Source: https://www.chicagotribune.com/
By JOSH NOEL
MAY 13, 2020
Chicago beer drinkers could see a shortage of popular imported Mexican brands as soon as next week due to an ongoing shutdown of Mexico’s beer industry.
Most immediately at risk are the brands owned by Heineken USA, including Dos Equis Tecate and Bohemia.
Should the shutdown persist, beers owned by Constellation Brands – which include Modelo Especial, Corona and Pacifico – may also be in shorter supply by summer.
When Mexican beer production was paused in early April due to that country’s government not declaring brewing an “essential” industry – as it has been deemed in the U.S. – observers predicted it would be resolved quickly or wouldn’t translate into empty store shelves.
However, the shutdown has endured. The Mexican government has said brewing can begin next week only in the places where COVID-19 has been curbed.
While Heineken has paused brewing in Mexico, Constellation has said it continues to brew for the U.S. market at a reduced capacity. However, how much beer Constellation is making and importing to the U.S. remains unclear.
Constellation did not respond to a request for comment.
Dos Equis, Tecate and Bohemia are believed to be limited to the stock on hand in the Chicago area as multiple beer distributors said they do not expect shipments of those brands for the foreseeable future.
Heineken USA did not respond to a request for comment.
Beer Business Daily reported Monday that distributors nationally have been told by Jim Sloan, sales chief of Heineken USA, that certain beers in certain packages “may not be available for ordering at certain times.”
That has included six- and 12-packs of Dos Equis bottles, 7-ounce Dos Equis bottles in four- and six-packs and 7-ounce bottles of Tecate Light, according to Beer Business Daily.
The issue has reached a crucial junction, said Harry Schuhmacher, editor and founder of Beer Business Daily.
“If it lingers, it will be a problem and could be a huge issue,” Schuhmacher said. “It’s a big risk for Heineken and Constellation, but especially for Constellation.”
While Heineken is a diverse company with breweries around the world – including the Lagunitas brewery in Chicago – Constellation’s beer business, which is based in Chicago, is rooted almost entirely in making and importing Mexican beer to the U.S.
A Chicago liquor store owner who did not want to be identified due to the sensitivity of the situation said the effects are already being felt locally, especially with regard to brands owned by Heineken USA. Any drastic decrease in product might force customers to switch the Budweiser or Miller, the store owner said.
Last week, Constellation put its brands on allocation to local distributors, which means there is a measured flow of the beer moving through the system rather than the usual limitless supply.
Being “on allocation” is common in the craft beer and whiskey worlds, where volumes are smaller and the most popular brands can’t keep up with demand. White Claw hard seltzer has been on allocation for more than a year.
In a report issued last week, Wall Street analyst MKM Partners downgraded Constellation’s stock to a “sell” rating due to the possibility of beer shortages, predicting “the breadth of (Constellation) U.S. out-of-stocks will increase through the end of June.”
In the report, MKM’s Bill Kirk said Constellation needs 40 days to brew and ship most beer. If the company “can’t increase production by mid-May, July could feature wide out-of-stocks,” Kirk said.
Mexican imports have become a formidable segment of the U.S. beer industry. Modelo Especial is the nation’s fourth-highest-selling brand with more than $618 million in sales in 2020 through April 19, according to Chicago-based market research firm IRI. Corona is the nation’s seventh highest-selling brand and Dos Equis is 16th.
Exacerbating the shortfall is a spike in beer sales since COVID-19 stay-at-home orders began in March. Modelo Especial sales were up 23%, Corona sales were up 15% and Dos Equis sales were up 13% for the four-week period ending April 19, according to IRI.