Corona & Budweiser
By
Lupita Sanchez
BSAD 10
III. Comparative Strategic Analysis……………………………………………………
7
IV. Comparative Financial Analysis………………………………………………...…
9
V. Comparative Productive Plans (Manufacturing)……………………………….... 12
VI. Production Plan (Retail or Services)…………………………………………...… 15
VII. Comparative Marketing Plan…………………………………………………....
17
VIII. Organization……………………………………………………………………..
23
IX. Management………………………………………………………………….….…
25
X. Works Cited………………………………………………………………………....
29
The beer
industry is a growing industry. It is projected that the beer industry will
most likely _ grow as the adult population increases in size (Dieusaert).
Budweiser and Corona have fairly good growth potentials in the near future.
Budweiser has a growth potential of about ten percent (www.Hoovers.com).
Anheuser Busch, Budweiser_ s producer, not only produces beer but also
manufactures cans and owns theme parks such as Busch Gardens. A-B produces
Budlight, Michelob, O_ Doul_ s, and etc. On the other hand, Corona has a growth
potential of about two percent (Diesaert). Modelo, Corona_ s producer, produces
Corona Light, Modelo, and etc. Unlike Anheuser Busch, Modelo only produces
alcohol.
The markets
and consumers of both Budweiser and Corona are domestic and international.
Budweiser has captured the U.S. beer market. Internationally, Budweiser is
making its way into the markets of other countries. Budweiser sold 98.3 million
barrels of beer domestically and 7.3 million barrels of beer internationally in
the year 2000. Corona is the most popular beer brand in Mexico and is the most
popular beer brand in America. On the international level, Corona is a more
celebrated than Budweiser. Corona sold 8.55 million hectoliters of beer
internationally in the year 2000. Corona is quite popular in Asia and Europe.
Budweiser’s and Corona’s popularity has helped it gain and maintain strong
market shares.
Both Corona and Budweiser have
significantly high market shares. Modelo has a market share of about sixty
percent while A-B has a market share 48.4 percent. The market shares held by
these brands show good profitability. There are not enough competitors both
domestically and internationally that can knock off the position of these giant
brewery companies. Anheuser Busch was ranked 159 in the Fortune 500, showing
A-B to be a top player in the economy (Hoovers). A-B does not only find revenue
through producing beer but also by maintaining entertainment centers and
manufacturing packing material. Modelo, unlike A-B, specializes only in
alcoholic beverages and gains its reputation through their alcoholic beverages.
Modelo could possibly expand its profitability by producing other forms
revenues such as producing non-alcohol related products.
Employment
rates from Modelo are relatively higher than Anheuser Busch. Modelo had an
employment growth rate of about 6.5 percent in the year 2000 while Budweiser
had a 0.3 percent employment growth rate in the same year. This type of
economic indicator shows that profitability has lead to increases in
employment. However, the current economy is in a slight recession but Anheuser
Busch has continued to demonstrate its ability to deliver dependable
double-digit earnings per share growth this year (Spain). Modelo,
unfortunately, has been affected by the recession negatively. Modelo has
steadily decreased in stock value. Stocks decreased 3.8 percent in February
(www.Hoovers.com). The decrease in stock value might predict a decrease in
expected profitability for Modelo.
External
factors, such as the current economic recession, affect A-B and Modelo.
Although A-B has a predicted growth potential of 10 percent, this amount has a
two percent difference from the current percentage of 12 percent
(www.Hoovers.com). Modelo’s stock prices have also fallen due to the recession.
Recession is not the only external factor that can affect Modelo and A-B. If
Modelo lost its packaging suppliers, the lack of packaging supplies would slow
production and harm revenues for Modelo. A-B does not encounter problems with
packaging suppliers because they manufacture packaging for their own company.
If strikes occurred in both corporations, this would possess as a problem for
A-B and Modelo.
Comparative Description of Business
Both Corona
and Budweiser wouldn't be at the level of sales and popularity if it wasn't for
the hard work and dedication of their distributing firms. Both being bottled
beverages, Corona Extra introducing their "can" version in 200, are
leaders of their own domain. Corona is backed by Grupo Modelo, founded in 1925,
and is the leader in the production and marketing of beer in Mexico with 60.7% of
the total market share, both domestic and export. Its main concentration of
sales is in the country of Mexico, with eight brewing plants, with an annual
installed capacity of 41.0 million hectoliters. It currently brews and
distributes ten brands of beers, Corona Extra being the number one Mexican beer
sold in the world (www.corona.com.mx).
On the
other hand, Budweiser has been brewed and sold by Anheuser-Busch since 1876,
crowned "The King of Beers" (International Directory of Company
Histories). The history of Anheuser-Busch is one of remarkable achievement. It
embodies solid values, family tradition, vision, courage and integrity. In
1861, Adolphus Busch married Lilly Anheuser, and since then became known and
the leader and founder of the great Anheuser-Busch brewing company. His dream
was simple: to create a national beer market and a national beer that would
appeal to virtually every taste (www.anheuser-busch.com).
Since the founding days of this company, son's, grandson's and great-grandson's
have overpowered the beer market and have set undeniable standards that other
brewers could only dream of achieving. Anheuser-Busch has since been the
world's largest brewer, operating 14 breweries, 12 in the United States and two
overseas. The company currently brews approximately 30 beers for sale in the
United States. Budweiser, their main distribution product per capita, is
distributed in more than 70 countries (www.anheuser-busch.com).
As you
know, business location is everything. Weather you are located in a very
populated area or weather you are in very remote settings, your sales can
differ extremely. Grupo Modelo continues investing in their renovation,
improvements, and building new Modeloramas and warehouse for beer sales,
because their main goal is to provide an adequate infrastructure according to
their image of the leader in their Mexican Beer Industry. In Mexico, Corona has
these selling structures called "Modeloramas." What those are very
specific vending points where all that is sold is the product Corona Extra. In
Mexico, beer is consumed away from the sale point, as shown by the fact that
80% of sales were off-premise, while the rest were on-premise points of sale.
This year, the number of National Accounts of these "Modeloramas"
grew by 20% in comparison with last year (www.corona.com.mx).
Evidently, good results have been the outcome of this very specific product
allocation. These can be variously diversified: they can be at the corner of a
busy intersection, or maybe located at a very popular mall. Budweiser does not
have that. All their vending points are either at sporting events, or inside
commercial points, like stores or liquor. Equally important to Grupo Modelo
sales and increased exposure are international and local events such as trade
shows and sales conventions, where businesses and retailers have the
opportunity to view trademarked merchandise, point-of-sale displays and other
business-to-business marketing programs designed to increase consumer
awareness.
Even though
the advertisement aspect of a product has virtually no boundaries, certain
products are aimed at specified target markets and the beer industry is no
exemption. Corona, for example, is mainly targeted towards the Hispanic
community, being that is the primary brewed product distributed in the country
of Mexico. Grupo Modelo is well aware of this, and continues its expansion
project according to plans. Expected demand for the company's products sustains
this ambitious plan, based on the fact that 44.5% of the Mexican population is
under 19 years of age, and a potential group for the consumption of this
product (www.corona.com.mx). Another
aspect of their strategic advertising is that they run their commercials on
more Spanish-based channels than all the other networks combined. This is
because their goal is to appeal to as many young Hispanic males as possible,
ages ranging from 21-50. This is also visually evident when one drives to the
Hispanic concentrated areas of a city like south central Los Angeles and Santa
Ana, for example, as compared some of the white-dominated suburbs. You will
notice a heavier volume of corona ads in the city's than in the suburbs.
Both
Budweiser and Corona products have been the leaders in their prospective
markets. Even though in some aspects these two companies might seem as
competitors with each other, Anhauser-Bush and Grupo Modelor are the leaders of
their own domain. In Mexico, Grupo Modelo leads the Mexican domestic market
share with a 60.7%, as of December 31st, 2000 (www.corona.com.mx). On the other hand,
Anheuser-Bush leads the U.S. beer sales in the domestic arena, and is the top
imported brand in countries like Mexico, Canada, and Europe (www.anheuser-busch.com). As you can
see, even though these two dominating companies are in competition with each
other, they clearly have well-defined target markets, which, in a general
sense, do not intervene with each other. In the U.S., Budweiser is the number
one domestic selling beer, towering over the rest, and Corona knows that. That
is why they left that area in return to becoming the number one best-selling
imported beer in the U.S. And this also works vise-versa: Budweiser is number
one in export sales in Mexico, and Corona is number one in import sales in that
country too.
The bureaucracy of these two products is very specific. Both Anheuser-Busch and Grupo Modelo have trademarks and symbols that only they have the rights to. As for Anehuser-Busch, the A & Eagle design is widely recognized symbol of Anheuser-Busch Companies. They first introduced beer products in 1872, and the trademark was registered with the U.S. Patent Office in 1877 (www.anheuser-busch.com). No record remains of the symbol's original designer or its exact meaning. The "A" stood for Eberhard Anheuser, but a question remains about the eagle. Some of the company's current major trademarks include Anheuser-Busch, the A & Eagle design, Bud, King of Beers, King Cobra, Adventure Island, SeaWorld, and "Know When To Say When" (www.anheuser-busch.com). This Anheuser-Busch patented motto has risen in popularity like none other. It is part of a strategic campaigning program to spread the importance of safe drinking. Grupo Modelo on the other hand has rights to names like Corona Extra, Corona Light, Modelo especial, and Negra Modelo. They too have campaigning slogans, but they directed to a more "laid back" approach, such as "A party isn't a party without Corona."
Comparative Strategic Analysis
Both Budweiser and Corona are extremely well liked beer products in the beverage industry. Budweiser’s manufacturer, Anheuser Busch, holds a market share of about fifty percent (www.anheuserbusch.com). The light taste of Budweiser seems to attract huge groups of consumers in the American market. Because of Budweiser’ s popularity, it has become the number one selling beer in the United States (www.anheuserbusch.com). However, Grupo Modelo, the manufacturer of Corona, has a market share of sixty percent (www.corona.com.mx). Similar to Budweiser’s number one spot in the American market, Corona is the leader in Mexican beer industry. The strong and bitter taste of Corona draws attention to many Mexican consumers and international consumers. Corona has earned a name of being the number selling imported beer in the United States (www.hoover.com). Although Corona and Budweiser both hold stable spots in the beer industry, these beer companies have their own strong and weak characteristics.
The
strengths and weaknesses of Corona and Budweiser can be seen through an
analysis of the their consumers and market strategies. Budweiser is quite well
known for their Super Bowl commercials. This marketing strategy of airing
Budweiser commercials during Super Bowl games increases Budweiser’s contact per
dollar. Anheuser Busch has won many awards including the 2002 advertising crown
for Budweiser commercials (MacArthur). Also, Anheuser Busch’s pricing strategy
of [increasing] price slightly less than overall annual increases in the
consumer price index allows for affordable beer prices
(www.anheuserbusch.com). The cheap price of Budweiser attracts consumers and
allows them to continue purchasing this beer. A more weaker area of strategy of
Business instead of ozone depleting chlorofluorocarbons (CFCS) throughout
operations (www.abehsreport.com). Modelo, similar to A-B, has also
created ways of decreasing the global warming. Modelo has created water
treatment plants in their breweries in efforts to decrease water pollution.
Modelo and A-B take responsibility both environmentally and socially.
A-B and
Modelo take social responsibility through different means. A-B promotes and
supports wildlife conservation and education. The Anheuser Busch Gardens was
created to provide homes to nearly extinct wild animals. A-B also promotes
alcohol awareness by investing nearly $350 million in efforts to eliminate
drunk driving and underage drinking (www.anheuserbusch.com). Likewise,
Corona takes social responsibility through the creation of programs like OHSAS
that protects Modelo employees from injury. Also, Filantropia Modelo was
created to gear towards education, social programs, environmental issues,
heath, arts and culture as well as programs for handicapped persons
(www.corona.com.mx).
Grupo Model
is the leader of Mexico’s brewing industry. It has been proving to be one of
the country’s most financially sound corporations. Grupo Modelo wears the corona as Mexico’s King of Beers. Grupo
Modelo’s Corona Beer Corporation has shown much of their strengths from their
gross profit. From 1998-2000, Corona has increased by approximately three
hundred million dollars each year. However, Corona’s gross profit margin grew
substantially in the year 2000 by 3.4% and only 0/9% last year. In the net
profit margin, Corona had a slow growth period between 199-1999 and amazingly
rose by 4.3%. This was a huge improvement compared to a 0.3% increase in 1999.
Corona is also growing in their operation income. From 1998-2000, they have
shown to be gaining more and more money. Operation income is the “amount of
money a company makes from its business operation” (Hoovers). Their total net
income, which is the sum of income from continuing and discontinued operation,
is also rising through these three consecutive years.
Their cost
of goods sold does not show any significant improvements. Corona had sold more
goods in 1999 than in 2000. This was mainly due to the stability in raw
material prices and higher productivity reached with the new equipment used in
the breweries. Similarly, they had made more revenue in 1999 than in 2000.
Corona’s diluted EPS and depreciation & amortization was not applicable.
Depreciation and Amortization is a “non-cash charge that reduced the value of
fixed assets due to wear, age or obsolescence” (Hoovers).
Anheuser-Busch
had also proved to be one of the top leaders in the brewing corporation.
Anheuser-Busch, the founder of Budweiser had grown to become the world’s
corporation leader “by realizing visions on a scale grander than any ever
attained by another brewer” (Keith). The best way of examining how well
Budweiser is doing is taking a look at their income statement. Budweiser had
decreased in their gross profit in 1999-2000 by 145,800,000 million then
compared to their gross profit in 1998-1999. Their operation income had been
increasing during these three years. This gives the investors an idea of how
much money Budweiser makes from its business operations. Budweiser’s net income
had also been rising during these three years. Each year they have rose by
approximately 150 million more.
Corona and
Budweiser also had balance statements. A balance statement is a financial
statement that reports the assets, liabilities, and owner’s equities of a
company at one point in time. Usually it is at the end of the company’s fiscal
year. Corona had more total current assets during 1998-1999 then in 1999-2000.
Likewise, they also had more total asset during 1998-1999 then the year after.
An asset is anything that a company owns like machines. Corona’s inventories
were 33.2 million in 1998, not applicable in 1999, and 449 million in 2000.
Inventories are the companies merchandise bought for resale or supplies and raw
materials purchased for use in revenue-producing operations.
Corona’s
net receivables show that in 1998 they had 103.1 million. But in 1999 their net
receivables were not applicable. However by the year 2000 it was 104.8 million.
Net receivables are the money that customers owe to the Corona Corporation. The
balance sheet also shows that in 1998, Corona made 349.1 million, not
applicable in 1999, and 634.5 million in 2000. Corona’s total current
liabilities have been increasing throughout these three years. Their total
liabilities show a huge rise during 1999-2000. They increased by approximately
900 million dollars during this year. Total liabilities are the sum of total
current liabilities and total non-current liabilities Corona owe. Their total
equity had also been rising during these years. Total equity is the sum of
preferred stock equity and common stock equity.
Budweiser’s
balance sheet shows that their total current assets have been decreasing.
Budweiser had the most total current assets in 1998 then in 1999 and 2000.
However, their total assets have been rising consecutively. Budweiser had more
inventory in 1000-2000 by 155 million dollars whereas in 1998-1999 they were
only making 40 million dollars. Their net receivables shown in the balance
sheet have been decreasing. They had more net receivables during 1998-1999 they
were only making 40 million dollars. Their net receivables shown in the balance
sheet have been decreasing. They had more net receivables during 1998-1999 then
the year after. Budweiser also had more cash during 1998 then the two upcoming
years. Their total current liabilities have been fluctuating. In 2000 they had
lower liabilities as opposed to 1999. However in 1998 their liabilities
decreased. Budweiser’s total liabilities have been increasing. They had a sharp
increase during 1998-1999 by approximately 450 million dollars.
Corona Beer
Corporation and Budweiser are both corporations. What this means is they are a
distribution system in which “all of the organizations in the channel of
distribution are owned by one firm” (Hoovers). For example, Grupo Modelo and
Anheuser Busch own all of its corporations and coordinate everything: display,
pricing, promotion, inventory control, and so on. Budweiser’s expenditures have
been rising during these three years. Another positive side is that their cash
flows from operation actives are also rising yearly. Corona’s capital
expenditures show that they had more in 1998-1999 then in 1999-20000. This was
a 925 million dollar difference. In Corona’s and Budweiser’s capital
requirements and capital sources, they have shown than they get most of their
money form their market shareholders and their net sales. A market share is a
field where almost everyone in the world could be a potential client or
customer in a business.
People are allowed to in vest in these two corporations. Budweiser and Corona offer market shares for their customers. Budweiser achieved record sales and earning for the third quarter and nine months ended Sept. 30, 1999. “Earnings per share for the their quarter and nine months were up 15.5% and 16.1% respectively, compared to last year” (Hoovers). Grupo Modelo’s net sales grew 9.5% rising to $29, 329 million pesos, relative to 19999. Corona’s “domestic shipments of beer grew to 28.0 million hectoliters, accounting for a 4.1% increases compared to 1999” (Hoovers). This meant that a 1.2% points rise in market share reaching 56.1%.
Comparative Production Plans (Manufacturing)
For many years, Grupo Modelo has been investing, upgrading, and modernizing its production process. While Budweiser’s state-of-the-art brewing and packaging facilities have been created at breweries in Houston, Jacksonville, Los Angels, Columbus and Williamsburg. Budweiser came up with a Bio-‘Energy Recover System (BERS), which used methane from brewery wastewater to provide fuel for boilers. Grupo Modelo and Budweiser’s production process are very similar. There are nine steps in producing beer. First of all, the workers have to step the barley grain. Second the barley grain is soaked in water for germination. Third, the germinating barley is dried in kilns. Forth, the dried barley is taken to a milling machine to extract soluble substances like sugar. The milled barley is then mixed with hot water in a large plant to be mashed to be converted into starch and sugar. It is then filtered. Sixth, the mixture gets boiled. Hops and other flavoring are added in the boiling process and cooled in a freezer unit.
Next the
cold mixture becomes fermented. This is where natural carbonation is introduced
into the beer. After this is completed it is time for the fermented mixture to
mature for several days in huge refrigeration at freezing temperature. When
this step is completed, the beer had been made. The workers then start to rack,
can, and bottle the Budweiser and Corona beer. When the beer cans are filled
with beer, an assembly line is set up where the workers place the beer cans in
boxes and holders. These are then sent off to hundreds of super markets and
liquor stores.
Budweiser
employs 8,000 brewery employees in total. Budweiser offers award bonuses to
their employees when their brewery meets “specific goals that improve safety
and reduce absenteeism” (Hoovers). Budweiser’s goal is to have safer working
conditions and drug awareness and testing policies. This program trains
employees in the effects of illegal drugs, and offer rehabilitation to those
who abuse drugs. When employees become a member of a union working for
Budweiser, supervisors train them. These people do not need much skills or experience
to work for Budweiser. At Budweiser, employees either work form 9-5am or 10-4
pm depending on what would suit them best. There are no walk-ins though.
Workers are supervised in helping them maintain smooth operation by clearing
can line jams, picking up fallen bottles on conveyor, and checking or adjusting
equipment, processes or products to maintain quality. Budweiser has many
benefits for their employers. They have 100% company paid health care premiums
for the entire family, 8 weeks vacation, 15 paid holidays, pension, sick pay
and overtime.
Corona has
8 production plans located around Mexico, 8 offices around the world and 44,000
employees. Like Budweiser, their employees work as a union. However Corona does
not provide as much benefits as Budweiser. Their health care benefits are only
for the employee themselves and not for their family. Corona also does not have
sick pay. They employee’s vacation is also approximately 8 weeks, though Corona
does not pay their employees during on holidays. Similar to Budweiser,
employees can work from 9-5am and 10-4am as well. Each manager is in charge of
a certain task. From here the manager trains the employees on what they are
expected to do.
Budweiser
and Corona has hundred of supplies buying their bee every day. Many liquor
stores, supermarkets such as Ralph’s, Vons, and Albertson’s order their beer in
vast amounts. When the supermarkets buy more volume or bulks of beer, they get
the advantage of getting a discount. Most of the time, Budweiser and Corona
Company sends their people out to sell and advertise their beer to hundred of
supermarkets and liquor stores. This strategy works very well because the
seller (Corona and Budweiser) gets to interact with their soon to be customers.
This way of doing business is a more personal and comfortable one.
Corona’s
operation expenses shows that in their SG&A Expenses in 1998, they spend
604.5 million dollars. While in 1999, their selling, general and administrative
expenses were not applicable. But in 2000, they spent 895.7 million dollars in
expenses. Budweiser’s selling general and administrative expenses have
gradually been increasing as well. Budweiser’s total revenue is also looking
very good. They have been increasing in their revenue each year. Budweiser made
over one million dollars more in revenue by 1999-2000 then in 1998-1999.
Anheuser Busch expended Budweiser’s reach for beyond U.S. borders. Budweiser shops products to 125 markers in 44 countries on six continents. While Corona, in 1997, Compania Cervecera de Zacatecas had just opened a new plantation. In January 1999, they have decided to build another plantation to be completed by 2003, reaching an annual installed capacity of 20 million hectoliters. The Ciudad Oregon, Corona, plant completed its expansion project in 2000, increasing its capacity by 100% to 3 million hectoliters annually. This plant is located in North West Mexico.
Production
Plan (Retail or Service)
Anheuser Busch and Corona
want to reduce the domestic price discount in order to increase revenues and
protect their companies’ brand equities.
This is quite hard to do because the competition is extremely hard in
this area. Anheuser Busch has been able
to reduce the domestic price discount more successfully. The reasons of this are that Corona is not a
domestic beer so it is hard to compete with Budweiser’ prices. Also, Anheuser Busch produces most of the
products needed to the production of its beer.
On the other hand, Grupo Modelo buys some of the products needed for its
beer production from Anheuser Busch production companies such as cans. It seems that Anheuser Busch is more retail
than a service and corona seems to be just the opposite.
The planning processes of the Grupo Modelo are to reach an annual installed capacity of 600 million hectoliters by early 2005 because their exports are expected to grow in higher rates. Also, new demographic data show that in Mexico, 44.5% of its population is 19 or younger. This means that all this growing up population will increase their sales. Anheuser Busch is panning to modernize its brewery systems in order to reduce maintenance, produce more, and reduce equipment costs. Both companies are expecting to increase their sales, but the way they are facing this is very different. While Grupo Modelo wants to increase the size of its factories to produce more breweries, Anheuser Busch wants to make the whole process simple by modernizing its factories.
Grupo Modelo is very considerate on the quality of its products. They state the following about quality; “quality is not limited to our products, but rather to our entire process, from the production to the customer service. This implies among other things, a permanent cross-functional work and broader sense of empowerment from better decision making (corona.com.mx).” Quality is designed and implemented through out the organization. The form they do it is by: a continuous improvement of process and services, the involvement of personnel at all levels, by having competitive management, an organizational and personal learning system, and by increasing productivity in the different strategic business units. They also have won number if awards for its quality considerations and safety and security standards. Anheuser Busch is also well known for its quality practices. The main quality of Anheuser Busch is that old and the finest world brewery methods are still used in the production of beer as well as all natural ingredients.
Technology plays an important role in the two companies. Grupo Modelo, for example, has implemented projects that will strengthen their telecommunications and improve their operation systems and craft Modelo’s e-business strategy. Grupo Modelo wants to start its B2B strategy to seek higher profitability, but in order to do that they need to have a proper telecommunications infrastructure to allow them to implement these strategies worldwide. Anheuser Busch on their side wants to improve everything related to production. An example of this is the building of a brewery in Caterville, GA, which was created to increase productivity and reduce costs.
Comparative Marketing Plan
When all
products are placed on the market, it often goes through the Product Life
Cycle. There are no particular marketing strategies that guarantee success. Even
though Budweiser and Corona are alcoholic beverages that are sold
internationally, they have different marketing strategies. Neither one can
follow a specific marketing strategy because of the individual stages in the
Product Life Cycle, which call for a different marketing strategy. As of today,
both companies are at a maturity stage, where they can take over wholesaling
function and intensify distribution.
The
sales strategy for Corona is consistent and simple, which have built Corona
into a strong force in the import business and the entire beer industry for 75
years. Their sales objectives are focused on reaching new consumers and getting
high quality beer products to countries around the globe. The name Corona, in
Spanish means “Crown,” and it does resemble a king by dominating one-third of
the market. It is Mexico’s #1 leading beer and U.S. #1 imported beer. It is
currently sold in 150 countries worldwide. Modelo is also known as a “global
powerhouse” because it has locations in Canada, Asia, Spain, Brussels, Pacific
Rim and Latin America. (Hoover’s online)
Modelo aims
at their two main target consumers. First, in the general market, Modelo
symbolized Corona as fun and relaxation, their slogan “ vacation in a bottle.”
(Shuey, Michelle. 56-59) When consumers drink a Corona, it reminded them about
their relaxing trip to Mexico on that one hot sunny afternoon, but their had a
ice-cold Corona beer in their hand, which made it all better. Next, Modelo
focused on the Hispanic market. They have been aiming at that target since the
1980’s because it is a fairly large market and they are very festive. The
distinctive longneck, clear Corona bottle reminded the Hispanic consumers of
their Mexican heritage. Modelo’s main purpose of having such a distinctive look
for the Corona bottle was an attempt to engage these consumers with their pride
and ownership to the Mexico imported beer. This was their value package.
However, Corona in cans was also introduced for sites such as beaches,
concerts, outside venues and other likely Corona hot spots, where glass bottles
are not permitted. Still, the focus will stay on bottles, but the cans have
added to the U.S. business and have been well received.
In the same
way, Budweiser’s sales strategy is also simple and consistent. Anheuser-Busch
is by far the largest U.S. brewer and they took over the #1 spot among beers
close to 40 years ago and has held it ever since. Today, Budweiser is already
sold in 80 countries and is considered one of the world’s valuable trademarks.
One of its sales objectives is to build Budweiser into a leading global brand
outside the U.S. They are targeting several key countries, such as, China,
Canada, United Kingdom and Ireland. (Watts, Jenny. 16-24)
From 1957 on, children and adults
all recognize Budweiser as the “King” of beers. Budweiser’s contemporary
marketing is reaching the younger customer by having slogans, such as “the
Budweiser drinker is getting younger again.” (Dawson, Havis. 26-32) However,
Budweiser targets male consumers ages anywhere from 25-54, who are passionate
about their downtime and enjoy spending 2 or 3 hours in front of the television
watching a sporting event. Furthermore, the fact that these guys are most
likely to drink more than 3 – 4 beers during their sporting time. Ever since
the 80’s Budweiser have turned into nachos and cheese dip for the American male
audience. Yet, Budweiser is still trying to increase diversity in its
ethnicity, particularly African-American and Latinos consumers.
Budweiser
and Corona both do not have any commissioned sales staffs, but they have a lot
of sales agents. Nevertheless, they have a great relationship with its ad
agencies. The Anheuser-Busch’s plan is to have multiple agencies pitching
different ideas and to pick the hottest ones. In 1994, they only had 2 ad
agencies, yet today they have a total of 14, whom they all work closely like
family.
The
distribution channels for Budweiser and Corona are fairly similar.
Anheuser-Busch is an independent minded wholesaler. They have the power of push
and power when it comes to distributing their products. The Birmingham
Budweiser Distributing Company acts as the middle- man for the Anheuser-Busch
wholesaler to the retailers. There are also retail outlets, which sells
Budweiser brand goods, such as T-shirts, hats and sporting bags. Also, Anheuser-Busch negotiated a tremendous
price off a huge volume deal on behalf of being a wholesaler, who turned the
whole series of collectible print glasses with Budweiser logos, including
surfboard, bowtie and eagle, to retails without any profit. This was part of
Anheuser-Busch’s sales tool on encouraging the retailers to offer these glasses
as a premium to draft purchases one at a time.
Next, the
Corona’s company, Modelo, also has a very strong hold on the push and pull power
to their retailers. Modelo controls the beer process each step from raw
ingredients through the wholesales and distributors putting bottles on the
shelves. In order to ensure on maintaining the strong growth pattern of the
past decade, they have established 6 affiliates around the world to help
distribution. However, Modelo controls the whole distributing system in Mexico.
Modelo owns more than 55% of the total domestic beer market in Mexico.
Moreover, there are a total of 700 distributorships throughout Mexico, in which
Modelo owns 500. In the beer business, Modelo have become it’s own brewer and
marketer. Their sales objective is to keep their brand “close and convent.”
There’s also an outlet in Mexico called “ Modeloramas,” which sells exclusively
Modelo brand goods. (Hoover’s Online)
In
addition, both Budweiser and Corona are aiming for its general market in their
own country, and they are trying to establish their reputation in the
international market. Therefore, the two companies have partnered up to work
together on importing each other’s beer to their own country. With Modelo’s
help on distribution, Budweiser achieved 14% of its total volume increase in
Mexico. On the other hand, with Budweiser’s help, Modelo increased a total of
20% of sales in the US. (Shuey, Michelle. 56-59)
The pricing
of Corona and Budweiser can be a major issue. Especially when both importer
faces increase in import taxes. Nevertheless, during certain years, both
companies spent way too much money on price promotions and discounts that their
fixed cost equals their revenues, which results in a break-even analysis.
The pricing
of Corona used to be discriminated upon in the U.S. because Americans did not
agree that Mexican beer should claim the same price as a high-quality import
beer that may have come over the ocean. However, in the fall of 1990 and early
1991, when the federal excise tax jumped and most imports’ shipments fell,
Modelo re-adjusted the price value equation. This enabled Corona’s retail price
to be repositioned against other imported beer. Furthermore, Modelo increased
the marketing budget. As a result of retail feature ads and displays, it had a
galvanizing effect. (Poole, Claire.128,130.)
Also, the
Mexican beer industry has developed high levels of vertical integration and
modern technology to help reduce their fixed cost. Modelo has formed a so
called “ beer clusters,” which group together raw material providers and
factories in the agro-industrial, glass, aluminum and cardboard industries.
(Dieusaert, Tom. 43-45) The suppliers tend to be the larger industry. As a
result, economies of scale have translated into immediate availability of
inputs, lower costs and quality control. Furthermore, computerization and
mechanization have modernized bottling, packaging and inventory control. Modelo
is currently investing US$500 million in a new plant; it is the largest of its
kind in Latin America in order to serve the North American market and to
reinforce domestic production. This plant was opened in 1996 and located in
Zacatecas. It was capable of producing three 16.8 gallons of beer per year with
the reduction of 50% of its labor cost.
The pricing
for Budweiser may not considered being cheap because Anheuser-Busch invests
large sum of their fixed cost on promoting their product. However,
Anheuser-Busch marketer’s strong pull power is still clearly noticed. Despite
the soft economy today, consumers seem willing to pay full price for the beer
they are pulled toward. The Anheuser-Busch wholesaler makes an average of a gross
profit of $2.92 per case versus $2.91 per case for the non Anheuser-Busch
wholesaler. (Refer to Appendix J) In the term of profitability, Anheuser-Busch
distributor dominates. They generate earnings before interest, taxes,
depreciation and amortization of $0.92 per case. They usually have many more
options available to them for the business to grow and to respond to the
competitive environment.
Out of all
the marketing strategies, promotion is considered the most important one
because this is getting consumers to want your product. This is also known as
the pull strategy that the companies use. There are several different parts in
the promotion mix, in which includes advertising, personal selling, public
relations and sales promotion. It is a fact that Corona and Budweiser have both
invested heavily in promoting their product. However, their approaches are
different. Corona explores and dissects the Hispanic culture to promote itself
while Budweiser advertise through sporting campaigns, which are universally
cultured.
As
competition has grown tougher over the years, Modelo recognized that it spends
less on advertising and image appeal than some of its major competitors, such
as Budweiser, became a drawback when it comes to marketing consumer product.
Therefore, the company has sought alternative approaches to increasing sales
and visibility. They include the introduction of new products such as Corona
Light beer and the sale of “Corona brand” products ranging from T-shirts to
golf balls. (Anonymous. Grupo Modelo sells Mexican lifestyle)
Adding to
the ideas for promoting Corona, the company turned the Mexican holiday “Cinco
de Mayo” to a beer event. This was used in their statewide campaign called “
Cinco de Mayo Con Orgullo!” They have generated heavy promotional investment in
this holiday and increased on advertising in the Spanish speaking media, which
include television, magazine and local newspapers. Between 1990 and 1995,
Corona had more than doubled its U.S. beer sales. Their corporate marketing
strategy liked investment in the “Cinco de Mayo” festivities, which might be
legal but it is unethical and not social responsible. They had massive point of
sale promotion such as ads on napkins, menus and banners. Also, in bars,
restaurants, markets and liquor stores, continual ads on Spanish speaking
radios and televisions. As well as hip-hop and oldies radio stations with a
large Latino youth listeners, which are Modelo’s target of younger generation.
(Gallegos, Bill “A Campaign to reclaim Cinco
de Mayo from the Alcohol Industry” page 98-105)
For
instance, Budweiser is engaged in a variety of television ads, billboard ads
and in the super bowl ad. Anheuser-Busch associates with most of the sporting
events, such as NBA (National Basket Association), ESPN boxing, NHL (National
Hockey League) and NFL (National Football League). In addition, they sponsors
NASCAR racing. As you can see, all these sporting promotions have help
Budweiser establish a strong bond with their targeted male consumers. Last
year, Anheuser-Busch ran spotlights in 41 separate markets nationwide, and
having 300 commercials in the past 5 years. This year, Anheuser-Busch will
spend about $500 million simply on advertising. That is an investment about $5
per barrel. (Beirne, Mike. A-B to bow eight-pack of Super Bowl spots; News;
Brief Article)
Anheuser-Busch
had many successful campaigns for Budweiser. One campaign called “Wassup?”
favored the male friendships among African Americans. This campaign struck gold
with the younger consumers- black, white, Hispanic, male and female. It also
won the Grand Prix in Film, which helped increase Budweiser’s public relation.
Moreover, Budweiser’s NBA related activities one season focused on “Budweiser
Hoops” program. These promotional sales guaranteed to bring some activities and
some fun to the retail establishment, where consumers have some contests to win
ticket to the NBA game. This was an effective way to sell beer and have better
relations with consumers. Also, for greater
convenience at sporting events, festivals and fairs, Anheuser-Busch mobilized
Budweiser Classic Draught trucks with canopies and walk-up bars, portable beer
stands and even back up units, so that it can serve the crowds better.
Finally,
the last promotional target that Budweiser is trying to seek relationship with
is its core 18-24 years old audience by becoming a party promoter with a
concept called “Ubud House Parties.” This was a cross between a house party and
a club and had launched in cities, such as Manchester and London. Budweiser had
also built a strong association with UK music events as the main beer sponsor
of their festivals since 1998. However, soon the Budweiser House Parties will
see the brand move beyond sponsorship into event management and promotion.
Since Corona and Budweiser are
products and not services, there are not many guarantees offered. The only
guarantees they ensure are the quality of their freshness and pureness. Corona
promises their consumers that the quality of the beer will always be
consistent. Indeed, the Corona one may drink in college will taste just as good
as the one may had last week.
Lastly, the sales forecast for the two companies seem to be looking extremely well. As for Corona, there is no limit on how much it can grow for the next 2 years. Hopefully, it can be nearly as established in the Western territory as it can be in the eastern markets. Bu focusing on regional sales and marketing while improving distribution efforts, Modelo will grow another 4% this year.
Organization
Large
companies, such as Modelo and Anheuser-Busch, can efficiently produce their
goods more inexpensively because they can purchase raw materials in bulk.
Therefore, the average cost of goods goes down as the production levels goes
up. While the economy of scale might benefit these two large companies, there
are no strong relationship bonds between employees and their boss like some
smaller companies might have. Although they both have a large number of
employees, each company has it’s own distinctive organization chart.
The Anheuser-Busch
company organization includes August A. Busch III as the chairman and CEO,
several other consultants and a great number of Vice Presidents. Yet, it
currently has a total of 23,725 employees, which can be difficult to manage
without a proper organizing plan. It has developed into a matrix organization,
in which there are project managers that are in charge of teams of several
departments. Those employees are responsible not only to the project manager,
but also the head of their individual departments. For instance the front line
employee A, a product designer, will report to both the project manager and the
vice president of engineering. Some of the advantages of establishing a matrix
organization chart are that so it can find creative solutions to problems that
are involved when developing new products.
Furthermore, since the main
stockholder for Anheuser-Busch has been a family business for many generations,
its job recruiting team is very selective when hiring new employees.
Anheuser-Busch has to maintain its reputation, so that explains last year’s
employee growth of 0.3%.
But on the
other hand, Modelo does not have an organization chart nearly as large as
Anheuser-Busch. It simply has a typical organization chart. This is a rather standard and simple chart
compared to Anheuser-Busch. Modelo has Antonino Fernandez Rodriquez as its
chairman and six other office members. Those members are managers for certain
major functions and they have other supervisors under6y them to manage the
front line employees.
Although Corona has a total of 46,890 employees, one may question on why Modelo have such a small organization chart compared to Anheuser-Busch, when it has a greater amount of employees. However, as you can see from the bottom of Appendix M, last year’s employee growth rate was 6.5%. That was a drastic difference compared to Anheuser-Busch. Its difference is due to the fact that Modelo are not as selective on hiring employees as Anheuser-Busch. Furthermore, since Modelo is originally from Mexico and most of its worker are Hispanic. Therefore, the labor costs for Modelo is cheaper compared to the American owned company, Anheuser-Busch.
Mission:
·
Be the world’s beer company
·
Enrich and entertain a global audience
·
Deliver superior returns to our shareholders
Vision:
·
Through all our products, services and relationships,
we will add to life’s enjoyment.
Culture:
·
Delivering responsibility.
·
Delivering Shareholder value.
On the
other hand, Grupo Modelo is the number one company in Mexico thanks to their
excellent beer, Corona, which is the leader beer in Mexico and the imported
beer that most sells in U.S. Grupo
Modelo knows that in order to succeed, they need more than an excellent
product, but dedication, hard work, and a strong vision like its mission statement
states:
Mission:
Produce, distribute, and sell
quality beer:
·
With excellent service
·
At a competitive price
·
Optimizing resources
·
Surpassing consumer expectations
·
With the collaboration of employees, suppliers and
distributors, contributing to their economic, cultural and social
development
·
Improving the profitability of the business
·
Protecting the natural resources and
·
Cooperating with the progress of the community and the
country
Definitely,
both companies are very consistent inside out in what they preach. They have to follow their respective stated
goal of success. It has not been easy
for both of them to be number one in their respective markets, but know that
they are, Anheuser Busch, and Grupo Modelo have to be very careful in what they
do and how they do it in order to keep their good fame and the favoritism of
its drinkers.
Anheuser
Busch would not be as competitive if it wasn’t for Budweiser the King of Beers
as it is also known. It has been more than a century and a half since Adolphus Busch
founded the company. Since then many
things have change but not the courage, commitment, and hard work that the
founder of this great company demonstrated.
Grupo
Modelo wears the Corona as Mexico's King of Beers. The brewer is Mexico's
largest, with almost 60% of the market, and its Corona Extra brand has
surpassed Heineken as the #1 imported beer in the US. The brewer, which has
grown by acquiring regional brewers, exports to more than 140 countries and is
also the exclusive Mexican importer and distributor in U.S. owns just over 50%
of Grupo Modelo, which was founded in 1925 by Pablo Diez Fernandez.
Both
companies have an incredible family tradition because the people who founded
were the direct ancestors of the people who direct the companies directly
today. The Chairman
and President of Anheuser Busch today is August A. Bush III. He is the fourth generation in his family
running the company with magnificent success.
In the case of Grupo Modelo the Chairman is Antonio Fernández Rodríguez, and the Vice Chairman and CEO is
Carlos Fernández González. They all are
excellent leaders and the reason of this strong leadership and success is due
to the ancestors experience, secrets, and inherited ability and desired to keep
their respective companies in been number one in their markets. This is somewhat unfair for both the
management and for the leaders who run the companies because workers don’t have
opportunities to obtain the highest position in the companies. Also, the leaders are expected to run the
companies even before they are born regardless of their will.
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22, 2001, 42(4): 9.
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the Alcohol
Industry” 98-105
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Corona Conquers Market Share Business Mexico. Case Study;
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Profile. 1994, 4(1,2): 56-59.
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