Carlos Alvarez: My Biggest Mistake
Carlos Alvarez is chairman and CEO of the Gambrinus Co., with headquarters in San Antonio and revenues of more than $500 million.
Our business is beer. We import Corona from Mexico and Moosehead from Canada. We also own Pete's Brewing and are brewers of Bridgeport, in Oregon, and we own Shiner here in Texas. When we first introduced Corona to the U.S. market, it enjoyed a very, very positive reception. Sales grew incredibly fast during the mid-1980s. It seemed that nothing could stop that growth, and we became overconfident of the brand's ability to continue it.
Total Corona sales went from 5 million cases in 1985 to 13 million in 1986 and then to more than 20 million the following year. We were dazzled and very optimistic. We weren't conducting significant market testing at the time, so we didn't know well who our consumers were or why they were drinking Corona. Had we been more attentive, we might have seen sooner that the customer base had not solidified. A great number of consumers were sampling our product, but few were becoming loyal customers. A lot of people wanted to see what this phenomenon Corona was all about. They would try us and then just go back to a regular domestic beer, like Coors.
Sales eventually slowed down, and then in 1988 they deteriorated rapidly. In Texas, for example, we went from selling 3 million cases a year to just one million. Also, we started to see some pretty intense competitive pressures from the likes of Miller Brewing, which launched Miller Genuine Draft in a clear long-necked bottle just like ours.
In 1991, Congress raised the federal excise tax on beer from 65¢ to $1.30 a case. I decided that we had a problem with our price/value proposition. By that point customers were not all that interested in being loyal Corona drinkers. So we decided to become the only seller of beer, imported or domestic, to absorb the tax and not raise prices.
We communicated our strategy to our distributors and retailers and put full-page ads in the Wall Street Journal and USA Today to inform consumers. Corona sales grew 4% in 1991, the first increase we'd seen in four years.
From 1992 until today, we've had uninterrupted double-digit annual growth. Corona became the #1 U.S. import in 1997, overtaking Heineken.
Because of the difficult experiences of the '80s, we now do market research from every angle to make sure that we don't miss any signs of trouble. When everything is positive and everybody is saying great things about your product, you don't think you need to look into the situation much more closely. That's a big mistake.
We were not necessarily complacent, but there were things out there that we should have seen sooner and more clearly. We should have been more attentive and less optimistic. We learned the hard way that sometimes you can be too successful for your own good. --Written with Mike Hofman
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