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When supply chain meets Global Marketing: Will Corona lose its Mexican identity?

In the fourth quarter of 2019, the multinational brewing company Anheuser-Busch InBev (AB InBev) announced the beginning of the production of Corona outside of Mexico. No big deal, actually, because many multinationals spread geographically their supply chains to meet the global demand of their products. Such decisions make sense from a business perspective, because they improve the availability of products in different markets and increase profitability, mostly because doing local production reduces costs, especially in logistics. Therefore, with the increasing demand of Corona from China, which some analysts [1] estimate to become the largest market for beer, AB Inbev´s move is expected. However, this will be the first time the beer will be produced outside of Mexico and the transfer of the production of Corona to China raised an interesting question: Will the shift of production hurt the Mexican identity of Corona?

What is AB InBev?

Anheuser-Busch InBev, whose revenues in 2018 were above US$ 54 b, was created in October 2008 after the merger (an acquisition, actually, but this will be the topic of another post) between the US-based Anheuser-Busch and InBev (a company formed after the merger of Interbrew, from Belgium and AmBev from Brazil). In 2015, AB Inbev acquired SABMiller and confirmed its position as the world’s largest brewer. AB InBev´s marketing strategy is based on 200 brands divided into three categories: Global brands (Beck’s and Stella Artois, Multicountry brands (Brahma, Leffe, Staropramen, Hoegaarden, and Local brands (Keith’s and Labatt Blue, in Canada), Bohemia, Antarctica, and Skol (in Brazil), Quilmes (in Argentina), Jupiler (in Belgium), Siberian Crown (in Russia), and Cass (in South Korea). With the production in China, Corona´s position as a Multicountry brand will be strengthened and probably will be upgraded to a Global brand.

It is a logical business decision, but what are the risks involved?

It was already argued [2] that there is a perception of risk involved in the production of Corona outside Mexico, which may lead the beer to lose its Mexican authenticity. The company stated that to begin Corona´s production in China, a Mexican master brewer will supervise the production.

Will the Corona production outside Mexico hurt the Mexican authenticity of the beer?

It is unlikely that the Mexican identity of Corona will be hurt. From the technical perspective, Corona is produced in a very large-scale process, therefore, with the adequate process control, the product will be the same, regardless of the country in which the beer will be produced. From a marketing perspective, there are many products that keep their country-of-origin identity even their production takes place in foreign markets. For example, Budweiser, a US brand, is produced in China, Stella Artois, from Belgium, is produced in Brazil and Bud Light, another US brand, is produced in Mexico. AB InBev seems to know how to play the game of multi-country brands mixed with global supply chains. Other examples come from Louis Vuitton, a fashion brand that announced that it will manufacture in Texas [1]. Finally, Coca-Cola provides a solid argument of the tradeoff between country-specific identity and global production. Although Coke is bottled throughout the world, Mexico included, the product is firmly associated with the United States. In fact, one of the largest Coke bottlers in the world is the Mexican FEMSA, which is in Mexico, one of the largest markets for Coca-Cola. Even in this case, no one associates Coca-Cola with Tequila or Mariachis.

Takeaways

  1. The perception that the brand is Mexican will prevail because in many industries the consumers are not carefully analyzing the location of the plan. In the Chinese case, most likely the consumer will buy the perception that Corona is Mexican, not the company is a Brazilian-Belgium multinational (AB InBev) and that the product was not produced in Mexico.
  2. Mass-market beers are produced through large-scale processes. Thus, the rules of economies of scale, reduction in transportation costs and savings in procurement apply and process control is the name of the game. Even with premium brands, such as Corona
  3. In the beer industry, country-of-origin identity comes from marketing activities, neither from product characteristics nor from manufacturing location.

References

[1] https://www.mexicanist.com/l/corona/

[2]  https://www.just-drinks.com/news/anheuser-busch-inbev-takes-corona-production-out-of-mexico-with-china-move-analyst_id129533.aspx

Source of the photograph of Corona: https://newsbeezer.com/mexicoeng/corona-the-favorite-beer-brand-in-china/

Source of stylized Chinese flag; https://supchina.com/2019/07/22/why-do-chinese-people-like-their-government/

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