More beer in America is paired with lime than ever before.
The story of how Modelo Especial, a Mexican lager, overtook Bud Light as America’s best-selling beer predates the conservative backlash Bud Light faced in April over its partnership with a transgender influencer. The country’s ever-growing Hispanic population is only part of the story, too.
Rather, the factors that, for the better part of a decade, set Modelo on its successful path included an increasing preference among American consumers for imported, more expensive beer; a decade-old antitrust deal; and effective marketing campaigns aimed at attracting young, non-Hispanic consumers to Mexican beer.
“Most people in the beer industry thought Modelo would overtake Bud Light at some point,” said Bart Watson, chief economist for the Brewers Association, a trade group representing more than 6,000 American breweries. “It’s a question of when, not if.”
The move took place at the beginning of June, after Bud Light held the No. 1 spot for about 20 years. In the four-week period that ended July 8, Modelo accounted for 8.7 percent of retail beer sales in the United States, compared to Bud Light’s 6.8 percent, according to Nielsen IQ data analyzed by consulting firm Bump Williams.
The expulsion of Bud Light follows a conservative-led boycott that was set in motion when Dylan Mulvaney, a transgender influencer, posted an Instagram video on April 1 promoting a Bud Light contest. The company fired two marketing executives and reported falling sales.
In an earnings call last month, Bill Newlands, the chief executive of Constellation Brands, which owns Modelo, told investors that the beer’s rise to the top happened “sooner than we expected.” Constellation’s beer business reported an 11 percent increase in sales and a 7.5 percent 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 American beer market, as consumer tastes in alcohol have changed over the past decade.
Americans are drinking less beer than ever before, and the beer they prefer is more expensive than Bud Light, Mr. Watson said. Craft beers and imports, such as Modelo, as well as hard seltzers and canned cocktails, have benefited from that change at the expense of domestic brands, he added.
Younger drinkers tend to want something new or different, and often more expensive, than previous generations, said Nadine Sarwat, an alcoholic-beverage analyst at Bernstein Autonomous, a market research company. That trend has been going on for generations: When lighter beers like Bud Light started having a moment in the 1980s and 1990s, they, too, were more expensive than competitors.
“You don’t want to drink what your parents drink,” Ms. Sarwat
Changing demographics also contributed to the success of the Model. Hispanics will make up 19 percent of the US population in 2021, up from 13 percent in 2000, according to the Census Bureau.
At the same time, Mexican products have gained “cultural appeal” among non-Hispanic consumers, Ms. Sarwat And it’s not just beer: The amount of tequila and mezcal — Mexican liquor — sold in the United States will increase 273 percent from 2003 to 2022, according to the Distilled Spirits Council.
Mexico exports more beer to the United States than any other country right now. By 2022, it shipped seven times the volume of the second-highest US beer import source, the Netherlands.
From 2013 to 2022, the volume of Mexican beer imports will double, according to data from the Beer Institute. Mexico led the overall growth in US beer imports during that period: Imports from everywhere dropped by more than 25 percent.
The biggest growth in Mexican beer sales over the past year has been in states closer to the Canadian border, which tend to have lower Hispanic populations, while growth in states closer to Mexico has lagged, according to a Nielsen IQ analysis of on-premise sales.
Modelo, however, has enjoyed more success than other Mexican beers selling in the United States, including Tecate and Dos Equis.
“That’s proof that just having a Mexican beer brand is not enough,” said Ms. Sarwat
Anheuser-Busch InBev, the maker of Bud Light, began to see the writing on the wall a decade ago.
In 2012, the company sought to acquire Grupo Modelo, which makes the Modelo and Corona. The Department of Justice under President Barack Obama sued to block that deal in early 2013, arguing that keeping Modelo beers independent from Anheuser-Busch and MillerCoors, the two major American beer companies, was critical to maintaining a fair market.
Bill Baer, who headed the agency’s antitrust division at the time, said Anheuser-Busch sought the deal because it was concerned about Modelo’s rise. The parties reached an agreement in 2013, allowing the takeover as long as a different company, which became Constellation, controlled Grupo Modelo’s US operations.
“The result in the market was that Constellation had every incentive as an independent owner to really promote the hell out of Corona and the other Modelo brands,” Mr. Baer, now a visiting fellow at the Brookings Institution. “And that’s exactly what happened.”
Asked for comment, an Anheuser-Busch spokesman pointed to the fact that Bud Light sells more beer by volume in the United States than Modelo, which owes part of its sales to its higher price point.
In the decade since Constellation has owned Modelo, it has worked diligently to refine the beer’s identity.
Promoting Modelo is a balancing act of maintaining its authenticity with its Hispanic base while inviting new consumers, said Jim Sabia, head of Constellation’s beer division. In 2016, Modelo launched its first English-language advertising push, with “fighting spirit” marketing campaign.
Since then, Constellation has sought to position Modelo as a game-day beer. In 2017, it became a sponsor of the Ultimate Fighting Championship, a deal it renewed and in “eight numbers are low” annually, according to the Sports Business Journal. That identity contrasts with Modelo’s sister brand, Corona, which Constellation promotes as a beer to drink on the beach with friends.
“It takes a lot of time to really find the essence of these brands,” Mr. Sabia said, “and when we finally get it, we stick with it.”
