US embassy cable - 09GUADALAJARA238

UNCLAS SECTION 01 OF 02 GUADALAJARA 000238 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: SCUL, SNAR, ETRD, EIND, MX 
SUBJECT: NO SMALL BEER:  MICROBREWERY'S MARKETING CAMPAIGN RAISES 
ETHICAL DILEMMAS 
 
REF: 08 CIUDAD JUAREZ 0642 
 
GUADALAJAR 00000238  001.2 OF 002 
 
 
1. Summary: Cerveceria Minerva, a microbrewery in Guadalajara, 
used a notorious narco-saint as a successful marketing tool, 
garnering some high profile press. The strategy increased sales, 
and the new-found success placed the business at odds with an 
entrenched Mexican beer business. Narco-culture and oligopolies 
are woven tightly into Mexican society and they often benefit 
from loose legal controls and intrinsic corruption. End Summary. 
 
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A Culture, a Brand, and an Obstacle 
----------------------------------- 
 
2. Narco-culture generates fear and fascination among Mexicans, 
and its influence on Mexican life has increased during the 
ongoing drug-war. As a result, the gap between those who deplore 
it and those who admire it has widened. In December 2007, 
Cerveceria Minerva, a micro-brewery in Guadalajara, unveiled a 
new brand of lager beer in the Northwestern Mexican city of 
Culiacan, Sinaloa. In doing so, they offered an ironic 
commentary on this peculiar aspect of Mexican culture. They 
named the brand "Malverde" after a legendary Sinaloan "Robin 
Hood" figure, Jesus Malverde, who is commonly known as the 
patron saint of narcos. The objective was to ironically employ 
narco-culture to reach a specific audience. Despite press 
reports to the contrary, the director and principal investor in 
Minerva, Jesus Briseno, stated the intended audience was neither 
the narcos nor those who idolize them; but rather, those willing 
to laugh at this curious narco subculture. 
 
3. Veneration of legendary figures like Jesus Malverde, worship 
of saints like Santa Muerte or the "Death Saint," the popularity 
of narco bling jewelry, cell phone adornments, ostrich skin 
boots, or gangster SUVs, and the success of narco-corrido music 
(reftel) are all evidence of the influence of narco-culture in 
Mexico. Employing the ironic narco moniker, Cerveceria Minerva 
has had great success selling their product. In the process they 
crossed a beer-making giant. Their continued success is in 
jeopardy, not due to narcos angered by the cultural critique, 
but because they now confront a business oligopoly. 
 
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Building a Business 
------------------- 
 
4. Cerveceria Minerva began in 2004 with a specific objective: 
to offer a new variety of specialized, high quality beers, 
brewed in Mexico, to the Mexican beer consumer. It was an idea 
born abroad. After studying beer-making in Chicago, the 
principal owner returned to Guadalajara and, with his friends 
and partners, opened a restaurant and an attached brewery. They 
named the company after Guadalajara's famous icon of freedom, 
the goddess Minerva. The five owners/investors are young and 
they come from wealthy Guadalajara families. They have started 
other businesses, and of the five, most treat the beer business 
as a pastime. They are from a segment of Mexican society that is 
well educated, well traveled, and well versed in contemporary 
culture. They, and others like them, question and criticize 
certain aspects of Mexican life, especially corruption and 
narco-culture. The owners of Minerva are idealistic and proud of 
their nationality, and their pride is manifested in the mission 
of their company. After nearly five years in operation, 
Cerveceria Minerva is a member of a consortium of nearly twenty 
micro-breweries whose objective is to break open the beer market 
in Mexico and to provide a made-in-Mexico, top-shelf, microbrew 
product that is currently unavailable. 
 
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Skyrocketing Production 
----------------------- 
 
5. Although the brewery began as a small producer with only five 
partners and a few employees, its profits skyrocketed. By 2007 
the company increased production and sales by seventy percent. 
Due to the economic downturn, they experienced a slightly 
smaller increase in 2008; fifty percent. Although the economic 
crisis in Mexico continues, Minerva expects to increase profits 
in 2009 by a similar percentage. In March 2009, they contracted 
with an important retailer, Seven Eleven, to sell their 
products. They already have contracts with Wal-Mart and the 
Mexican grocery store chain Superama, selling everything except 
the Malverde brand. They have discovered that many prominent 
retail businesses do not want to be associated with Malverde due 
to press reports describing it as the "narco" or "blood" beer. A 
contract initiated in May 2009 with Crown Envases Mexico, 
Mexico's largest producer of aluminum cans, will further expand 
Minerva's business. When the Malverde brand is in cans Minerva 
will expand into the most profitable, low-cost, high-volume 
portion of the beer market. In addition, the company plans to 
begin exporting to a distributor in Los Angeles. 
 
 
GUADALAJAR 00000238  002.2 OF 002 
 
 
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Pressure from a Powerful Rival 
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6. Despite their successes, in May 2009, Minerva received their 
last shipment of malt and hops from their normal provider, 
Extractos y Maltas. The provider has a monopoly on malt and hops 
production and distribution in Mexico, and it is owned by 
Mexico's largest brewery, Grupo Modelo. According to Minerva's 
owner, Grupo Modelo refuses to provide Minerva with shipments in 
the future. The microbrewery has supplies sufficient for one 
month of production, and they are searching for a new malt and 
hops provider, possibly from the US. They requested USG 
assistance to identify new providers, and the Foreign Commercial 
Service will provide them a list of US malt and hops companies. 
Shipments from the US will be more expensive, but the owners 
claim it will be better quality and more reliable. Grupo Modelo 
presents an additional hurdle for the brewery; according to 
Briseno, it controls most of the distribution market in Mexico. 
Retailers who carry contracts with Grupo Modelo agree to not 
sell competitor's brands, and for that reason they are unwilling 
to work with Minerva. 
 
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Comment:  A Fine Line 
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7.  Minerva is not the first company to trade on the narco 
subculture in Mexico as a means of generating attention and 
sales, but they are among the most prominent. The hostility of 
their entrenched competitors is generated not by moral 
indignation, but rather by pure commercial self interest. The 
fact that an innovative young company felt that it had to take 
such a dramatic step in order to break into the market 
illustrates the continuing power of oligopolies in the Mexican 
economy; the fact that it appears to have succeeded demonstrates 
the pervasive presence of narco culture in many aspects of 
Mexican society. Consumers may be fascinated or repelled by this 
presence but they cannot ignore it, and they must wrestle with 
the ethical dilemmas involved. Is Minerva to be praised for 
tackling deeply entrenched interests or condemned for exploiting 
an image that costs thousands of lives annually? Time, and 
future sales, will tell. 
RAMOTOWSKI