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Dutch company Heineken beats Mahou in the battle for the Spanish market

Teresa Sánchez

The battle between two beer giants for the Spanish market is finally beginning to yield a clear winner: Dutch multinational Heineken, which owns Cruzcampo. In recent months, the company has stolen several of Mahou-San Miguel's big clients, such as Barra de Pintxos and, more importantly, Restalia, which owns the franchises 100 Montaditos, La Sureña and burger chain TGB.

Moreover, its future growth outlook is enabling it to land several major contracts, such as Andalusian company Taberna de Volapié, and it also has an exclusivity agreement with the brand's chains, including Gambrinus, Cruz Blanca breweries, Vía Birra Italian restaurants and Dublin House Irish pubs. Although Mahou-San Miguel is still a leader in Spain with 37% of the market, it is gradually losing ground to its biggest rival.

Heineken's performance in the last year has not yet been released, although the company did announce at its global earnings presentation that sales in Spain declined slightly in 2013, much less than the drop registered by Mahou. Moreover, and despite the situation, Heineken was able to boost sales volume, allowing it so slowly take over its rival's market share.

According to industry sources, in recent years Mahou has been one of the main parties responsible for triggering price wars in the sector, as it reduced its margins to almost nothing to maintain contracts such as Restalia, which it lost in the end. "It faces a tough situation because, in addition to the impact on its P&L, its price strategy is not working, and every day the company is losing out on new clients", according to sources.

Mahou-San Miguel's revenues dipped by 1.9% in 2012, to 1.173 billion euros, and last year's performance was even worse. Revenues tumbled 4.6%, to 1.118 billion euros, due mainly to the shift in consumers from the hospitality to the food segment, where the company is weaker, according to recent statements by its general director, Alberto Rodríguez-Toquero.

In view of its unstoppable slide in Spain, Mahou-San Miguel group has implemented a diversification and growth strategy in international markets. The objective is clear: to reduce its dependence on Spain at all costs. Countries other than Spain currently account for 13% of its revenues, a figure the company aims to double in just two years.

"Our goal is for international revenues to account for around 25% of the total by 2017, which would represent notable progress, since they accounted for 8% five years ago", said Rodríguez-Toquero during the annual earnings presentation.

Outside Spain, Mahou has made some safe bets, such as signing a sales agreement with Wal-Mart stores in Florida (US); however, the bulk of its strategy is focused on countries where there's little beer-drinking culture and per capita consumption is currently very low.

For example, the company has entered India, where it has established its first subsidiary outside Spain after acquiring the remaining 50% of Arian Breweries & Distilleries just a few weeks ago (it bought the other 50% two years ago).

The problem is that beer consumption in India is one of the lowest in the world (1.5 liters per person per year), although in total it's equivalent to half of the Spanish beer-drinking market (47.5 liters per person), since India has a population of almost 1.3 billion.

Mahou-San Miguel is also focusing heavily on China, where annual per capital consumption is barely 4 liters and competition is much stronger, as most international beer brands already operate there, including Philippine company San Miguel Corporation. Mahou is now studying its options and is aware that this strategy is very long term and that introducing a new brand requires marketing actions that will be extremely expensive.

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01/08/2017