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Heineken-Modelo Beer Probe Nears Mexico Agency Decision

A worker closes the door of a delivery truck operated by Cuauhtemoc-Moctezuma, a subsidiary of Heineken NV, in Mexico City on June 6, 2013. Photographer: Susana Gonzalez/Bloomberg
A worker closes the door of a delivery truck operated by Cuauhtemoc-Moctezuma, a subsidiary of Heineken NV, in Mexico City on June 6, 2013. Photographer: Susana Gonzalez/Bloomberg

Heineken NV and Grupo Modelo SAB, the dominant brewers in Mexico with brands such as Dos Equis and Corona, are nearing the end of an almost three-year-old government antitrust probe.

Mexico’s competition regulator gave itself another 15 business days to decide whether exclusive beer distribution agreements held by the two brewers are anticompetitive, meaning a ruling is likely around the end of the month.

The Federal Competition Commission, which held a closed-door session on the case June 3, made the announcement on its website yesterday without providing more details.

Modelo and Heineken control close to 98 percent of the market in Mexico, according to an analysis from Barclays Plc, and pay to have exclusive distribution at privately owned mom-and-pop retailers and numerous restaurants. SABMiller Plc, the world’s second-biggest brewer, brought a complaint against the practice in 2010 for the second time, saying these agreements blocked access for other brewers.

Any change to Heineken and Modelo’s current exclusivity agreements “would theoretically open up the market a little bit as SABMiller and other brewers outside the Heineken/ABI duopoly would find it easier to sell some of their brands,” Eddy Hargreaves, an analyst at Canaccord Genuity in London, said today. “But, because of their huge scale advantage in the market, the big two would likely find other ways to exercise their dominance through increased consumer marketing, sponsorship, and promotions.”

Growth Markets

Brewers including SABMiller are racing to expand into fast-growing emerging markets such as Mexico as sales in Europe and the U.S. stagnate. Amsterdam-based Heineken, the third-largest brewer, bought into Mexico with the purchase of the beer unit of Fomento Economico Mexicano SAB in 2010, giving it brands including Dos Equis, Tecate and Sol.

Anheuser-Busch InBev NV, the world’s largest brewer, this week completed the $20.1 billion purchase of the 50 percent of Modelo it didn’t already own.

SABMiller is “encouraged by the commission’s deliberation over this significant matter involving anticompetitive activities,” Richard Farnsworth, a spokesman for the London-based company, said yesterday in an e-mailed statement.

Marcela Cristo, a spokeswoman for Mexico City-based Modelo, the brewer of Corona, and Marianne Amssoms, a spokeswoman for Anheuser-Busch InBev NV, declined to comment.

Hugo Loya, a spokesman in Mexico City for Heineken, also declined to comment.

Heineken shares rose 1.6 percent to 53.33 euros at 2:07 p.m. in Amsterdam. SABMiller was down 0.3 percent in London at 3,270 pence, while AB InBev added 1.3 percent to 69.94 euros in Brussels. Modelo climbed 1.3 percent in Mexico City yesterday.

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