Cinco Promo

Like
any other good thing that really gets rolling, Cinco de Mayo
is getting complicated. First it was a memorial to Mexican
pride, a battle won against the French invader. Then it was
a touchstone for Chicano pride, something to encourage
Mexican-Americans to be proud of the Mexican part of their
identity. Then it became a general celebration of Latino
culture, and then a party that everyone invited themselves
to – and now it’s a sales opportunity.

Beer sales for
Cinco de Mayo are mammoth in southwestern cities like Los
Angeles and San Antonio, where beer wholesalers, importers
and brewers sponsor huge celebrations and parades. It is the
biggest promotional season for the biggest Mexican beer,
Corona. Cinco is huge, and like the Mexican-American
population, it’s growing.

As George Bush
could tell you – 41 or 43 – when you make it to the top,
everyone’s got issues. “Cinco isn’t the ‘real’ Mexican
independence day,” people will tell you. “It’s not a holiday
anymore, it’s become an excuse to sell beer, and we need to
take it back” Latino activists complain. “It’s not even a
holiday in Mexico,” know-it-all’s smugly
proclaim.

Any of this
sound familiar? Sure, begosh and begorra, it must be
familiar to a Bostonian, for faith, ’tis the same things
folks say about the wearing of the green on St. Patrick’s
Day. Just as everyone’s Irish on March 17, when some folks
will eat the only corned beef they’ll have all year,
everyone sticks a lime in their beer and eats nachos on
Cinco. And just as St. Pat’s is a much bigger holiday here
than it is in Ireland, Cinco practically goes by unnoticed
in Mexico. So what? I was at a big Groundhog Day celebration
at a bar in Philadelphia, hardly a major holiday. The same
bar has created a huge celebration around Friday the
Thirteenth, with both floors packed to the gills from
mid-afternoon to midnight. Cinco isn’t celebrated in Mexico?
Friday the Thirteenth isn’t celebrated anywhere!

Some people get
completely wrapped around the axle about this. The “it’s not
the real Mexican independence day” crowd wrings their hands
as badly as the folks who insisted on reminding us that
January 1, 2OOO wasn’t “the real millennium” – that was on
January 1, 2OO1. Did you notice anyone partying extra hard
on December 31, 2OOO because it was the “real millennium?”
No, and you won’t hear about many people celebrating the
“real Mexican independence day,” September 17, either. Cinco
is an American holiday, and we celebrate it when and how we
want.

That goes for
the complaints of the anti-alcohol and Latino heritage
activists as well. These folks are horrified that Cinco de
Mayo is “used to sell beer”. They have press conferences,
and proclaim that they’re going to take back Cinco and
organize beerless counter-celebrations. But the mainstream
Cinco fests all have beer sponsors, and still continue to
grow.

“We try to
always promote and sell beer in a responsible way,” said Don
Mann, marketing group general manager for The Gambrinus Co.
(eastern US importer for the Modelo brands, which include
Corona and Corona Light). “Beer as a product is promoted
throughout the year, other holidays included: Christmas and
New Years’ Eve, the 4th of July. We’ve always been very
cognizant and proud of the way we’ve sold and promoted the
product.”

Dan Tearno,
vice-president of corporate affairs for Heineken USA
(importer for the FEMSA brands, which include Dos Equis and
Tecate), echoed that. “The key to any beer promotional
activity any time of year is responsibility,” he said. “We
do all our promotions in a responsible fashion. The POS we
use has a responsibility statement on it, following the same
policy as Heineken. Beer is sold all year long, and whenever
we sell it we want to do that in a responsible
fashion.”

After all, no
one seems to mind that President’s Day is used to sell major
kitchen appliances, but in the beer business you’re probably
used to that double standard. Holidays are used to sell
goods by everyone with the creativity to make a hook, a
tie-in, for their particular product, and brewers and
retailers are just as smart as anyone else.

“It’s the most
important promotion for us every year,” Mann said. “It kicks
off the summer season for our brands, and for Corona, that’s
particularly important. There’s such a strong seasonality
for our brand. We have an association with warmer weather, a
warmer climate. Some customers may move away from the brand
during colder months. Cinco reintroduces the brand to
them.

“That’s been
true since we started doing the promotion in the late ‘8Os.”
he recalled. “At the time, other brands were not associated
with Cinco, weren’t promoting it. When we first developed
it, it was not a major program, and we were able to build it
from nothing. That allowed us to exert a great degree of
ownership on it. Now it’s much more competitive, everyone
does it, but it’s strongly linked to our brand. That works
to our advantage.”

What works to
the advantage of the importer, works to the advantage of the
wholesaler. “Cinco de Mayo launches us into summer,” said
Tim Ullman, who is import portfolio manager for Atlas
Distributing in Auburn. “We load up in April, get ready for
May, and take it into summer. Business picks up; you can see
the numbers pick up big-time in April and on into
May.”

“We get a bump,
I wouldn’t call it a big bump,” said Steve Doherty, director
of sales and marketing for Quality Beverage in Taunton. “But
it’s a nice holiday to have in early May. Having an event
like is something to build progress on. Corona has a great
program, a big program, one of their heaviest
programs.”

Corona has
another big promotional program in store for Cinco 2OO6,
according to Mann. “We will support the Massachusetts Corona
retailer with TV and radio spots,” he said. “We have new
radio creative breaking this year; general market creative
and Hispanic creative as well. Both spots are music-based,
the Hispanic spot uses a different style and approach;
they’re geared towards different markets.

“As always we
will put out a plethora of promotional items,” he continued.
“There’s so much available for retailers to take advantage
of. The promotional pieces become the representative piece
for the program; they speak the loudest. The promotion is
based on last year’s, it builds on that: Get Your Cinco
Started. It’s very colorful, a tropical Mexican heritage
piece. The Corona Cinco pennants are very colorful, and tend
to be left up all year. That’s a good thing for
us.”

Corona has
another big thing going for it in 2OO6, a part of the magic
that had been missing recently: sales momentum. “We have a
lot of momentum going into this year,” said Mann with
well-deserved satisfaction. “Our business was up over 12%
for 2OO5 for the wholesaler group, and in January we’re up
27% for The Gambrinus Company. Our business has been coming
back and regaining momentum after price increases. Corona
has outpaced the import segment, it’s driven the category.
It’s gathering steam as retailers and consumers adjust.
There’s a bit of sticker shock when it first comes out, and
you hope that wears off. It has.

“Our Coronita
7oz. biz has gone very well,” Mann said. “We have a new
party package of twenty-four 7oz. bottles, done in colorful
tropical colors. We’re bringing that out in the summer.
We’ve always been associated with tropical escape, now we’re
bringing that to our retail packaging.”

It’s not all
Corona, either. “The other big driver last year was Modelo
Especial,” said Mann. “It’s just been on fire, it’s
exploding. We did 14.6 million cases in 2OO5, and we’re on
track for 2O million cases in 2OO6, which would make it the
3rd largest import in the country. That probably surprises
some retailers in Massachusetts. It blew by Corona Light.
Corona Light was up 13.5%, but Especial was up 53%. It’s got
a very strong following in the Hispanic market, but we’re
seeing crossover. We introduced a 12-pack bottle package,
and we got tremendous exposure in grocery stores. That put
it in a crossover market, and is helping to fuel the
growth.”

Corona doesn’t
just overshadow other Grupo Modelo beers, it overshadows the
other Mexican beers: Dos Equis Amber and Lager, Tecate,
Bohemia, Sol, and Carta Blanca, the beers of the FEMSA
brewery, which are now imported by Heineken USA. But
Heineken USA had a great first year with the brands, and has
momentum of their own going.

“There are lots
of synergies in the business,” said Tearno. “The fine
Mexican brands are a complement to the Heineken brands.
Heineken’s strong in the Northeast, the Mexican brands are
strong in the Southwest. Our folks are learning how to sell
that portfolio. They’re great brands.” “We’re very happy,”
confirmed Eduardo Casas, director of Mexican brands for
Heineken USA. “The brands are fully integrated into the
overall portfolio. It says a lot about the organization. We
had a pretty limited portfolio. But the addition of these
five brands adds a lot of consumers in different parts of
the country. We’re excited about having them. The Mexican
beer segment is a growth segment. To have Heineken, Heineken
Lite, and the Mexican brands clearly puts us in a leadership
position for the future.”

FEMSA may be new
to Heineken USA, but they get Cinco, too. “It’s like St.
Patrick’s Day,” said Casas, “the one day everyone celebrates
being Mexican. It’s amazing when you go in the bars on
Cinco: they’re having fun like they’re in Cancun. Everything
that’s Mexican is so hot, the Mexican influence on the US is
being felt everywhere in the culture: food, art, music,
movies. With the growing Hispanic population, that’s only
increasing across the country. And Mexico’s one of the
biggest vacation destinations.”

What do they
have to take advantage of that? “We have a full-brand lineup
promotion for Cinco,” Casas promised. “It can be tailored
for a specific brand or the wholesaler family. That will be
out in April through Cinco.”

Tecate is the
portfolio’s best seller nationally, but things are different
in Massachusetts. “In the Boston area, Dos Equis Amber does
very well,” said Casas, “and Dos Equis Lager is growing. The
brands have some clearly distinct strengths within
themselves. The beauty of the brand, the Dos Equis brand, is
that it’s also sold on draft. The other Mexican beers are
not, and that’s a big plus.”

Don’t forget the
“dark horse” brands of either brewer. “Have you ever had
Bohemia?” asked Casas. “The beauty in Mexican beers is the
drinkability, the back of the throat is always clean. But
Bohemia has more body, more malt, it’s more a European style
of beer.” Carta Blanca, Sol, Pacifico and the “dark Corona”,
Negra Modelo, all represent opportunities for a customer
who’s looking for “something different”.

Looking at the
numbers, though, it’s still largely a Corona world when it
comes to Mexican beer. In fact, as Tim Ullman put it,
“Corona now targets all consumers. Where before it was a
summer, Mexican beer, it’s bigger than that. It’s not really
a ‘Mexican’ beer any more.” Corona is the largest imported
beer by far, and it’s in the top ten of bestselling beers in
the US market overall. It has made Mexico the third-largest
beer exporting country in the world, after Holland and
Germany. Success like that should be something to make
Mexican-Americans as proud as Cinco de Mayo. That’s
something to celebrate.

A TALE OF TWO IMPORTERS Corona sells an image of a vacation in a bottle, relaxed enjoyment on a warm beach. The images are tranquil rather than frenzied. But there are storm clouds out over the ocean, and the waves are rising – at least for one part of the Corona empire. Grupo Modelo, the Mexican brewer of Corona, has relied on two importers to cover their American marketing: Chicago-based Barton Beers in the west, and The Gambrinus Company, a San Antonio company, in the east. The model has worked, and Modelo has made money hand over fist as the two importers broke the US beer market wide open with an energetic blend of “vacation in a bottle” imagery and intense local promotion. Corona did so well that its coattails have brought along success with other Modelo brands: Corona Light, Modelo Especial and Negra Modelo. But the relationship between Grupo Modelo and Gambrinus turned sour. Modelo tried to purchase Gambrinus, a private company owned by former Modelo executive Carlos Alvarez, “as a means to improve Modelo’s profitability,” according to a Gambrinus press release. At that time, Modelo said the action was unrelated to Gambrinus’s performance, which was called “outstanding”. To be fair, it would have been hard to call it anything else. Alvarez declined the offer. Modelo has since informed Gambrinus (and the media) that their importer agreement would not be renewed after its December 31, 2OO6 expiration date. Gambrinus, in turn, filed for arbitration with the International Court of Arbitration of the International Chamber of Commerce in Paris. “It’s an entity that’s been agreed upon in the contract for disputes,” explained Don Mann. “It’s not a court, it’s a private organization.” Gambrinus issued a statement in mid-2OO5, saying that they expected a decision by the fall of 2OO5, and refused to make any further comment on the issue. Obviously, that date has come and gone. “It’s still pending,” said Mann. “All the interested parties are still waiting for direction to come back from the arbitration party. They’ve been working on it for quite some while. We were originally expecting a much earlier decision, but it’s more complex that it might appear. We remain confident. It’s not a performance issue, that’s clear.” And that’s as much as anyone has heard on the matter for eight months. Is it something to worry about? Probably not. “The wholesalers aren’t that nervous,” said Steve Doherty. “We’ve got rights to the brands that we paid for. We have no issues with Gambrinus, but we will continue to get product. Whether the importer is Gambrinus, Anheuser-Busch, whoever, we’ll get beer.” Meanwhile, FEMSA had its own importer problems back in 2OO2. The brands were being imported by Labatt USA, which was then taken over by InBev when that company bought Labatt. Former InBev head Hugo Powell noted that “FEMSA had never been happy with this relationship.” Things got worse when InBev acquired German brewer Beck’s in 2OO1 and decided to merge Beck’s US importer with Labatt USA to cut costs. FEMSA wasn’t happy, and got a court order to halt the merger in May of 2OO2. InBev fought back, but lost in the courts. The solution was for FEMSA to buy back the FEMSA shares owned by InBev, at which point InBev agreed to “unwind” FEMSA’s relationship in Labatt USA, which as of September 2OO4, is now InBev USA. FEMSA regained its US importing rights, and is now represented by Heineken USA, a major expansion of that company’s portfolio. It has been a happy marriage. “Transitions are always a slow start,” noted Dan Tearno. “But at our national distributor conference, the FEMSA officials were praising the transition as one of the best in the business in decades. There’s usually a drop, but we were up high single digit growth total on the brands in 2OO5, and the momentum increased as the year went on.” That’s the story on the two portfolios. FEMSA’s happy in their new home, while Gambrinus is waiting to see if they’re going to continue to bring you Grupo Modelo beers. As one industry source told me, “The contract’s up December 31, so people will have to know something well before that.” Maybe we’ll hear something by – Cinco de Mayo.