FEMSA’s convenience chain Oxxo ends exclusivity deal with Heineken

Mexico | The Mexican Coke bottler and retailer FEMSA will start selling AB-InBev’s beers, including Corona and Pacifico, at its Oxxo stores. This was announced on 26 February 2019. The agreement will take effect in April for certain Mexican markets, and will spread to all stores by the end of 2022.

Founded in 1977, Oxxo is Mexico’s largest chain of convenience stores with about 17,000 outlets. It is also rapidly expanding, adding roughly 1,000 outlets each year. Although independent Mom and Pop corner stores vastly outnumber the chains, approximately 11 million people make a purchase at an Oxxo Store each day, the company boasts.

FEMSA has already partnered with AB-InBev at some of its other retail chains, but never at Oxxo. That is because in the past Oxxo used to peddle Heineken’s brands exclusively. The current exclusivity contract between Oxxo and Heineken was signed in 2010 for a ten-year period. The new five-year, non-exclusive agreement will run until 2024.

Obviously, FEMSA is keen on bringing Modelo beers into its Oxxo chain. Its other convenience store chains saw a significant hike in turnover once they carried both brewers’ brands.

The Mexican beer market is a duopoly of AB-InBev and Heineken, after Heineken acquired FEMSA’s beer business (Sol, Tecate, Dos Equis) in 2010. In exchange, FEMSA obtained shares in Heineken.

Relations between Heineken and FEMSA two must have been strained at times, not least since Heineken terminated its distribution deal with FEMSA’s bottlers in Brazil in 2017. Subsequently, FEMSA reduced its stake in Heineken to 14.7 percent from its original 20 percent.     

FEMSA did not disclose terms of its agreements with AB-InBev or Heineken, which are both set to be finalised in March this year.

Although FEMSA is predominantly a Coke bottler, the retail unit’s contribution to group profits is sizeable, estimated at nearly 30 percent of group EBITDA, it was reported.

According to Euromonitor, the Mexican beer market reached USD 21 billion in value in 2017. AB-InBev holds about 57 percent of total domestic beer consumption, with Heineken ranked second at 40 percent. This leaves only about 3 percent for craft brewers, although their share has risen in recent years.

Beer consumption is said to stand at 60 litres per capita in 2018 (that is about 100 litres per capita in the northern part of the country), up from 55 litres in 2010.