USA: Gambrinus’ shipments of Corona dropped 5%, rival Barton increased imports by 16%

The shortage of Corona Extra and Corona Light has created a "dire situation" where the No. 1 import is losing tens of thousands of case sales each week, said Don Mann, market group general manager for San Antonio, Texas-based Gambrinus Company, which imports and markets the Grupo Modelo brands in eastern markets, Brandweek released August 25.

The shortage has become acute during August and more so apparently in the Gambrinus markets than in the West territories served by Barton Beers, Chicago. Some large markets are saddled with zero inventory, claims Mann, and are waiting for shipments from Modelo. An upstate New York retailer reports that his stores were out of Corona Extra for 10 days before finally receiving a pallet delivery earlier this week. He also just started to receive six-packs of 7-ounce bottles after being out all summer and hasn't had any shipments of Corona Light for weeks. Various Eastern wholesalers also claim their stocks are low or depleted. The cause is a bottleneck with the production of long neck bottles, perhaps a glass shortage or a problem with the label-painting operation.

"They haven't really given us more explicit information than that," said Mann, referring to Grupo Modelo. As early as mid-May, the Mexican brewer sent letters to distributors and some retailers warning that it was working to fix the glassware production glitch.

"The question is why would such a situation persist if it is true, that it's one vendor with a sourcing issue," said Mann. "This issue is costing everybody a lot of money. There's bottle-production capacity available all over the world and why, with the stature of a brand like Corona, would you allow this sort of problem to continue?"

Procermex, Grupo Modelo's San Antonio-based arm, did not respond to a request for comment.

The relationship between Gambrinus and Grupo Modelo began turning sour two years ago when the Mexican brewer sought to activate a 2006 termination clause in its contract, which expires Dec. 31. Gambrinus, which had grown the Modelo business by 12% last year, fought the move. But the dispute was settled in March by International Chamber of Commerce arbitrators who ruled in favor of Modelo. The brewer recently formed a 10-year joint venture with Barton, making that company the sole importer of its portfolio, including Modelo Especial, which is making a bid to surpass InBev's Labatt Blue as the No. 4 import by year’s end. The arrangement will give Modelo a greater cut of U.S. profits, which currently are split with Barton and Gambrinus.

Mann said the shortage is affecting Gambrinus disproportionately because the shipments it receives from Modelo for the year so far are down 5% versus the comparable 2005 period, while brewery shipments to Barton are up 16%. Despite that decline, Gambrinus sales of Modelo brews are up 15%. Gambrinus typically handles about 59% of Modelo shipments to Barton's 41%. A Barton spokesman could not confirm the shipment numbers. He did note that Corona inventories are tight in some Barton markets but those situations are being managed by filling in gaps with quick shipments or deliveries of Corona in cans. The Chicago company sent a May memo to customers telling them that it did not anticipate allocating Corona shipments but to expect lower working inventories from month to month.

Meanwhile, distributors of Femsa brands, which are handled by Heineken USA, see an opening to get imports like Sol and Tecate into the shelf space that otherwise would be occupied by the Corona family.

"We're having our retailers give their customers who can't find Corona in their store a nice cold bottle of Sol to bring home and try," said a Pennsylvania wholesaler. "They tell them that Sol is $4 a case cheaper. If I can get just 2% of Corona's business, I'll be dancing in the aisles."

Corona Extra posted the largest shipment increase, 8.5%, among the top ten beer brands last year, per Beer Marketer's Insights. Case sales are up 9.7% in grocery, drug and mass outlets (excluding Wal-Mart) and Corona Light sales are ahead by 10% for the year ended June 18, per Information Resources Inc.

"We were having a great year and we wanted to finish the last year of our contract on an upbeat note but the fact of the matter is our performance is being curtailed by our supplier," said Mann.

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