Bachelor of International Sales and Marketing Management Professionsbachelor International Handel og Markedsfaring Microbreweries in Mexico Written reexam Ist semester/Skriftlig re-eksamen 1. semester 8th August 2013/8. august 2013 The basis for the company ‘s sale / Virksomhedens salgsgrundlag This examination paper consists of 4 assignments. For grading purposes the assignment are given the following approximate weights Dette opgavescet bestar af 4 opgaver, der indgar i bedammelsen af den samlede opgavebesvarelse med falgende vejledende veegte: Assignment 1/Opgave 1: 20% Assignment 2/Opgave 2: 30% Assignment 3/Opgave 3: 25% Assignment 4/Opgave 4: 25% Page/Side 1Bachelor of International Sales and Marketing Management Professionsbachelor International Handel og Markedsforing Contents/Indhold Assignments in English Opgaver (pa dansk) Danish microbrewer enters the market for specialty beers in Mexico Potential for spe ity beer From 4-60 competitors The Mexican beer market in summary Trends Sales of Beer by Category: Total Volume 2006-2011, Company Shares of Beer by Global Brand Owner 2007-2011 Artisanal Alcoholic Drinks: Increasingly an Option for Mexican Consumers Rise of craft beer Market leaders looking to capit ize Despite growth remains niche 10 an a 2 2 14 as 16 16 v7 7 Page/Side 2Bachelor of International Sales and Marketing Management Professionsbachelor International Handel og Markedsforing Assignments in English Assignment 1 (20%) In connection with the continued growth, the owner of Calvera Bjorn Nielsen, decided to hire a new sales manager. She has taken the time to analyze the brewery's cost structure. She wondered whether the brewery’s current model for allocating costs gives the true picture of resources. The brewery distributes today its costs based on the assumption that each product use 35 percent of the gross margin. The brewery has two niche products Montezuma and Cuauhtémoc. Montezuma | Cuauhtémoc Net sales 3.150.000] 3.850.000 Production costs 1.750.000| 2.485.000 Contribution margin_| 1.400.000| 1.365.000 Assignment 1.1) Calculate the contribution margin for the two niche products Montezuma and Cuauhtémoc using the current cost allocation. The new sales manager has made a series of calculations with the finance department. The calculations show the following resources on the two niche products Montezuma and Cuauhtémoc: Page/Side 3Bachelor of International Sales and Marketing Management Professionsbachelor International Handel og Markedsforing Montezuma| Cuauhtémoc Travel expenses 315.000 56.000 Servicing customers 630.000 84.000 Order handling 70.000 7.000 Shipment costs 525.000| 140.000 Assignment 1.2: Calculate the EBIT of Montezuma and Cuauhtémoc in the light of the new Activity Based Costing calculations. Assignment 1.3: Which of the two methods of cost allocation provides the best picture of the brewery’s resources? Justify the answer. Assignment 1.4. The Brewery has been offered a new IT-system for order handling. The orders are widely handled manually today. The new system decreases the time for order handling from 60 minutes to 30 minutes per order for the niche products Montezuma and Cuauhtémoc, Today these two products generate 1.000 and 100 orders. The Brewery uses a discount factor of 15 percent. The investment cost is 200.000 DKK. Is this investment is profitable? Page/Side 4Bachelor of International Sales and Marketing Management Professionsbachelor International Handel og Markedsforing Assignment 2 (30 %) Based on the case description of the beer marked in Mexico you have to analyze the competitor situation for Calavera Micro Brewery and based on this identify market openings, if you think there are any? Furthermore you have to identify which data, not specified in the case, you need to be able to verify your conclusion on the competitor analysis. Your analysis has to be well-argued and based on application of relevant theories and models. You may make assumptions, where relevant and apply justified limitations as appropriate. Assignment 3 (25%) After some initiating negotiations with a Danish supplier of production equipment to the brewery - Alcol A/S - Calavery and Alcol A/S on 28 May 2013 concluded a contract of the delivery of production equipment for the amount of 200.000 DKK. As a part of the negotiations Alcol A/S had promised to pay the transportation to Mexico City. Accordingly the parties agreed upon the following transportation clause: “CPT Mexico City (Incoterms 2010)" The equipment was delivered at the brewery in Mexico City on the 24 July 2013. During the following week Calavery found out that the equipment produced a substantial lesser amount of beer than expected by Calavery and promised by Alcol A/S. On 2264 July 2013 Calavery forwarded a mail to Alcol A/S in which they claimed the small production and both cancelled the sale and demanded damages for the financial loss that have occurred due to the lesser beer production. Alcol A/S responded within a few hours in which they promised immediately to forward an employee to Mexico City to repair the equipment. Assignment 3.1.: What is the legal status between the parties? (Both Denmark and Mexico have adapted the CISG). Page/Side 8Bachelor of International Sales and Marketing Management Professionsbachelor International Handel og Markedsforing Assignment 3.2.: If the parties do no come to an agreement may Calavery then sue Alcol A/S at the court in Mexico City (If you presume that the rules regarding venue is the same in Mexico as in Denmark)? Assignment 3.3.: If Alcol A/S is not sure of the financial capacity of Calavery how could Alcol A/S ensure that the purchase price is paid provided that cash sale is not a possibility? (This assignment 3.3. shall be solved independently of your solutions to assignment 3.1 and 3.2). Assignment 4 (25 %) Considering the market structure of specialty beer in Mexico, please analyze the requirements for the supply chain for Calavera. Your answer must include an evaluation of whether you believe Calavera should design an efficient or an innovative/market driven supply chain as well as suggest how this supply chain should be structured, Page/Side 6Bachelor of International Sales and Marketing Management Professionsbachelor International Handel og Markedsforing Opgaver (pa dansk) Opgave 1 (20%) | forbindelse med den fortsatte vekst, har ejeren af Calvera Bjorn Nielsen, besluttet at ansaette en ny salgschef. Hun har brugt tid pa at seette sig ind i bryggeriets omkostningsstruktur, | den forbindelse har hun undret sig over om Bryggeriets nuveerende model for fordeling af omkostninger giver det sande billede ressourceforbruget. Bryggeriet fordeler i dag sine omkostninger ud fra en antagelse om at hvert produkt forbruger 35 procent af dakningsbidraget. Bryggeriet har to nicheprodukter Moctezuma og Cuauhtémoc. I DKK Montezuma | Cuauhtémoc Samlet salg 3.150.000] 3.850.000 Produktionsomkostninger| _1.750.000| 2.485.000 Deekningsbidrag 1.400.000 | 1.365.000 Opgave 1.1: Beregn daekningsbidraget to nicheprodukter Montezuma og Cuauhtémoc ved brug af den nuvaerende omkostningsfordeling, Den nye salgschef har imidiertid lavet en raekke beregninger sammen med okonomiafdelingen. De beregninger viser folgende ressourceforbrug pa de to nicheprodukter Moctezuma og Cuauhtémoc Page/Side 7Bachelor of International Sales and Marketing Management Professionsbachelor International Handel og Markedsforing LDKK Montezuma _| Cuauhtémoc Rejseomkostninger |___ 315.000 56.000 Kundeservice 630.000 84.000 Ordrehandtering 70.000 7.000 Forsendelsesomkostninger| 525.000] __140.000 Opgave 1.2: Beregn indyjeningsbidraget for Moctezuma og Cuauhtémoc pa baggrund af de nye Activity Based Costing beregninger. Opgave 1.3: Hvilken af de to metoder til omkostningsfordeling giver det bedste billede af Bryggeriets ressourceforbrug? Begrund svaret. Opgave 1.4: Bryggeriet er blevet tilbudt et nyt i system til ordrehandtering. Ordreme handteres manuelt | dag. Det nye system reducerer tiden for ordrehandtering fra 60 minutter til 30 minutter pr. ordre for nicheprodukter Montezuma og Cuauhtémoc. | dag genererer disse to produkter hhv. 1,000 0g 100 ordrer. Investeringsudgiften er 200.000 DKK. Bryggeriet bruger en kalkulationsrente pa 15 procent. Vurdér hvorvidt denne investering er rentabel. Opgave 2 ( 30 %) Med udgangspunkt i case beskrivelsen af al marked i Mexico skal du analysere konkurrence situationen for Calavera Micro Brewery og pa baggrund af dette identificere markedsabninger, hvis du mener der er nogen?. Derudover skal du specificere, hvilke data, som ikke er givet i casen, der mangler for, at du kan verificere konklusionen pa konkurrentanalysen. Veer opmeerksom pa at gennemfore din analyse med brug af relevant teori og relevante modeller. Det er tilladt at gare antagelser, hvor det er relevant og foretage begrundede afgraensninger. Page/Side 8Bachelor of International Sales and Marketing Management Professionsbachelor International Handel og Markedsforing Opgave 3 (25%) Efter nogle indledende forhandlinger med en dansk leverandor produktionsudstyr til bryggeriet ~ Alcol A/S —indgik Calavery og Alcol A/S den 28. maj 2013 en kontrakt om levering af produktionsudstyr for 200.000 DKK. Som en del af forhandlingerne lovede Alcol A/S at betale transporten til Mexico City. Derfor blev parterne enige om falgende transportklausul: "CPT Mexico City (Incoterms 2010)." Udstyret blev leveret pa bryggeriet i Mexico City den 2. juli 2013. I den folgende uge fandt Calavery ud af, at udstyrret producerede en betydelig mindre mangde al end forventet af Calavery og lovet af Alcol A/S. Den 22, juli 2013 sendte Calavery en mail til Alcol A / S, hvori de haevede kobet og forlangte erstatning for det akonomiske tab, der opstod pa grund af den mindre olproduktion. Alcol A / S reagerede inden for et par timer, hvor de lovede straks at sende en medarbejder til Mexico City for at reparere udstyret. Opgave 3.1.: Hvordan er retsstillingen mellem parterne? (Bade Danmark og Mexico har tltradt CISG). Opgave 3.2.: Hvis parterne ikke nar til enighed, kan Calavery derefter sagsoge Alcol A/S ved retten i Mexico City (Hvis det forudsettes, at reglerne om veerneting er den samme i Mexico som i Danmark)? Opgave 3.3.: Hvis Alcol A/S ikke var sikker pa Calavery betalingsevne, hvordan kunne Alcol A/S sikre kabsprisens betaling, forudsat at kontantsalg ikke er en mulighed? (Denne opgave 3.3. skal loses uafhengigt af dine lesninger til opgave 3.1. 09 3.2.) Opgave 4 (25 %) Med udgangspunkt I markedsstrukturen for specialal | Mexico skal du analysere kravene til Calaveras supply chain. Din besvarelse skal som minimum indeholde en vurdering af hvorvidt Calavera skal designe en effektiv eller en innovativ/markedsdreven forsyningskaede samt give forslag til hvorledes denne skal struktureres. Page/Side 9Bachelor of International Sales and Marketing Management Professionsbachelor International Handel og Markedsfaring Danish microbrewer enters the market for specialty beers in Mexico Bjorn Nielsen (rear) along with an employee of Calavera microbrewery in Mexico. Photo: Nicolai Raastrup 26 February 2013, Bjorn Nielsen gave up research In Denmark and started brewing beer In Mexico. Now he benefits from their growing thirst for specialty beers ‘The noisy neighborhood in the middle of Mexico City is scruffy and the black metal gate is well worn. But when Bjarn Nielsen opens the gate, we enter a new world, Three huge, shining kettles, bottles moving on an assembly line through a humming washing system and at the rear hundreds of boxes of bottles, which a Mexican employee picks up and labels, one by one, "Calavera," it says on them, Spanish for "skull". "We chose the name Calavera because the Vikings originally drank from skulls and because the skull and death is very important in Mexican culture. For the Aztecs skulls have always been synonymous with life, death, change, variability and a step towards something new. We represent death of the old and the renewal of beer in this country, "says Bjorn Nielsen, owner of microbrewery Calavera, producing specialty beers toa growing crowd of quality-conscious Mexican beer drinkers. 41-year-old Bjorn Nielsen's family moved from Denmark to Mexico when Bjorn was three years, but he returned to Denmark at the age of 16 to go to high school and later to university where he studied biochemical engineering. In 2008 he left his research position at DTU in Lyngby and moved with his Mexican wife Elizabeth to Mexico City to start the Calavera. Page/side 10Bachelor of International Sales and Marketing Management Professionsbachelor International Handel og Markedsforing Potential for specialty beer Bjorn Nielsen had brewed beer for fun in Denmark, and he saw an opportunity in the specialty beer category for Mexicans. "In the beer market there is a huge thirst, literally, for new and different beers. People wish to taste, sense and try different things," says Bjorn Nielsen, when we have left the loud hum of the fermentation tanks and is, drawn into a meeting room with rough walls and a number of Calaveras beer lined up, Calavera produces 12 types of beer, including wheat beer, an American pale ale, Christmas beer and a special Dia de Muertos of the dead) beer for the special Mexican holiday. The labels on beers, all with skulls in various styles, are designed by Elisabeth, who is a graphic designer. "In 1996 you could buy two kinds of beer in Denmark, but people wanted more than Carlsberg and Tuborg. There were many who did something about that and between 1996 and 2006, 250 microbreweries emerged in Denmark. | lived in Denmark, while this revolution was happening, and | could see that something similar would happen in Mexico, "says Bjorn Nielsen. From 4-60 competitors When Calavera sent the first beer out through the black gate in 2009 there were four competitors. Today, there are 60, And since the beer giants AB Inbev and Heineken have taken over the popular Mexican beer Corona and Sol, interest in local beer has become even greater. “The big breweries are no longer Mexican, so now it's Calavera and others who are the Mexican breweries," says Bjorn Nielsen. Calavera, which last year grew 60 per cent and are heading towards similar growth this year, currently has 10 employees and sells 7-8000 liters of beer a month. The sale is primarily targeting specialty beer stores and premium supermarkets focusing on higher quality and better goods Bjorn Nielsen explains the success of Calavera as a consequence of improvement in the social and economic state of the Mexican middle class. "Mexico is the 13" or 14" largest economy in the world, but when you see the villages and all the poor people, you ask yourself where all this money is? The answer isthat it's in industries, and that people are starting to get alittle bit of money and moving up into the middle class,” Brn Nielsen says. “The middle dass disappeared in the 1980's. At that time you were either massively rich or completely poor. But the middle class is returning and the really substantial buying power is targeting our products,” he says ‘The success of Calavera — how to survive on the Mexican market - Only cash is guaranteed: robberies, delays in payment, checks without coverage and normal in Mexico, Calavera receives max 5000 pesos in cash (=DKK 2300) and joins the buyer in the bank to ensure that checks can be cashed - Prepare: it took one year for Bjorn Nielsen to prepare the documentation for starting production. Start in time and find people who know the system + Get the right people: after having to pay fines to the public system because of mistakes and misinterpretations, Bjorn Nielsen hired an administrative manager - Read the market: Mexicans prefer local products. Therefor Calavera uses Mexican spices in their beer and produces beers for special Mexican festivals. Page/Side crBachelor of International Sales and Marketing Management Professionsbachelor International Handel og Markedsforing The Mexican beer market in summary (extracts from Euromonitor, Beer in Mexico: category briefing, 21 December 2011) Trends A stronger economic recovery lead to a boost in consumer confidence in 2011, with Mexicans more willing to spend on beer compared with the previous year, when companies decided to increase prices, thus inhibiting consumption. Overall, total volume sales of beer grew 59% while current value sales increased by 10% in 2011. The volume growth observed in 2011 was indicative of increased consumer interest, particularly regarding a mature industry such as beer in Mexico. This growth, much superior to the 2% historic growth rate, was only recorded at the beginning of the review period, and was likely motivated by strong advertising campaigns, new product development activity and the expansion of consumer choices across the standard and premium segments. Domestic standard lager is by far the largest beer niche, accounting for over 97% and 96% of total volume and current value sales respectively in 2011, Domestic standard lager experienced a positive performance in 2011, with sales growing by 5% in volume terms. Consumers have an improved perception of the Mexican economy and thus became more relaxed, spending a greater portion of, their budget on beer. Most brands within domestic standard lager, such as Corona Extra, Victoria or Modelo Especial (Grupo Modelo) and Sol, Tecate or Carta Blanca (Heineken) are quite traditional names with strong roots among Mexican consumers. As such, these brands do not need to compete aggressively in terms of product innovation or unusual advertising campaigns, rather they depend ‘more on a competitive price basis, together with regular positioning campaigns and a good level of consumer confidence ~ conditions which were met in 2011. Premium lager accounted for more than 2% and 3% of total volume and current value sales, respectively in 2011. It is mostly imported brands such as Budweiser, Heineken and Miller which are better positioned within this segment. The outlook for premium beer is likely to start @ transformation phase with the arrival of Heineken in the country. Company spokesmen have openly manifested their commitment to boosting the premium beer category in Mexico, which might crystallize with the start of production operations of the Heineken beer in the plant owned by the company in Orizaba, Veracruz, The economy lager niche represents still an insignificant proportion of total beer sales, and is mostly driven by imported Guatemalan brand Gallo, Men are still the main consumers of beer in Mexico. Nevertheless, women are emerging as an interesting group of consumers who feel increasingly attracted to products such as light beer. Companies use their brands to increase age segmentation and presence. Heineken is strongly positioned in the segment of youngest consumers with its Sol brand, which is very actively promoting parties, concerts and free trips to popular resorts. Corona Extra by Grupo Modelo is able to capture a wider and more universal segment of consumers by means of its strong distribution and brand power. With Victoria and Tecate, both Grupo Modelo and Heineken typically look forward to attracting soccer fans, creating a strong base of loyal consumers. Some brands, such as Indio by Heineken, are emerging with considerable success among young adult consumers, who proclaim a ‘more inclusive culture and a more relaxed lifestyle reflected on the products they buy. Traditional brands such as Negra Modelo by Grupo Modelo or Bohemia by Heineken appeal to a segment of adult and knowledgeable consumers who enjoy high quality beer. Almost 80% of total beer volume sales were made through the off-trade channel (=retail, Page/Side 12Bachelor of International Sales and Marketing Management Professionsbachelor International Handel og Markedsfaring supermarkets etc) in 2011, while only 54% of total current value sales are made through this channel. This difference is due to the higher prices at which beer is sold at on-trade channels (=bars, hotels, restaurants) versus off-trade outlets. Interestingly, the share of on-trade sales has not significantly changed since 2009, a sr which saw the AHN1 virus outbreak largely inhibit on-trade consumption in bars and restaurants. What these figures might indicate is a greater propensity among Mexican consumers to celebrate and drink at home in order to save money. Craft beers are a burgeoning trend in Mexico and experiencing momentum in key spots within large Urban areas such as the Condesa and Roma neighborhoods in Mexico City, Craft beers are particularly appreciated by young and effluent consumers who wish to be more acquainted with the latest global trends in this industry. Distribution is presumably the greater hurdle producers of craft beer face due to the agreements the two giants, namely Grupo Modelo and Heineken, set with a number of on- trade establishments and off-trade retail outlets. This scenario is likely to start changing gradually in the wake of the anti-monopolistic law approval in 2011, Currently, 16 small producers of craft beer are joining efforts through the ‘Por la Cerveza Libre’ (for the free beer) movement, through which they exhort on-trade establishments to remain open to all beer options. Furthermore, this movement is continuously promoting exhibitions and fairs throughout the country in order to raise consumer awareness, Some of the artisanal beer brands gaining popularity in recent years include Cerveza Minerva, Cerveza Querétaro and Tempus, which can be found with some regularity in Superama supermarkets (Wal-Mart de México). Some other artisanal beer brands, such as La Belga or The Beer Depot, sell their products off-trade in specialized stores as well as through Internet retailing activities. Another obstacle producers of craft beer face is to do with price Relevant innovations have not been observed in the segment of standard beer brands, as major manufacturers would rather spend their budgets on positioning campaigns for their existing ranges. In turn, new products can be observed on the side of artisanal brewers. In early Cerveceria Minerva launched its Diosa Blanca (white goddess) beer —a formula that contains wheat, oats, coriander seeds, aniseed and orange peel. Interesting new product developments were also observed during 2010, along with the celebration of the ‘Bicentenario’ and ‘Centenario’ festivities. In early 2010, Cerveceria Revolucién launched the Adelita and Villa beers, inspired by two famous characters of the Mexican revolution. Later in 2010 Cerveceria Revolucién launched Zapata beer —a brown ale with 5% alcohol offered in a limited edition bottle of only 120,000 units. The impact of these launches is becoming evident in craft beer, where small producers continue to steadily innovate in terms of new ingredients in beer formulas, such as chocolate, honey, parsley, ete. Page/sideBachelor of International Sales and Marketing Management Professionsbachelor International Handel og Markedsfaring Sales of Beer by Category: Total Volume 2006-2011 fea ec Bed Eee OR Me LE! Dark Beer : - - : : - Lager 6,040.6 6,313.1 6,451.1 6511.7 6,364.2 6,698.3 Premium Lager 119.9 146.7 162.7 1868 155.9 162.6 =DomesticPremiumLager 4.0, 13.9155 18.3 19.8211. = Imported Premium Lager 116.0 1328 147.2 1385 136.1 141.4 - Standard Lager 5,904.0 6,149.3 6,270.8 6,332.9 6,184.7 65105 ~ Domestic Standard Lager 5,904.0 6,149.3 6,270.8 6,332.9 6,184.7 65105 ~ Imported Standard Lager : = “ = = co = Economy Lager 167 172 176 22.0286 25.3 —DomesticEconomy lager 110 112, 116 «120 12,126 ~ImportedEconomylager 58 5.9 6.010.118 12.7 Low/Non- Aleohol Beer - 18 96 105 104 114 - Low Alcohol Beer : < E : 2 : = Non-Alcoholic Beer + 18 96 105 104 114 Stout - 2 : 7 - - Beer 6,040.6 6,314.9 6,460.6 6,522.2 6,374.6 6,709.8 Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources Page/sideBachelor of International Sales and Marketing Management Professionsbachelor International Handel og Markedsfaring Company Shares of Beer by Global Brand Owner 2007-2011 Poekerad) EME ME COMETS! Modelo SA de CV, Grupo 547 551 559 566 561 Heineken NV 04 04 03 411 416 Anheuser-Busch InBev NV - 12 11 10 10 SABMiiller Ple 03 03 03 03 03 Cerveceria Centroamericana SA 01 O1 02 02 O02 Molson Coors Brewing Co 02 02 02 02 O02 FEMSA (Fomento Economico MexicanoSAdeCV) 428 422 415 = - Anheuser-Busch Cos Inc ao] -| -| -| | Others 05 06 06 O7 O07 Total 100.0 100.0 100.0 100.0 100.0 Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources Page/sideBachelor of International Sales and Marketing Management Professionsbachelor International Handel og Markedsfaring Artisanal Alcoholic Drink: increasingly an Option for Mexican Consumers Opinion | 15 Mar 2 by Bethany Gomez, Analyst, In a country where mega brands are rapidly expanding at the expense of small independent brands and retailers, the opposite trend is becoming apparent in the Mexican alcoholic drinks industry: artisanal products are on the rise. This offers opportunities for entrepreneurs, with new players and craft beers entering the market every month. Rise of craft beer {HRMBIEIE As disposable incomes are on the rise in Mexico, the rapidly expanding urban middle class is seeking out higher quality food and drinks. Mexico has a strong culture of beer consumption, with the third highest consumption per capita in Latin America, However, there is little variety available, with 97% of all beer sold being standard lager and more than 99% of beer sold coming from two companies, Cerveceria Cuahutémoc Moctezuma and Cerveceria Modelo, leaving substai ‘opportunity for growth in the premium beer segment. The artisanal beer market started to be explored years ago by the now popular Beer Factory, a restaurant and brewery known for producing high quality beers, including some flavored and seasonal varieties, and that was later acquired by Comercial Mexicana, a major retailing company in Mexico that owns several chains of grocery retailers, as well as several restaurants. With this move, Comercial Mexicana diversified its offering in the foodservice market and introduced the Beer Factory beers in its several sales points - Costco, City Market and Comercial Mexi contributing to its position as one of the most popular craft beers in the country. This proved that artisanal beer had significant potential in the country, so other microbreweries started to follow this pattern; moving from on-trade offer to negotiating with retailers to increase its presence through the off-trade channel. The next craft beer sold at grocery stores soon after Beer Factory was jerva from Cerveceria Minerva; who subsequently emerged as one of the most important artisanal beer players, leading and uniting others to lobby the government to avoid the exclusivity contracts that Cerveceria Cuahutémoc Moctezuma and Cerveceria Modelo use in the traditional grocery channel Given the popularity of microbrews in the US, itis unsurprising that many of the independent breweries, such as Cerveceria de Baja California and Cerveza Mexicali, are located in the north of the country, targeting the border region, though there are now small breweries popping up in many other cities. In Mexico City's fashionable neighborhoods, dozens of restaurants and bars have appeared that feature extensive selections of artisanal beer and are extremely popular amongst young professionals. Some of the more popular artisanal beers, such as Minerva, Tempus and Mexicali, are increasingly becoming available through modern grocery retailers including Costco, Superama and Comercial Mexicana Page/sideBachelor of International Sales and Marketing Management Professionsbachelor International Handel og Markedsforing Market leaders looking to capitalize While most craft beers are produced by small independent breweries, such as Cerveceria de Baja California, Cerveceria Minerva and Andreau Primus, larger companies are trying to capitalize on the trend as well. Grupo Modelo is also trying to leverage this new trend by launching its own craft beer, recognizing the opportunity that craft beer presents. The beer is named Ideal and was launched in mid-2012 in both dark and light varieties (Ideal Azabache and Ideal As d'Oros). It is currently being distributed primarily through restaurants in the fashionable districts of Mexico City (Condesa, Roma, Polanco) and a limited number of off-trade establishments. Given Modelo's immense distribution network, if the beer catches on, it has the potential to become the top craft beer. Although small independent breweries cannot compete with the distribution power of the larger players, itis the independence and niche nature of craft beers that has driven their success. This gives opportunities to local brewers versus the market leaders, which are internationally owned, with Cuahutémoc Moctezuma, having been bought by Heineken in 2010 and Grupo Modelo, purchased by AB InBev in 2012. Moreover, small breweries are increasing in number, launching events, fairs and contests throughout the country to promote their products. These are becoming increasingly popular, particularly among young ‘consumers, who are the "heavy users’ of alcoholic drinks. Despite growth remains niche Though craft beer is on the rise in Mexico, the segment remains very niche, at less than 0.1% of the total beer market by volume. It is growing quickly, but will remain a niche segment in the future due to the higher unit prices of craft beers and stiff competition from Modelo and Cuauhtémoc Moctezuma, companies which have exclusivity agreements with most independent small grocers in exchange for discounts, or other incentives. ‘These exclusivity agreements limit the ability of artisanal brewers to promote their beers through off-trade channels, especially independent grocery retailers, an important channel for this product. Page/Side