Corona

CORONA BEER.

OBJECTIVES:

* Make Corona the leading importing beer in the US.

* Become one of the 5 best-selling beer brands in the United States.

* Increase consumer trial of Corona to over 30% of target consumers.

STRATEGY:

BACKGROUND:

BUSINESS DESCRIPTION OF GRUPO MODELO.

Grupo Modelo (GM) is a Mexican brewer company with a 57% share in Mexico. The Mexican beer market is the world's eighth largest beer market. The company is also an important player in the United States premium beer segment with a market share of about 6%. Three of its brands - Corona Extra, Modelo Special and Corona Light - are among the top ten highest selling imported beers in the US. Grupo Modelo has a distribution system covering more than 122 countries, with its flagship brand, Corona, being the fourth largest selling brand in the world. The major beer brands of the company are: Corona Extra, Corona Light, Modelo Especial, Pacifico, Victoria and Negra Modelo.

Grupo Modelo operations comprise of mainly two areas: brewing process and sales. The brewing operations include five breweries located in Mexico with a total processing capacity of more than 50 million hectoliters per year. The group has several subsidiary / affiliate companies that provide support services to the core business of producing beer. GM has followed a strategy of vertical integration since the 60's which has resulted in this network of companies engaging in the brewing and ancillary operations. GM has an established distribution network in Mexican market, which is a key factor in maintaining market shares in the domestic beer market. The export sales of beer are coordinated through a set of representative offices around the world. It may also be mentioned that the distribution network of the company is strengthened by company owned convenience stores operated in Mexico, which assist the company in maintaining its dominant market position.

GM is a company whose primary business is brewing operations, with non-beer items comprising a mere 9% of the income. The focus of the beer business is in the local Mexican market, although in recent years, exports sales of beer have increased significantly (with a growing demand of Mexican beer in US and depreciation of the Mexican peso against the dollar).

Sources of Revenue

(in $ million) 2002 2003

Local Sales 2,467 67% 2,310 64%

Foreign Sales 895 24% 961 27%

Other Revenue Income 315 9% 328 9%

Total 3,676 100% 3,599 100%

Source: Grupo Modelo

2004, total beer sales volume increased by 2.3% to 32.0 million hectoliters, with the exports providing the major impetus to sales with an increase of 7.6% in export volumes. Export growth occurred primarily in the US along with Europe and Asia.

FINANCIAL PERFORMANCE

The financial performance of Grupo Modelo can be characterized by its absence of debt , its domestic moderate growth of sales as well as a high but decreasing growth rate of export sales. The domestic sales are fairly stable around a trend that is mainly driven by the population growth. Deviations from that trend can be explained mainly by recessions. In the export market, Modelo has maintained a high growth rate in volume mainly driven by the successful positioning of Corona in the US market. The growth rate has been declining in the last years but remains high (6.3% increase in volume during 2003).

MARKET POSITION

Grupo Modelo's market positioning is a result of a business strategy that generates profit in a way that is difficult for its competition to replicate. The Mexican beer market is segmented geographically with each of the two major market players, GM and FEMSA, having their own areas of influences. These zones of influences are based primarily on the control