Grupo Modelo

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Justin Scott Newberry
MGT 422 – Mexican Economy and Markets
Dr. Di Gregorio
3/3/2009
Grupo Modelo:
An In-Depth Look
Mexican grupos have survived, grown, and dominated in Mexican domestic and export
markets for decades. A grupo can be defined as a single, unified conglomeration of various
companies from usually very different sectors of the economy. Grupo Modelo has an expansive
network including twelve brands of beer, bottling facilities, logistics companies, real-estate
properties, sports teams, and other affiliates and subsidiaries, undeniably classifying it as a grupo
(Grant). Historically, the trend has been that grupos have had significant influence and presence
in the Mexican domestic and export market and they tend to be quite powerful economically. In
this paper, I will describe and discuss Grupo Modelo’s history, scope, strengths and weaknesses,
and current issues, performance, and strategy.
The history of Grupo Modelo is a long and successful one. Nowadays, Grupo Modelo
consists of an expansive network of beer producers and distributors with various affiliates and
subsidiaries. Before I go into the current organization, progression, and strategy of Grupo
Modelo, however, I will first describe the journey that has brought it to where it is today. After
first describing its history and progression in terms of its primary activities of creating, acquiring,
and selling popular and successful brands of beer and expanding its sales of these brands
internationally, I will then proceed to outline its history of expansion as a grupo. The latter
history includes its acquisition of companies and affiliates that both support the primary

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activities and branch out into new categories as has been the trend and definition of the Mexican
grupo.
Grupo Modelo was originally called Cervecería Modelo and was officially founded in
Mexico City in 1925 by Pablo Díez Fernández and a group of a few other businessmen (Latin
CEO: Executive Strategies for the Americas 1). From this first brewery in Mexico City came
their first two brands of beer: Modelo and Corona (which would go on to become Grupo
Modelo’s modern-day “crown jewel” and the number one most imported beer into the United
States) (Latin CEO: Executive Strategies for the Americas 1, Grupo Modelo [reference 6]).
After exploding in popularity and having sold more than 8 million bottles of these brands in
Mexico within the first three years alone, Cervecería Modelo decided to launch a third beer in
1930, which was Negra Modelo (Grupo Modelo [reference 6]). With continued success of its
brands, Cervecería Modelo continued on to the next stage in its corporate development and
strategy: the exportation of its beer.
After the massive popularity and success of its first three brands (Modelo, Corona, and
Negra Modelo) in the late 1920s and early 1930s, Cervecería Modelo broadened its view of
potential market capture north to the United States. In 1933 they began to “sporadically” export
their beer to the United States (Grupo Modelo [reference 6]). In another two years, Cervecería
Modelo began a long road of expansion generously spread throughout Mexico that would
continue to present day. This long road of expansion began with their acquisition of their second
brewery (Cervecería Toluca y Mexico) and its subsequent brands Victoria and Pilsener. With
these five brands Cervecería Modelo continued its success, which can be summed up by its
marketing slogan of 1943: “Y veinte millones de mexicanos no pueden estar equivocados (And

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twenty million Mexicans can’t be wrong…)” (Grupo Modelo [reference 6]). With this
blossoming success as a firm foundation for the company, between the years 1954 and 1984
Cervecería Modelo went on to acquire and establish various other plants and their subsequent
brands to make them all part of the Modelo family of beers. With this extensive family of
popular brands of beer firmly in place, Cervecería Modelo once again looked out for
international market share expansion. This time, however, they had their sights on markets a
little further than their northern neighbor.
Between 1985 and 1990, Cervecería Modelo expanded its distribution network to include
(among others) Canada, Japan, Australia, New Zealand, China, Singapore, Greece, Russia,
Africa, Holland, Germany, and Belgium, the latter three representing a significant
accomplishment being that these have long been internationally well known for their beer
(Grupo Modelo [reference 6], Grupo Modelo [reference 7]). Expansion of Modelo’s
international presence in beer sales has continued to present day to a current sales presence in
over 159 countries with the five brands they export (Corona Extra, Corona Light, Negra Modelo,
Modelo Especial, and Pacífico) (Grupo Modelo [reference 6], Grupo Modelo [reference 7]).
Modelo’s performance worldwide can definitely be classified as a success, with Corona Extra,
Modelo Especial, and Corona Light occupying the first, third, and sixth positions of premium
imported beer to the United States, respectively (Grupo Modelo [reference 6]. Additionally,
according to Grupo Modelo, Corona Extra is the number one selling Mexican beer worldwide
(Grupo Modelo [reference 5]). Without doubt, Modelo has definitely learned and mastered its
presence in the domestic and export beer industry throughout its long history. However, there is
more to Grupo Modelo than the simple production of their twelve brands in their seven plants

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throughout Mexico. There are also many affiliated companies under Modelo’s wings that
support and even branch out classifying Grupo Modelo as a true Mexican grupo. I will now
outline a brief history of these subsidiaries and proceed to describe Grupo Modelo’s current
performance, issues, and strategies.
Beyond Cervecería Modelo’s strict brewery operations, there have been many supporting
affiliates that have helped the company to achieve the global success it has presently. These
supporting and branching activities began in a significant capacity in the 1980s, when Cervecería
Modelo began establishing separate malting facilities (most notably Cebadas y Maltas in
Calpulalpan, Tlaxcala and INAMEX de Cerveza y Malta in Texcoco, Estado de Mexico) (Grupo
Modelo [reference 6]). This distinction in Cervecería Modelo’s diversification of subsidiaries,
being that it immediately precedes the massive worldwide expansion, perhaps explains its ability
to produce effectively and efficiently and send out high quality and successful brands to the
world. With this success and expanding network of subsidiaries, Cervecería Modelo was
renamed as Grupo Modelo in 1991 and went public in 1994. Ever since then, Grupo Modelo
vertically integrated itself with subsidiaries including six service companies, one bottling/lid
company, one machinery manufacturing company, three malting facilities, five logistics
companies, ten international companies, five various associates, thirty-two agencies and
distributors, seven breweries (as of 2007, the eighth was being constructed in Nava, Coahuila),
and four commercial companies (Grant, Grupo Modelo [reference 8]). As Tina Grant points out
in her 1999 analysis of Grupo Modelo in International Directory of Company Histories Volume
29:

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“Grupo Modelo was, in 1997, operating 33 companies, which owned approximately
1,394 facilities, including one factory each for producing metal cans, plastic caps, glass
bottles, and cardboard boxes, and convenience stores under the names Modeloramas,
Super Flash, Circle K, and Stores 12+12. Other subsidiaries were involved in the
production of ice and machinery and the operation and maintenance of warehouses and
distribution centers, real-estate properties, a shipping fleet, and even a soccer stadium in
Torreón” (Grant).
Grant’s profile of Grupo Modelo provides an important look into the expansiveness of Mexican
grupos and particularly an important look at Grupo Modelo. From this we can see just how
significant the extensive network of affiliates and subsidiaries really is for Grupo Modelo.
Beyond Grant’s analysis and jumping ten years into the future to present day, Grupo Modelo still
maintains its extensive network in widely varying industries. For example, presently Grupo has
affiliations with three sports teams (Club Santos Laguna [soccer], Yaquis de Obregón [baseball],
and Venados de Mazatlán [baseball]). Additionally and of more economic significance, Grupo
Modelo has an alliance with Anheuser-Busch, an American beer company. This alliance was
established through Anheuser-Busch’s purchase of a fifty percent non-controlling interest in
Grupo Modelo. Although this is a non-controlling interest, it is an influential alliance in Grupo
Modelo’s strategy and competitive advantage because it gives them the exclusive right to
distribute Anheuser-Busch’s products such as Budweiser, Bud Light, O’Doul’s, and 180 Energy
Drink in Mexico. Also worthy of noting in regards to Grupo Modelo’s affiliates and distribution
activities is its importation and domestic distribution of Carlsberg (beer from Denmark),
Tsingtao (beer from China), San Pellegrino (sparkling water), Perrier (sparkling water), and

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Acqua Panna (water) (Grupo Modelo [reference 9]). Now that I have detailed the history,
progression, and scope of Grupo Modelo’s extensive network of subsidiaries, I can now move on
to describing the strengths, weaknesses, and the current issues, performance, and strategy of
Grupo Modelo.
Grupo Modelo has various strengths and weaknesses as a company. Appendix 1 to this
paper shows a supplemental SWOT analysis ([Strengths, Weaknesses] – internal factors,
[Opportunities, and Threats] – external factors) I have put together highlighting what I have
found in terms of Grupo Modelo’s strengths and weaknesses and surrounding business
environment. One of Grupo Modelo’s major strengths is its relationship with Anheuser-Busch,
which grants them exclusive rights to distribute popular beers such as Budweiser and Bud Light
in Mexico. With all competitive advantages in place, Grupo Modelo has been able to capture 63
percent of the domestic and export market in Mexico (Grupo Modelo [reference 5]). This is
obviously a strength for Grupo Modelo because they have become the reputable and
recognizable company in these markets, which is something that they have gained over time. A
notable weakness for Grupo Modelo, however, is that like many grupos they can become over-
diversified and forget about their core competencies. If Modelo starts forgetting about what it
knows best, it will most likely begin to lose ground because of diving quality in their products.
In terms of opportunities that exist in the Mexican market for Grupo Modelo, there is definitely a
chance to take advantage of the fact that it currently has seven plants operating spread all over
Mexico. This combined with the fact that certain vacation spots such as Cabo San Lucas,
Cancun, Puerto Vallarta, and Puerto Peñasco attract international visitors, Grupo Modelo has an
opportunity to introduce its products to an international market that it may not have had a chance

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to touch yet without having to go blindly into a country not knowing what to expect in terms of
bottom-line returns or risks. Along these same lines we can also see a potential threat for Grupo
Modelo. If Modelo gets too comfortable waiting for the market to come and show itself, they
will surely miss out on opportunities that they would not have missed had they kept their eyes
open and done a little research to find the next market opportunity.
I will now discuss Grupo Modelo’s current issues, performance, and strategies for the
future. One interesting distinction that I discovered upon researching Grupo Modelo and its
history as a company/conglomerate is that it does differ in a fundamental way from other grupos.
Although it does not seem to be an issue per se, it is a distinction quite worthy of mentioning in
order to contrast it with other contemporary Mexican grupos. In his discussion paper, Taeko
Hoshino opens with: “Indigenous firms in Mexico, as in most developing countries, take the
shape of family businesses. Regardless of size, the most predominant ones are those owned and
managed by one or more families or descendent families of the founders” (Hoshino [reference
11] 1). He goes on in his paper to talk about the leadership in Mexican grupos and how human
resource limitations perpetuate the cycle of top-level management and control staying within the
founding family primarily because of insufficient education and training (Hoshino [reference 11]
23-26). With all this being said about grupos and leadership trends in such grupos, Hoshino
makes an important distinction regarding Grupo Modelo. He points out that although it would
appear as if leadership and control of Grupo Modelo has remained in the founding family’s
hands ever since 1925 (founded by Pablo Díez Fernández and current CEO is Carlos Fernández
González), it has not:

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“MODELO […] was founded by several investors. One of them bought the majority of
shares. As he had no offspring at the time of his retirement, he transferred his shares to
various salaried managers. The founder’s nieces hold the post of president of the board,
and his son is now the CEO. This son married the daughter of one of the salaried
managers to whom part of the shares had been transferred. In the end, the founder
families came to own the shares and now hold the principal management posts” (Hoshino
[reference 11] 8, Hoshino [reference 12] 156, Modelo [reference 4] 410).
Indeed this is an interesting distinction from many other grupos in that it shows a large period of
time where outsiders (non founding family members) were able to come in and give their input
in regards to the top-level management and handling of the company. This perhaps, among other
things, could explain some of Grupo Modelo’s immense historical success being that it was able
to circulate fresh management ideas over the years instead of having one family controlling the
company with, in effect, a closed mentality. This, however, is only speculation to be pondered.
Grupo Modelo’s performance has historically been very strong. This can be seen in its
rapid expansion of brands and breweries in its first twenty years of operation and has only gotten
stronger to the present day. In fact in June 2008, the magazine Expansión released its yearly
report (for fiscal year 2007) on the top 500 companies with operations in Mexico, and Grupo
Modelo was ranked 21st
(Expansion 200). Additionally, Expansión ranked Grupo Modelo 10th
for companies that increased absolute sales (non-percentage increment) and the 37th
most
profitable operation in Mexico for 2007 (Expansion 228). From Modelo’s 2007 financial
reports, we see that they had a net income of 15.269 billion pesos and we also see that between
the years 2003 and 2007 exports grew by 35.85% and net sales grew by 53.54% (Fernández

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González, Carlos (CEO – Grupo Modelo), Dr. Juan José Suárez Coppel 2-12). One question
seems to still remain, however. What exactly has led to such constant financial success for
Grupo Model?
Again, Tina Grant in her analysis of Grupo Modelo in 1999 provides us with some
insight into how we might explain Modelo’s success, even in times of economic hardship and
devaluations of the peso:
“Because the company had virtually no debt and was earning large quantities of dollars
and other hard currencies, its shares even rose during the severe recession that gripped
Mexico following the sudden and devastating devaluation of the peso in December 1994.
In 1998 the stock increased 24 percent in price even though all shares on Mexico City's
stock exchange fell an average of 24 percent during the year” (Grant).
This seems to provide an excellent context of Grupo Modelo’s international presence and the
financial security such presence gives the company. With this explanation, Grupo Modelo’s
constantly strong financial performance does not seem so surprising anymore. Furthermore, with
this explanation, I can now tackle the question of Grupo Modelo’s overall strategy and how
effectively it can compete by employing this strategy.
Grupo Modelo says its mission is: “To establish the leadership Model in the global
beverages and consumer products market…” (Grupo Modelo [reference 10]). In order to do this,
a big consideration for Modelo is its competitors and what they are doing. Although Grupo
Modelo currently has a 63 percent share of the domestic and export market in Mexico, some of
its main competitors are FEMSA Cerveza (Fomento Económico Mexicano – beer industry –
Tecate, Dos Equis), FEMSA (Fomento Económico Mexicano – bottled beverage, juice industry

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competing against Modelo’s water distribution), and MillerSAB (beer industry – Miller Genuine
Draft, MGD64, Miller Light). With its current domestic and international market share (and
having the first, third, and sixth most imported premium beers to the United States), Grupo
Modelo is in an excellent position to compete effectively, efficiently, and profitably (Grupo
Modelo [reference 7]). Additionally with Grant’s explanation of Modelo’s financial success
despite market instability, it remains clear that Grupo Modelo is quite capable of competing and
accomplishing its goal of becoming the leader in the global beverages and consumer products
market through increasing global reach to new markets.
In conclusion, Grupo Modelo has definitely had a long, interesting, and successful history
in the beer, beverage, and consumer products industries. Ever since its first two brands rolled
into stores in the 1920s up until present day, Grupo Modelo has shown that it’s willing to provide
the world with high quality products that really are what the people want.

11. References
1. Expansión. “Expansión 500: A Río Revuelto.” (Spanish) Expansión. June 2008
2. Fernández González, Carlos (CEO – Grupo Modelo), Dr. Juan José Suárez Coppel. “Facing
the Future.” Grupo Modelo Annual Report (2007): 2-12. 1 Mar. 2009
http://www.gmodelo.com/inversionistas/informe_anual/informe_2007_en.pdf
3. Grant, Tina. “Grupo Modelo, S.A. de C.V.” International Directory of Company Histories.
Vol. 29. St. James Press, October 28, 1999. 3 Mar. 2009.
http://www.fundinguniverse.com/company-histories/Grupo-Modelo-SA-de-CV-Company-
History.html
4. Grupo Modelo. Mexico. “Grupo Modelo, cimientos de una gran familia.” (Spanish).
(2000): 410
5. Grupo Modelo. “¿Quiénes somos?” Grupo Modelo S.A.B. de C.V. 1 Mar. 2009
http://www.gmodelo.com/index-1.asp?go=hoy
6. Grupo Modelo. “Historia de Grupo Modelo.” (Spanish). Grupo Modelo S.A.B. de C.V. 1
Mar. 2009 http://www.gmodelo.com/index-1.asp?go=historia
7. Grupo Modelo. “Expansión Internacional.” (Spanish). Grupo Modelo S.A.B. de C.V. 3
Mar. 2009 http://www.gmodelo.com/index-4.asp?go=expansion
8. Grupo Modelo. “Estructura Corporativa.” (Spanish). Grupo Modelo S.A.B. de C.V. 3 Mar.
2009 http://www.gmodelo.com/index-1.asp?go=uens
9. Grupo Modelo. “Marcas Importadas.” (Spanish). Grupo Modelo S.A.B. de C.V. 3 Mar.
2009 http://www.gmodelo.com/index-1.asp?go=importadas
10. Grupo Modelo. “Mission, Vision, and Values.” Grupo Modelo S.A.B. de C.V. 3 Mar.
2009 http://www.gmodelo.com/index-1_en.asp?go=vision
11. Hoshino, Taeko. “Family Business in Mexico: Responses to Human Resource Limitations
and Management Succession.” Institute of Developing Economies Discussion Paper No.
12 (2004): 8.
12. Hoshino, Taeko. “Ownership Structure of Large-Scale Mexican Enterprises: The
Mechanism of Management Control by Owner Families.” (2003): 156.
13. Latin CEO: Executive Strategies for the Americas. Grupo Modelo Speaks for Itself.
(August 2001). CEO Publishing Group, Inc. 3 Mar. 2009.
http://findarticles.com/p/articles/mi_m0OQC/is_8_2/ai_100500722

12. Appendix
1.
Strengths
• Anheuser-Busch gives exclusive right to distribute
its products
• Gives Grupo Modelo a knowledgeable,
experienced partner in the beer industry
• Additional alliance with Carlsberg (Denmark)
• Long, established presence in the market
(Advertising slogan in the 1940s : “Y veinte
millones de mexicanos no pueden estar
equivocados…”)
• Large market share (63%)
• Production facilities throughout Mexico
Weaknesses
• Like many grupos, too much company diversification
can lead to a loss of core competencies
• Loss of product quality, loss of focus on what
customers actually want

13. Opportunities
• With significant tourism industry in key locations
(Cabo San Lucas, Puerto Vallarta, Cancun, Puerto
Peñasco), Grupo Modelo can expose/test a product
with international customers that come to them
• They don’t have to take a full risk of
expanding operations, marketing, logistics to
a new international market with uncertainty
Threats
• Along with this opportunity for new international
segments simply coming to them at tourist vacation
spots comes the threat that Grupo Modelo will become
too comfortable with this advantage and lose
international market share
• They might stop doing their own
research and miss out on
expansion opportunities they
would have otherwise missed