FEMSA: A tumultuous 130+ year long history
FEMSA: A tumultuous 130+ year long history
1890 - The beginning as Cervecería Cuauhtémoc
FEMSA has a >130 years long history and is Mexico’s 4 th largest listed corporation by market value (after Walmex, America Movil and Grupo Mexico). Its roots go back to the founding of the brewery Cervecería Cuauhtémoc 1890 in Monterrey which over many decades transformed into today’s conglomerate.
Five entrepreneurs from five families: Francisco Sada Gómez, José A. Muguerza Crespo, Isaac Garza Garza, José Calderón Penilla and Joseph M. Schneider started the brewery with $5k in capital, a workforce of 70 people and the Carta Blanca brand. Today, the brewery has >16k employees and descendants of the founding families control FEMSA to this day through a voting trust. For most of its history, one family has provided the CEO who reported back to the other four families represented at the board level.
In the 1900s and again in the 1980s, FEMSA went through a period of vertical integration, diversification, followed by a restructuring and refocusing of activities. In the 1900s, Cervecería Cuauhtémoc established its own glassworks plant to supply bottles, a steel mill to supply crown caps, a malt production facility and a corrugated cardboard plant after the brewery replaced wood bottle crates with cartons.
During this period, these operations were part of what was known as the Monterrey Group, which besides the core beer operations also included interests in a bank called Banca Serfin. The bank grew into Mexico’s third largest bank before the nationalization of all commercial banks happened during the peso devaluation in 1982. Another noteworthy acquisition was the takeover of a small regional brewery in Tecate, Baja California in 1954. The newly acquired brand “Tecate” was subsequently rolled out nationwide and today is Mexico’s #2 beer by volume sold after Corona.
1970 - 1980: A prosperous decade followed by a near-death moment
The 1970s and 80s turned out to be hugely important decades for FEMSA for the following reasons: In the 1970s, the company prospered. It was headed by José Calderón Muguerza (the son of co-founder José Calderón Penilla) and the two Garza Sada brothers Eugenio and Roberto (both MIT graduates and sons of co-founder Isaac Garza Garza). In a tragic turn of events, Eugenio Garza Sada was killed 1973 in a kidnapping attempt by Mexican left-wing guerrillas when his bodyguards put up resistance. Without Eugenio’s unifying influence on the ever more complex Monterrey Group, the company was split into two main units ALFA and VISA in 1974. While ALFA received the steel and packaging operations, VISA retained the brewery and Banca Serfin. VISA became the predecessor of FEMSA. Eugenio Garza Lagüera (son of the assassinated Eugenio Garza Sada) became Chairman of VISA and accompanied its IPO in 1978.
The prosperous 1970s were followed by the disastrous 1980s when the freshly IPOed VISA headed to a near death moment because of too much debt. Inspired by Tom Peters‘ book „In search of Excellence“ VISA engaged in a spree of leveraged buyouts of dozens of unrelated businesses. By 1981, its interests had grown to include construction businesses, real estate, tourism, animal feed, canned food, plastics, flowers, quick service restaurants, cemeteries and fishing joint ventures besides its core beer and banking operations.
One noteworthy acquisition from that era is VISA‘s acquisition of the Coca-Cola bottling operations in Mexico City and the Southeast region of Mexico for $60m (a predecessor of KOF). When oil prices began to fall in 1981, Mexico went into a steep recession and severe debt crisis. VISA found itself overlevered and was forced to sell off ~70 subsidiaries to pay down as much debt as fast as possible.
…
The full PDF is available online here* (*by clicking the link, you confirm your status as a QUALIFIED INVESTOR) and QUALIFIED INVESTORS resident or domiciled in Germany can subscribe for full articles here.
This document is for informational purposes only. It is no investment advice and no financial analysis. The Imprint applies.