Beer Wars

Those who have been hanging around Guatemala for a while now will have undoubtedly noticed the plummeting prices of that all-too-
precious commodity: cerveza. Even just over a year ago, you would be hard-pressed to find bars where you could buy a litre of beer for under Q30 (not including the infamous cantinas, of course). Walk around the centre of Xela now and you’d be hard-pressed not to notice all of the gigantic signs hung up outside bars attempting to lure you into their drinking holes with promises of beer for prices reaching under Q10 a litre. Last year, big events such as the Independence Day celebrations saw prices reach a record low of Q1 for a beer. Carry on at this rate, and soon the beer companies in Guatemala will be paying us to drink their beer (not altogether a bad prospect).

But no, these plummeting prices are not a concerted attempt of Guatemalan beer companies to turn the entire population into alcoholics, although we’re sure they wouldn’t complain if this was an unintended side effect. Behind the scenes, a fierce power play is at work involving one of Guatemala’s most powerful families and an ever-expanding behemoth of a global drinks company, with a grand prize none other than the hearts, minds and wallets of Guatemala’s beer drinkers – a group of people that, by our underestimate, makes up a rather large portion of the population. And this month’s edition of XelaWho is here to bring you all the gory details.

The Cervecería Centro Americana S.A, most associated with the iconic rooster head to be found on beer bottles, tables, chairs, t-shirts, beer mats, concert stages and even atop giant Christmas trees, represents one of Guatemala’s most enduring and easily recognisable brands. Gallo is Guatemala’s oldest produced beer – going into production over 100 years ago way back in 1896. It is also owned by one of Guatemalan’s wealthiest and most powerful families, the Castillos, a name which you are guaranteed to see on those lists of “the Oligarch families that run Central America.”

Until just a few years ago the Cervecería Centro Americana had held an almost complete monopoly on the production and sale of beer in Guatemala for over a century. And all that your Economics 101 professor taught you about the dangers of monopolies proved to be no less true in this case. They held prices unreasonably high compared to the prices of goods throughout the rest of the economy, but just low enough in order to prevent rioting in the streets. They used their sheer market power to aggressively oust any sign of potential competitors, no matter how small. Even micro-brewers making a few kegs of beer for a local bar would run the risk of receiving a visit from Gallo´s legal team who could prosecute them on any number of grounds given that the Cervecería held not only a monopoly on beer, but also on beer bottles, beer taps, beer fridges and beer kegs.

That monopoly held until 2003 when the Brazilian Company AmBev entered the Guatemalan market with their signature Brahva beer. AmBev had recently been formed by a merger between two of Brazil´s biggest breweries and, brimming with newfound confidence, it set its sights firmly upon the conquest of Central America´s beer drinkers. 

Breaking the monopoly of the Cervecería Centro Americana was no easy task, but their persistent efforts have been gaining traction in recent years, in no small thanks to a series of subsequent mergers that have transformed the company into the global behemoth that it is today. Now called Anheuser-Busch InBev (after a 2004 merger with Belgium´s Interbrew and a 2008 merger with the United States´ Anheuser-Busch), it is the world´s largest brewer with a 25% share of the global market and annual revenues of over $1 billion. They are responsible for the production of more than 200 brands, including Budweiser, Corona, Stella Artois, Beck´s, Quilmes (Argentina´s “national” beer) and Presidente (the Dominican Republic´s national beer), and they show no signs of slowing up their quest for global domination. There are even reports of it merging with the second largest brewery, SAB Miller – producers of beers such as Peroni, Grolsch, Fosters and Miller.

The sheer size of Ambev has given them the luxury of being able to drop their prices to those such as the ones we are seeing in Guatemala today, and this has been their chosen strategy for gobbling up national beer companies, who have tended to simply give up after failed attempts to battle with such fierce competition and accept the more than generous offers made by Ambev.

In just a few short years, Ambev have gained control of 30% of the Guatemalan beer market, in the process forcing the Cervecería Centro Americana to bring out their budget beer Dorada Ice in an attempt to compete with Brahva´s rock-bottom prices (somewhat unsuccessfully, we may add: Brahva is still easily the cheapest beer in the country, and any attempt made by Dorada Ice to catch up has been met by further price reductions from Ambev).

Neither side show any sign of giving up the fight quite yet. And why should they? The latest statistics show that Guatemala has one of the fastest growing markets for beer in the Americas – growing 7% in the last 3 years (surprised? We thought not). AmBev for their part are responding by pouring even more money into the market: in October last year, they announced an investment of $100 million for the next three years. The Cervecería Centro Americana, meanwhile, is relying on the staunch national pride of Guatemalans to maintain their market dominance – just reading their slogan says it all: “We Believe, Trust and Invest in Guatemala”.

The beer war has led to a crisis of consciousness for many Guatemalans, with their national pride pulling them in one direction and their wallets in the other. Most will be quick to dismiss Brahva, unabashedly comparing its taste to things such as “orina de gato” o “acido de batería” (just a few of the comparisons we´ve heard). But when the time comes to forking out for a cold one, the well-known tacaño mind-set often overrides national pride as they sheepishly ask for the more economical option of Brahva.

Regardless of whether your own personal preference is to give your money to Central American oligarchs or to one of those evil global TNCs intent on world domination, neither side shows any sign of giving up anytime soon, so we can all enjoy these bargain prices for at least the foreseeable future. Salud to that!

 

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