Mexico’s FEMSA chipping away at beer rival Modelo

Mexico’s number two brewer FEMSA is expected to grab more market share from its bigger rival Modelo this year as it expands its convenience store chain and considers a cost-cutting merger of its distribution channels.
After gains last year at the expense of Modelo, analysts were reported as saying that FEMSA will chip further away at the maker of the popular Corona beer in 2005, boosted largely by an expected major expansion of its Oxxo convenience store chain.
FEMSA, the brewer of Sol, Tecate and Dos Equis beers, has more than 3,000 Oxxo stores dotted across Mexico, selling its beers alongside soft drinks made by its Coke unit, Coca-Cola FEMSA .
As FEMSA opens more stores, it will sell more beer. Imports are minimal and Mexico only has a handful of microbreweries..

By all accounts, that is six times more outlets than Modelo’s rival Extra chain that sells Corona and its other beers such as Victoria and Pacifico alongside snacks and sodas. FEMSA executives have said there could be 10,000 Oxxo stores in Mexico in the not-too-distant future.
Another ace up FEMSA’s sleeve in the beer battle with Modelo is its distribution chain. FEMSA ­currently operates two separate channels in Mexico – one for its beer arm and another for its Coke products. But FEMSA could soon go down the road of joint distribution of beer and soft drinks, which would cut costs and allow the ­beverage producer to expand its routes to sell more beer.
The beer market share gains seen come after FEMSA ate into Modelo’s local beer volumes last year, winning up to 2 percentage points of local market share from aggressive pricing and territorial expansions.
But despite losing share last year, Modelo still is the dominant player in Mexico’s beer duopoly, with 55 percent of the national market compared to FEMSA’s 44 percent.