E-Malt.com News article: Canada: Mexico's Grupo Modelo and Molson form venture to import Modelo's beer into Canada

Molson Coors Brewing Co. and the largest Mexican brewer Grupo Modelo - owner of the Corona brand - have created a joint venture to import and sell Modelo's beer in Canada, The Canadian Press posted on January 3rd.

The 50-50 venture will be called Modelo Molson Imports L.P. and based in Toronto. Robert Armstrong, previously CEO for Modelo's office in Canada, will lead the new venture. Financial details about the establishment of Modelo Molson Imports LP were not disclosed Wednesday in a release.

As of 1 January 2008, the companies, through the 50/50 joint venture Modelo Molson Imports, will ship, distribute and market the Mexican firm's products throughout the country in a bid to boost respective sales.

Modelo, which owns the Corona brand, is Mexico's No. 1 brewer, controlling 63 percent of the Mexican market. It operates seven breweries there and distributes 13 brands, including Corona Extra, Modelo Especial, Victoria, Pacifico and Negra Modelo.

Molson's Canadian division, based in Montreal, already imports, distributes and markets Modelo brands in Ontario, Quebec and the Atlantic provinces.

The 50/50 joint venture will have its headquarters in Toronto and be led by Robert Armstrong, previously CEO for Modelo's office in Canada, called Canacermex.

Grupo Modelo, founded in 1925, accounts for about 63 per cent of the beer sales market in Mexico. It has seven brewing plants, with a total annual installed capacity of 60 million hectolitres.

The joint venture's board will consist of six directors - half from Grupo Modelo and half from Molson, including Jose Pares, vice-president of international markets for Grupo Modelo, and Dave Perkins, Molson Coors's chief strategy officer.

The move "presents the Modelo brands with an excellent opportunity for growth in Canada, our second most important export market," said Rodrigo Testas, director of North America for Grupo Modelo. "Molson showed great commitment to our brands ever since it first began importing our products into Canada and is the ideal partner for us."

Kevin Boyce, CEO of Molson, said the joint venture "gives us an excellent opportunity to expand and further develop our business in Canada."

Grupo Modelo's brands include Corona Extra - the top imported brand in Canada and No.1 Mexican beer sold in the world - Modelo Especial, Victoria, Pacifico and Negra Modelo.

Molson's roots date back to 1786 and its brand portfolio includes Molson Canadian, Coors Light, Molson Export, Molson Dry and Rickard's. Molson also has partnerships with other brewers to offer Corona, Heineken, Miller Genuine Draft and Foster's Lager.

Molson employs 3,000 Canadians and operates six breweries, including the craft brewery Creemore.

Molson Coors US ambitions

Molson Coors, formed in 2005, following the merger of Canada-based Molson and US counterpart Coors, continues to make a major push into the North America market for beer imports.

The brewer announced in October that it planned to combine operations with global rival SABMiller to operate in the US through a single entity called MillerCoors, which will have combined net sales of $6.6bn.

The company said the decision to enter into a joint venture with SABMiller highlighted the growing financial pressures facing brewers, both as a result of increasing commodity and materials prices and a competitive global beer market.

Both SABMiller and Molson Coors will hold equal voting rights in the partnership, though their economic interests will vary between 58 per cent and 32 per cent respectively, to reflect the individual value of the contributed assets.

Molson Coors vice chairman Pete Coors said the move was directly related to the challenge currently facing beer production within major North American beer markets, both from its rivals and in changing consumer demands towards premium and imported beer brands.

The US alone was found to be a particularly significant market for premium beer growth, with the segment accounting for 25 per cent of the country's beer sales volumes, according to consumer analyst Canadean.

Grupo Modelo's Mexican Corona brand currently dominates beer sales in the US, helping the product to become the world's third highest selling beer, the analyst added.

However, back in Corona's domestic Mexican market, the product is not viewed as a premium brand, according to Canadean.

The lack of recognition as a premium beer in the country may go some way to account for the attractiveness of export markets to Grupo Modelo.


04 January, 2008