Why AB InBev will produce Corona outside of Mexico?
For the first time, AB InBev will produce Corona outside of Mexico, a decision in which not only logistical savings come into play, but also maintaining the authenticity of what is 'Made in Mexico'.
The movement is due to increased demand for this beer outside the country. Carlos Brito, CEO of AB InBev, said in a conference with analysts that in the third quarter, Corona sales outside the country grew 21%. It highlights the performance in China, where the brand has grown to double digits high. In addition to having "solid results" in South Africa and Western Europe.
With more and more consumers asking for Corona, the firm opted to take the production process of the brand to other countries, which in addition to increasing its availability in different markets where it has presence will also increase its profitability, because doing local production will reduce costs, especially logistics, explains Evodio Kaltenecker, professor of International Business at the Business School in Guadalajara Campus of Tec de Monterrey part of the International Faculty of Egade Business School.
With the expansion of its production, the brand will also be able to grow in countries such as China. "It will be the world's largest market for beer. The company's idea is to conquer it with a premium, quality product," says Kaltenecker.
According to Brito, "Corona is twice the price of Budweiser, another of AB InBev's brands, and what we see is that Corona is growing with strong double digits in China. The top segments, premium and super premium continue to grow. That's where the margins are, the growth, and that's where most of our business is, and that's why we're much more profitable than any other brewery in China.
The expansion of Corona in China was one of the elements that led to a growth in brand value this year, explains Constanza Gabelich, director of Strategy and Brand Valuation at Interbrand, a consulting firm that annually produces a global brand value ranking (the 'Best Global Brands', in which the first Mexican brand to appear, in position 79 and with a value of $6,369 billion dollars, is Corona).
And it is precisely this growth in markets, such as Asia, that will counteract one of the challenges the company will face with its decision: the authenticity factor of a brand like Corona that has been sold abroad in close association with Mexico. "From the perspective of the markets, which identify Grupo Modelo and its Mexican origin, there could be the feeling that they are taking the jewel out of the crown, but their global level of awareness is low," says the specialist. "In the markets furthest away from this concept of 'Mexicanity' will not be so important.
The Interbrand specialist indicates that brand value is determined with three measurement elements: the financial performance of the brand, the strength of the brand and its role in generating those sales. "In the financial, it will not affect, on the contrary, it will increase because it facilitates the delivery of the product faster. But in authenticity... Corona is one of the most premium brands and in the category of beer, and in other alcoholic beverages, the more premium (the product) you expect to be produced in its place of origin. And Corona has leveraged a lot on 'Made in Mexico,'" explains Gabelich.
For the Tec academic, the other major challenge for the company will be to maintain standards, because taking its production to other parts of the world "involves maintaining process control, quality and developing a local supply chain," with the aim of maintaining the essence of the brand.
Laurence Newell, CEO of Brand Finance America, points out that the decision will strengthen Corona's value. "These kinds of decisions are made on a daily basis. Louis Vuitton recently announced that it will manufacture in Texas. The question was whether he would sell less if he produced $1,000 bags outside Paris. And no, it won't hurt them," he says as an example.
For the executive, the perception that the brand is Mexican will continue to prevail. "The consumer is not carefully analyzing where the product is made. Surely, distribution will improve and that will increase consumption. The consumer buys the perception that it is Mexican, not so much that has been done in Mexico," he notes.