The Culprit in Mexico’s Beer Shortage Isn’t Just Supply. It’s Demand

Date: Friday, July 8, 2022
Source: Bloomberg

Mexican beer sellers who’ve struggled through bottle and can shortages are facing a new challenge keeping their shelves stocked: robust demand.

Plummeting sales during the pandemic followed by now-rebounding purchases have created a whiplash effect and another round of supply-chain strains. That’s pushed prices higher and sent stores and their customers scrambling to ensure they don’t run out in a country that Kirin Holdings Co., the Japanese beer maker, ranked fifth worldwide in total beer consumption in 2020.

At Storybird, a distributor of Heineken beers near Mexico City, the sales manager has spent the past few months figuring out how to replenish his thinning stocks. The first beer to disappear was the 1.2-liter Dos Equis, whose dark green glass became hard to source. Then big bottles of Heineken and Indio became hard to get.

Shipping hubs in Mexico State or in Veracruz offered other beers made by the same parent company to make up for the gap, but clients still called to complain.

“The first sign, the first red flag, was in February, with the XX Lager,” said Ricardo Leon, 40, the Storybird manager. “There are days when we don’t meet our quota and we have to find a way to meet it. You bust your brain saying, ‘What do I do?’”

The price of Victoria and Corona beers, which are made by Grupo Modelo -- the other beer giant in Mexico and property of AB InBev, went up 24% from late May to early June, according to a survey taken at supermarkets and wholesalers by El Financiero newspaper.

Earlier this week, a 12-pack of Negra Modelo regular cans was advertised for 216 pesos, or $10.46, on the Modelorama Now delivery site. But a recent attempt to try and get it delivered to a Mexico City location found it was sold out -- leaving customers to settle for Corona Light, Victoria, or a mango-flavored Vicky beer.

Ivan Duran Gonzalez, 40, who runs a brick-and-mortar Modelorama store in the city of Zacatecas, saw customers panic-buy. Sales usually rise in the summer, but he was surprised when one patron bought 50 cartons. Others who usually bought a single 24-pack instead doubled up.

“They’ve told us that the shortage is because of the high demand, because everyone wants beer now,” he said, adding that in 15 years in business, “it’s the first time I’m seeing something like this.”

Heineken Mexico said in June that it would invest 1.8 billion pesos in a can-making plant in Meoqui, Chihuahua, near the US-Mexico border, due to growing demand. Last year, Grupo Modelo announced the expansion of its glass plant in Veracruz.

Both Grupo Modelo and Heineken Mexico declined to comment.

Smaller beer producers have started to buy large quantities of bottles together to make sure they are not elbowed out of the market. Twenty companies affiliated with the Mexican Independent Craft Brewers Association, known as Acermex, bought 365,000 glass bottles together over the past year from a single Mexican provider, said director Cristina Barba Fava.

“Aside from the shortage of aluminum and glass, there’s a shortage of malt,” Barba said. “Our products continue to be available, but they’re more expensive. We’ve found a way around the lack of bottles and cans, but we’re talking about an increase of 20 to 25% of our costs.”

Some of the supply-chain snarls have started to sort themselves out.

Jose Ramon Ruiz, 46, who supplies malt imported from Germany and the US to craft beer companies in Mexico, said improvements to shipping now means he no longer has to wait three months for products. Now he puts in orders less than two months before he needs to replace inventory, since a container takes only three weeks to arrive from Europe.

He suspects high demand, both domestically and internationally, is more to blame for the current beer woes.

“When there weren’t enough cans, the natural thing for beer-makers to do was substitute them with bottles. You reach a point of maximum consumption of bottles, and the national makers do not have the capacity,” he said. “There is a question about the availability of raw materials, but I think there is more of an increase in demand than a decline in supply.”

 

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