PictureMario Garcia of Cucapá Brewing
Think back 1000 years ago to central Mexico, to the cold dry climates of the highlands where the agave plants grow. People made something called pulque out of agave sap – fermented, white, viscous, yeasty, sour, and considered the precursor of today's distilled tequila. Consumption was primarily limited to sacred ritual, until the Spanish arrived – bringing with them colonial domination and the dogma of Catholic faith. Consumption of pulque rose significantly, no longer limited to religious ritual, and as it became associated with the lower classes and a rise in crime was subsequently regulated by the ruling Spanish. Consumption of pulque exploded after Mexican independence in 1821, fueled both by deregulation and a sense of national pride, but by the 20th century had again declined due to a wave of European immigrants and that thing they brought with them: beer.

The Maya and Aztecs of the region were brewing corn-based fermented drinks before the Europeans arrived, but it was the German immigrants in Mexico who popularized the use of barley in brewing, creating a template for what we think of as Mexican beer today.

I have come across several websites (of questionable repute) which claim that beer brewing was first introduced to Mexico by the Spanish – by soldiers of Hernán Cortés - and that the first known right to brew European-style beer on a commercial scale was given to Spaniard Alfonso de Herrero around 1543. I have my doubts about this, though. In the regions of the world where grapes grow well (Spain, Italy, France, Portugal...), wine is usually the drink of choice (it is, after all, more difficult to make beer), and to the best of my knowledge, Spain doesn't have much beer brewing in their history. In addition, ingredients to make beer were scarce in Mexico at that time. Although I was unable to find a reputable source which described introduction of beer by the Spaniards, this is not to say that one doesn't exist.

Regardless, what is certain is the lasting European influence on the beers of Mexico today, particularly of the Germans and Austrians – although it was actually a couple of Swiss gentlemen who started the first lager breweries in Mexico: Bernhard Bolgard in 1845 followed by Agustin Marendaz in 1865. Particularly influential was Habsburg's control of Mexico in the middle of the 19th century with the reign of Austrian Ferdinand Maximilian – who, it is said, never traveled without his brewmasters (it's good to be king!). Perhaps Maximilian should have traveled with his body guards instead because his three-year reign did not end well for him. Brief as Maximilian's tenure was, it had a lasting influence on Mexican beer and from it, for example, we get today's Negra Modelo and Dos Equis Ambar, both Vienna-style dark lagers.

By the late 19th century, the beer industry was exploding in Mexico and prohibition in the United States further bolstered the industry, with new breweries popping up everywhere in Mexico as Americans came in droves across the border to drink the forbidden beverage. It was also around this time that the European brewers of Mexico started a smear campaign against native Mexican drinks such as pulque, claiming them to be “unhygienic”. Their foolish claims – for instance, that pulque was brewed with feces – seemed to have the intended effect and pulque consumption dropped to nearly zero while the popularity of beer continued to increase. This would only be the beginning of shady European tactics to control the Mexican beer industry.

Fast-forward to contemporary Mexico and you will see that European control over the Mexican beer market has only gotten worse, thanks in no small part to the corrupt Mexican government whose hands lie in the pockets of two huge foreign beer-producing giants which have engulfed and devoured all other, smaller breweries and used Mafia-like tactics to maintain the status quo - producing approximately 98% of all beer sold in Mexico. While Mexico represents a huge beer market, it should also be noted that these two giants – Cerveceria Cuauhtemoc Moctezuma (FEMSA) and Grupo Modelo – send 80% of their exports to the United States.

While I'm not trying to belittle the impact of the notoriously violent drug rings of Mexico by making a direct comparison between their tactics and the shady business tactics of the beer-producing duopoly in Mexico, one cannot deny certain parallels between the two institutions. For instance, both are driven by economics and have maintained their dominance through morally repugnant means. And both institutions happen to be – and in no small part – driven by the insatiable desires of Americans, who have created a strong market demand for which the Mexican people – or the Mexican craft brewers, in this case – pay the price. While we Americans naively vote with our dollars, turning a blind eye toward the corruption and devastation resulting from our direct financial support, there is something else we're not seeing. A storm that's simmering: a Mexican craft beer revolution. And stifled and stunted though it may be right now, it's important that we recognize it because with a little support from outside, David may be able to defeat Goliath.

But just what is David up against?

FEMSA started out in 1890 as the first large Mexican brewery, Cervecería Cuauhtémoc, and produces well-known Mexican beers such as Indio, Dos Equis, Tecate and Sol. In 2010, they were bought by Dutch producer Heineken, who now controls approximately 41% of the beer market in Mexico. The remaining 57% of the market is controlled by Grupo Modelo. Founded in 1925 and bought earlier in 2013 by Belgian firm AB-InBev, Grupo Modelo produces – among others – Corona, Modelo, Pacifico and Victoria.

While AB-InBev and Heineken (the first and third-largest beer producers in the world, respectively) may have enough money to pay the government up to $100,000 for a single license to sell beer, most of the restaurants, cantinas, brewpubs and small craft breweries – all trying to share a piece of the remaining 2% of the market – most often, do not. Why does the government charge so much money for a license to sell beer? Because AB-Inbev and Heineken want it that way.

These exorbitant price ensures not only that AB-Inbev and Heineken are just about the only ones who can afford to buy a license, but it also ensures ALL of the licenses will be available to them – so that when a new restaurant or cantina requests a license, the government simply sends them to Goliath, who then doles out the licenses under the strict conditions that these smaller companies not sell any of the competition's beer, nor produce their own.

The two European beer giants also offer financial investment and valuable equipment to new businesses in exchange for total exclusivity – meaning, these small businesses sign a contract that says they're not even allowed to speak to a competitor. And just to cover all their bases, AB-Inbev and Heineken also control the entire supply of Mexico's malted grain. In addition to all of this, tax laws are written to benefit large producers of cheap beer. While AB-Inbev and Heineken continue to get massive tax breaks, the government forces smaller producers to pay over 40% in taxes, a margin that leaves very little room for profit.

Despite these giant's attempts to excise all potential competition like weeds at the root, there is a growing craft beer scene in Mexico. The demand is there. And in certain locations near the border – like Baja, Ensenada, Tijuana, and Mexicali – where small breweries are able to more easily obtain supplies and to export across the border to San Diego, David is finding a way around Goliath. And now some of these small businesses are fighting back. People are starting to take risks by providing needed supplies from the U.S. and cantinas are increasingly breaching exclusivity contracts to provide craft beer to their customers. On top of that, the high taxes force many of these craft breweries to go underground, skirting government regulation entirely.

The operation of underground craft beer producers is unfair to a craft brewery such as Cucapá, who has been around for over a decade playing by the rules, paying legitimately for its own licensing, and paying taxes that cut deeply into profit. While Mario Garcia from Cucapá does not approve of the underground scene, even he is forced to admit that it may be better in the long run for the progress of Mexican craft beer by making it more accessible to consumers and thereby bolstering demand. Penetrating the market, exposing the public to craft beer, and changing the definition of beer according to a culture steeped in a history of big beer business and outside influences is not an easy thing.

But things seem to be headed in the right direction.

While all combined, craft beer only accounts for 0.64% of the Mexican beer market – but only a decade ago, microbreweries didn't even exist in Mexico. According to McClatchy DC reporting, fifty-six different craft beer brewers showed up to a gourmet trade show in Mexico City in September – most of which had been around for less than two years. The Association of Baja California Craft Brewers (ACABC) was formed in 2010 and has doubled in size every year since. The Baja Beer Fest, which was launched by the ACABC in 2011 has seen a huge rise in attendance and had three different cities listed for its 2013 festival. Despite all of this, the question remains whether the Mexican government will eventually embrace Craft Beer – or will remain spooning Big Beer under the sheets. Garcia believes that tax reform would be instrumental in advancing the craft beer movement in Mexico and has so far presented four different initiatives to congress to change the tax code. While congress has essentially tossed these aside, unable to see an advantage to supporting craft beer, Garcia doesn't think tax reform is too far off. And there may be future opportunities to pursue change through a government agency set up to protect tax payers.

There also remains the opportunity to reach out to local government. Garcia, among others, has been working for the past decade to influence city mayors and push for the development of craft beer-specific licensing. But this is still a hard sell since even local government officials receive campaign contributions from big business, and lobbying is more prevalent than ever in Mexico due to recent political changes yet still remains unregulated. Regardless, there seems to be some positive movement on a local level: Mexicali is incorporating craft beer into their downtown redevelopment plans and there are reportedly similar plans for Ensenada and Tijuana.

And then, there's SABMiller.

Not too long ago, many people in the Mexican beer industry thought that London-based SABMiller – the second largest brewery in the world – was poised to buy FEMSA, until Heineken took over the reigns. I'm not certain how that all went down, but what I do know is that SABMiller wants in to the booming Mexican beer industry. This puts them in a curiously – if tenuously – allied position with the budding Mexican craft beer industry – the difference being, of course, that SABMiller has the resources and the might behind them to do something about it.

In July, 2013 – teaming up with Primus and Minerva, two of the oldest microbreweries in Mexico – SABMiller filed a complaint with the Federal Competition Commission, which resulted in no minor victory: a ruling, to take effect within ninety days, would force FEMSA (Heineken) and Grupo Modelo (AB-Inbev) to limit their exclusivity contracts to 25% of what they currently are, thus allowing the majority of Mexican restaurants and cantinas – in theory – to finally sell craft beer. (Unless, of course, SABMiller buys up the other 75%).

Disappointing, though sadly not surprising, are the results of the ruling in reality. While small business owners can sell craft beer to their customers now, they first need to ask permission from FEMSA or Heineken, who may or may not respond to their request. Those who do get a response are told that they'll need to give up any equipment that was provided to them through the exclusivity contract, which they may be unwilling to do. So, according to Garcia, not much has changed, and Cucapá still holds the exact same number of contracts that it held ten years ago.

Even if this recent ruling proves insufficient to oust the empire of engulf-and-devour beer producing giants, Craft Beer will find other ways around the tyranny. Craft beer is, after all, by its very nature, revolutionary. Garcia, too, feels confident that there will be a point when demand for craft beer will grow – where it will be more valuable to a small restaurant or cantina to serve craft beer to their consumers than to take hand-outs from Big Beer.

“...my biggest question is, when is this going to happen?” asks Garcia. “I don't think it will happen fast enough. And I don't think it'll happen to a great extent, where we see more than nanobreweries – where we see important regional sales. I don't see that happening anytime soon in Mexico. It will happen. I don't know if I'll be alive to see it, but it will happen.”

To read more about the general history of beer in Mexico:

To Read more about the politics of beer in contemporary Mexico:
And for his experience and first-hand knowledge on the subject, much thanks to Mario Garcia of Cucapá Brewing and best of luck to him in all his future endeavors.

 


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04/03/2016 12:54am

Were the Maya and Aztecs of the region brewing corn-based fermented drinks before the Europeans arrived?


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