How Modelo Beat Bud Light After a Decade of Transformation

In America, more beers are paired with lime than ever before.

Mexican lager Modelo Especial surpassed Bud Light to become America’s best-selling beer even before the company faced conservative backlash in April over its collaboration with a transgender influencer. The country’s steadily growing Hispanic population is only part of the story.

Rather, what has put Modelo on a winning trajectory for much of this decade has been a growing preference among US consumers for imported, more expensive beers. 10-year antitrust agreement. and an effective marketing campaign aimed at attracting young non-Hispanic consumers to Mexican beer.

“Most people in the beer industry expected Modelo to overtake Bud Light at some point,” said Bart Watson, chief economist at the Brewers Association, a trade group representing more than 6,000 breweries in the United States. “The question wasn’t when it happened, but when it happened.”

After Bud Light held the number one spot for almost two decades, a change occurred in early June. In the four weeks ending July 8, Modelo accounted for 8.7% of U.S. retail beer sales, compared with 6.8% for Bud Light, according to Nielsen IQ data analyzed by consulting firm Bump Williams.

Bud Light’s ouster follows a conservative-led boycott that began when transgender influencer Dylan Mulvaney posted a video on Instagram on April 1 promoting the Bud Light contest. The company has since laid off two marketing executives and reported declining sales.

Bill Newlands, chief executive of Constellation Brands, which owns Modelo, told investors on an earnings call last month that beer’s rise to the top came “faster than expected.” Constellation’s beer business reported an 11% increase in sales and a 7.5% increase in shipments for the quarter ended May 31.

Constellation, which also owns Mexican beers Corona and Pacifico, is perhaps the biggest winner in the U.S. beer market as consumer tastes in alcohol have changed over the past decade.

Americans are drinking less beer than they used to, and the beer they’ve come to prefer is more expensive than Bud Light, Watson said. Imports such as craft beer and Modelo, as well as hard seltzer and canned cocktails, have benefited from the change at the expense of domestic brands, he added.

According to Nadine Sarwat, an alcoholic beverage analyst at market research firm Bernstein Autonomous, young drinkers tend to want something new, different, and usually more expensive than previous generations. This trend has continued for generations, and when lighter beers like Bud Light started gaining popularity in his 1980s and his 1990s, they were also more expensive than their competitors.

“You don’t want to drink what your parents drink,” Sarwat said.

Demographic changes also contributed to Modelo’s success. According to the Census Bureau, Hispanics will account for 19% of the U.S. population in 2021, up from 13% in 2000.

In addition, Mexican products are gaining “cultural appeal” among non-Hispanic consumers, Sarwat said. And it’s not just beer. The volume of tequila and mezcal (Mexican liquor) sold in the United States has increased by 273% from 2003 to 2022. According to the Distillers Council.

Mexico exports more beer to the United States than any other country. By 2022, the shipment volume will be seven times that of the Netherlands, which is the second largest beer importer in the United States.

Beer imports from Mexico doubled from 2013 to 2022, according to data from the Beer Association. During this period, Mexico supported the overall rise in US beer imports, while imports from other countries fell more than 25% of her.

In the past year, sales of Mexican beer have grown the most in states near the Canadian border, which tend to have smaller Hispanic populations, while states closer to Mexico have seen slower growth. 1 Nielsen IQ Analysis of on-premise sales.

However, Modelo has had greater success than other Mexican beers sold in the United States, such as Tecate and Dos Equiquis.

“This is proof that having a Mexican beer brand is not enough,” Sarwat said.

Anheuser-Busch InBev, makers of Bud Light, began noticing writing on walls ten years ago.

In 2012, the company sought to acquire Modelo and Corona brewer Grupo Modelo. The Department of Justice under President Barack Obama filed a lawsuit in early 2013 to block the deal, arguing that keeping Modelo Beer independent of Anheuser-Busch and MillerCoors was critical to maintaining a fair market.

Bill Baer, ​​who headed the agency’s antitrust division at the time, said Anheuser-Busch had sought the deal because of concerns about Mr Modelo’s rise. The parties reached a settlement in 2013 that allowed the acquisition to continue as long as another company (later Constellation) controlled Grupo Modelo’s U.S. operations.

“As a result in the marketplace, Constellation, as an independent owner, had every motive to promote Corona and other Modelo brands to the max,” said Baer, ​​now a visiting fellow at the Brookings Institution. “And that’s exactly what happened.”

When asked for comment, an Anheuser-Busch spokesperson pointed to the fact that Bud Light sold more beer in the U.S. than Modelo, citing its higher price point as a factor.

In the ten years since Constellation owned the Modelo, we have taken great care to refine the beer’s identity.

Jim Sabia, Constellation’s head of beer, said Modelo’s promotion struck a balance between maintaining Modelo’s credibility with its Hispanic constituency and attracting new consumers. In 2016, Modelo said,fighting spirit” marketing campaign.

Since then, Constellation has sought to position Modelo as the game-day beer. In 2017, the company sponsored the Ultimate Fighting Championship, renewing its contract with “First half of 8 digitsEvery year,” according to Sports Business Journal. Its identity differs from Modelo’s sister brand Corona, which Constellation has promoted as a beer to drink with friends on the beach.

“It takes a lot of time to truly find the essence of these brands, and when we finally get it, we stick with it,” Sabia said.

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