Guadalajara, Mexico – Like many sectors of Mexico’s economy, the beer industry has long been dominated by a powerful duopoly. But a flourishing craft beer movement led by independent microbreweries is showing signs of finally forcing open this lucrative market.
Since assuming office in December 2012, President Enrique Peña Nieto’s administration has passed major reforms to combat monopolies and foster greater competition in key industries such as energy and telecommunications. Mexico’s beer industry, which is worth approximately $20bn a year, according to government figures, is also experiencing significant change.
The world’s sixth largest producer and consumer of beer, Mexico brews over 8.6 billion litres annually, while the average Mexican drinks 60 litres per year. But two dominant breweries, Grupo Modelo and Cuauhtemoc-Moctezuma, control 98 percent of the market, according to a US Department of Agriculture report from 2013.
Microbreweries account for less than one percent, although their combined market share is growing rapidly by 50 to 60 percent a year.
Breaking the mould
“When we started out 10 years ago the market was completely closed. The only beers that existed were those of Modelo and Cuauhtemoc-Moctezuma,” Jesus Briseño, the tall, middle-aged founder of Guadalajara’s Minerva brewery, told Al Jazeera.
Minerva, which proclaims itself the leader of Mexico’s “beer revolution”, sought to shake up the industry by encouraging Mexicans to embrace new styles of beer, while using legal action to open up the market. The latter path led to a federal decree in 2013 limiting the duopoly’s use of exclusivity contracts which prevent most bars, stores and restaurants from selling rival beer brands.
Although many bars still only serve a narrow range of commercial lagers and darker beers, trendier areas of Mexico City, Guadalajara, Monterrey and Queretaro now house dozens of specialist pubs that stock pale ales, pilsners, porters, stouts and wheat beers.
“I love the natural taste, the aroma and the sediment,” Mexican engineer Alejandro Lino told Al Jazeera, while sipping cacao-infused pale ale at a Minerva-run brewing workshop in Guadalajara.
“I’m so in love with craft beer that I haven’t drunk Corona in years,” he added, in reference to Modelo’s flagship beer, which market research firm Millward Brown named Latin America’s most valuable brand in 2013.
An amateur homebrewer, Lino had come to check out the workshop where enthusiasts can learn to make their own beer.
“The workshop is a means of democratising knowledge and a place for us to experiment with new beers on a small scale,” Briseño said. It is part of a wider effort by Minerva to “create a stronger beer culture,” he explained.
Promoting craft beer
Founded in Guadalajara in 2004, Minerva has grown from a staff of three to 48. Production at its new factory – a vast hangar brimming with shiny steel tanks, bags of malt and cases of freshly bottled beer – totalled 1.1 million litres last year. Their goal for 2014 is 1.5 million.
In 2008, Minerva and local microbrewery Cerveceria Revolucion cofounded the Guadalajara Beer Festival to showcase Mexican craft beer and introduce previously unavailable European imports.
Having begun as a modest collection of beer stands in a small city square, the annual festival has since morphed into a major three-day event with live music, workshops, food stalls and fairground rides. Now staged in a huge forum on the outskirts of Guadalajara, it draws up to 30,000 attendees a year and claims to be Latin America’s largest beer festival.
“We think the more craft beer that exists and the more exposure it has, the more the entire industry will benefit, Minerva included,” Briseño said.
Petra Kittel, a German expatriate who founded Guadalajara’s La Blanca microbrewery in late 2012, sold her first batch of beer at the festival that same year. “It really helps [to publicise your brand]. It’s a gigantic event,” she told Al Jazeera.
A dozen other beer festivals have since sprung up across Mexico. Meanwhile, Minerva has sought to strengthen the burgeoning craft beer culture by opening its brewing workshop and launching El Deposito, a popular franchise bar.
There are now seven Deposito branches in middle-class neighbourhoods across Guadalajara and Mexico City, all of which stock Minerva’s complete range, including a unique ale matured in oak barrels previously used to age tequila, plus other Mexican craft beers and British, Belgian and German imports.
“Minerva were the pioneers. They did a great job showing people that there’s more to beer than Corona,” added Kittel, who comes from a family of Munich-based brewers and produces her own range of German-style wheat beers.
Globalisation has also influenced the craft beer craze, Kittel said, noting that it was fuelled by the increased availability of imports and “Mexicans who travelled to Europe and tried different beers there.”
Opening the market
As the brewing revolution has taken hold, a few businesses have completely rejected commercial beer, such as Guadalajara’s “Pig’s Pearls” burger restaurant, which only stocks craft beer.
“We wanted to support Mexican micro-businesses, not monopolies,” owner Oscar Martin told Al Jazeera. “A lot of people come in asking for Corona or Heineken so I tell them, ‘We don’t have that kind of beer but we’ve got something better for you.'”
The most popular beers include those by Perro Negro from Guadalajara, Insurgente from Tijuana, Libertadores from Michoacan and the Baja Brewing Company from Los Cabos, Martin added.
However, until last year, most points of sale remained closed to Mexico’s microbreweries.
In a bid to circumvent the use of exclusivity contracts, Minerva teamed up with Mexico City’s Primus brewery and British multinational SABMiller to file a complaint with the Federal Competition Commission.
“It took three and a half years but last year they ruled that Modelo and Cuauhtemoc-Moctezuma could no longer exclude craft beers from bars and restaurants,” Briseño said.
We wanted to support Mexican micro-businesses, not monopolies.
Modelo declined to comment when contacted, but Cuauhtemoc-Moctezuma affirmed in a statement to Al Jazeera that it “cooperated throughout the investigation process and has fully complied with all the requirements established by the commission”.
Although the federal resolution partially opened the market by decreeing that only 25 percent of contracts could contain exclusivity clauses, it fell short of outlawing such agreements.
Among the other obstacles facing microbrewers, their products still cannot be sold in convenience stores. One of the country’s major convenience stores, OXXO, has 11,000 locations but belongs to the same conglomerate as Cuauhtemoc-Moctezuma.
Microbrewers must also import their malt from Europe or the United States because the duopoly dominates domestic malt production.
Enhanced production costs mean Mexican craft beer is effectively taxed at three times the rate of commercial beer, although several breweries are pushing for a fixed-rate quota for all beers so they can sell at more competitive prices.
Mexican craft beers currently retail at double or triple the price of commercial beer, thus pricing many people out of the market.
“I prefer craft beer, but if I’m going to a party I’m more likely to buy commercial beer,” Ricardo Ramos, a recent graduate from the University of Guadalajara, told Al Jazeera, citing the greater availability and lower cost of commercial beer.
Despite having made significant inroads, Mexico’s beer revolution has some way to go to overcome such hurdles.