Grupo Modelo’s sales rise in 2010 but profits remain under pressure

It could have been worse. Mexican brewer Grupo Modelo reported on 18 February 2011 that its net sales for the full year ended 31 December 2010 rose 3.9 percent to MXN 85 billion (EUR 5.1 billion; USD 7.0 billion), thanks to an increase of 4.0 percent in domestic sales. However, operating income dropped 0.2 percent to MXN 21.6 billion (EUR 1.3 billion; USD 1.7 billion) because of higher costs.

Total beer export volumes grew 3.7 percent to 15.8 million hl fuelled by the good performance in the U.S., Latin America, Australia and Asia, CEO Carlos Fernandez said in a conference call.

Although he would not give figures, Mr Fernandez claimed that Grupo Modelo’s family of brands in the U.S. witnessed some growth in 2010, despite the fact that the U.S. import segment’s total sales in 2010 (32 million hl) were still a far cry from their 2007 high of 35 million hl (figures of U.S. Department of Commerce).

Grupo Modelo’s 2010 full year sales volume rose 0.3 percent to 52.7 million hl.

Export joint-venture Crown Imports, which operates in the U.S., had total sales of USD 2.3 billion in 2010 and an operating profit of USD 435 million, down from USD 447 in 2009.

However, the rise in fourth quarter sales in the U.S. in 2010 must have been achieved at the cost of higher expenses as Crown Imports saw its operating profit decline USD 2 million to USD 82 million compared to the fourth quarter 2009 while sales rose to USD 552 million from USD 473 million compared to the previous year.

Modelo’s CEO, Carlos Fernandez, was quoted as warning that the appreciation of the Mexican peso currency against the U.S. dollar could prove a drag on earnings early in 2011.

"If the peso continues to strengthen, it would affect our profitability results," he told analysts.