Guatemala’s Miller time could be ‘white knight’ for national brewer

GUATEMALA CITY — Two of the world’s largest beer companies are girding for battle over Guatemala’s “cerveza” lovers.

The biggest brewer, Anheuser-Bush InBev, has been besieging Guatemala’s longtime national beer maker Cerveceria Centro Americana for years, as GlobalPost reported earlier this month.

Now, another huge conglomerate may be coming to the national beer maker’s rescue. SABMiller Plc, the world’s No. 2 beer brewer, and the Cerveceria announced Tuesday that they are forming a strategic alliance in Guatemala.

The Cerveceria will initially only distribute 355 ml bottles of Miller Genuine Draft, yet the companies plan to broaden the agreement to include other Miller offerings. The Cerveceria says with the deal it expects to gain an ambitious 20 to 25 percent of the country’s premium beer market.

The family-owned Cerveceria has struggled to compete since its Guatemalan monopoly was broken in 2003 by the Brazilian division of the major conglomerate now known as AB-InBev, and it has faced off multiple takeover attempts in the intervening years. Observers of the Cerveceria believe that it may be losing money, and the strategic alliance with SABMiller can be seen as a bit of a lifeline for the Guatemalan company.

AB-InBev only produces one beer in Guatemala, Brahva, a cheaper beer meant to compete directly with the Cerveceria’s core Gallo product. AB-InBev has been steadily gaining market share, and the Cerveceria's share has consequently fallen from 100 percent 10 years ago to as low as 70 percent now by some estimates.

Still, if the Cerverceria is seeking to dominate the premium market it faces stiff competition from AB-InBev’s Leffe and Stella Artois brands. In October, the Cerveceria launched a lighter version of its premium Monte Carlo brand.

The alliance with the Cerveceria fits squarely within SABMiller’s global plan. SABMiller is the third largest brewer in Latin America (the region accounts for 40 percent of its earnings growth since 2007), behind AB-InBev and Heineken. While AB-InBev has relied on a strategy of acquisition, SABMiller has sought to exploit niches for its already existing brands.

By introducing Miller Genuine Draft into new Latin American markets, SABMiller could be courting low-income buyers who still want to think of themselves as premium beer drinkers.

“They don’t think of themselves as poor. They just think they are temporarily out of money,” SABMiller Latin America President Karl Lippert told Quartz while discussing the expansion of Miller Genuine Draft in March.

For the Cerveceria, SABMiller represents potentially deep pockets and a thick portfolio of brands that can be shoehorned into the Guatemalan market. One next step for the companies could be to pursue a joint venture or for SABMiller to take a stake in the Cerveceria. SABMiller representatives have not answered questions about this possibility.

The alliance also underscores the ongoing feud within the Castillo family, which owns the Cerveceria. Two cousins, fed-up with the rest of the family, left Gallo to introduce AB-InBev’s Brahva into Guatemala in 2003. Since then, any relationship with AB-InBev has been anathema to Castillo family leaders.

With troubled family businesses, however, it’s not uncommon for “a white knight to come in,” Rob Lachenauer, partner and CEO at Banyan Family Business Advisors, said. The white knight is often able to provide new management and business solutions without getting involved in family politics.

The situation is not terribly unlike what occurred in 2008 when InBev merged with Anheuser-Busch, which was founded and owned by the Busch family.

It’s possible that SABMiller could be the Cerverceria’s white knight. Either way, the Cerveceria now finds itself reinforced against AB-InBev's onslaught.

Journalist Benjamin Reeves tweets @ReevesBenjamin.

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