourism industry in key locations (Cabo San Lucas, Puerto Vallarta, Cancun, Puerto Peñasco), Grupo Modelo can expose/test a product with international customers that come to them

•They don’t have to take a full risk of expanding operations, marketing, logistics to a new international market with uncertainty

Threats•Along with this opportunity for new international segments simply coming to them at tourist vacation spots comes the threat that Grupo Modelo will become too comfortable with this advantage and lose international market share

•They might stop doing their own research and miss out on expansion opportunities they would have otherwise missed

Fernández González, Carlos, Dr. Juan José Suárez Coppel. “Facing the Future.” Grupo Modelo Annual Report (2007): 2-12.

Grupo Modelo. Mexico. “Grupo Modelo, cimientos de una gran familia.” (2000)

Grupo Modelo. Grupo Modelo. 1 Mar. 2009 http://www.gmodelo.com/index-1.asp?go=hoy

Grupo Modelo. Grupo Modelo. 1 Mar. 2009 http://www.gmodelo.com/index-1.asp?go=historia

Hoshino, Taeko. “Family Business in Mexico: Responses to Human Resource Limitations and Management Succession.” Institute of Developing Economies Discussion Paper No. 12 (2004): 8.

Hoshino, Taeko. “Ownership Structure of Large-Scale Mexican Enterprises: The Mechanism of Management Control by Owner Families.” (2003): 156.