More beer is being mixed with lime in America than ever before.
The story of how Mexican lager, Modelo Especial, overtook Bud Light as the best-selling beer in the US is preceded by the stereotypical backlash that Bud Light faced in April over its collaboration with a transgender influencer. The country’s ever-growing Hispanic population is only part of the story.
Rather, the factors that, for the most part of a decade, kept Modelo on its winning path included a growing preference among American consumers for imported, more expensive beer; a decade-old antitrust settlement; and effective marketing campaigns aimed at attracting young, non-Hispanic consumers to Mexican beers.
“Most people in the beer industry have assumed Modelo will overtake Bud Light at some point,” said Bart Watson, chief economist at the Brewers Association, a trade group representing more than 6,000 American breweries. “It was a question of when, not if.”
After Bud Light held the No. 1 spot for nearly 20 years, the changeover took place in early June. In the four-week period that ended July 8, Modelo made up 8.7 percent of retail beer sales in the United States, compared to 6.8 percent of Bud Light, according to Nielsen IQ data analyzed by consulting firm Bump Williams.
Bud Light’s removal follows a conservative-led boycott that began when Dylan Mulvaney, a transgender influencer, posted a video on Instagram promoting a Bud Light contest on April 1. The company has since sacked two marketing executives and reported declining sales.
In an earnings call last month, Bill Newlands, chief executive of Constellation Brands, which owns Modelo, told investors that the beer’s rise to the top had happened “much quicker than we had anticipated.” Constellation’s beer business reported 11 per cent growth in sales and 7.5 per cent growth in shipments for the quarter ended May 31.
Constellation, which also owns Mexican beers Corona and Pacifico, is perhaps the biggest winner in the US beer market, as consumer tastes toward alcohol have changed over the past decade.
Mr Watson said Americans are drinking less beer than ever before and the beer they prefer is more expensive than Bud Light. Craft beers and imports like Modelo, as well as hard seltzers and packaged cocktails, have benefited from that shift at the expense of domestic brands, he said.
Young drinkers want something new or different, and usually more expensive than previous generations, said Nadine Sarwat, alcoholic-beverage analyst at market research company Bernstein Autonomous. This trend has been going on for generations: when lighter beers like Bud Light made their debut in the 1980s and 1990s, they were also more expensive than competitors.
Ms Sarwat said, “You don’t like to drink what your parents drink.”
The demographic change has also contributed to the success of the models. According to the Census Bureau, Hispanic people are expected to make up 19 percent of the US population in 2021, up from 13 percent in 2000.
At the same time, Ms. Sarwat said, Mexican products have gained “cultural appeal” among non-Hispanic consumers. And it’s not just beer: The amount of tequila and mezcal — the Mexican liquor — sold in the United States grew 273 percent from 2003 to 2022, According to the Distilled Spirits Council.
Mexico by far exports more beer to the United States than any other country. In 2022, it will ship seven times as much volume as the Netherlands, the second largest source of US beer imports.
According to data from the Beer Institute, the volume of Mexican beer imports is set to double from 2013 to 2022. The overall increase in US beer imports during that time came from Mexico: imports from everywhere else fell by more than 25 percent.
The biggest increases in Mexican beer sales last year occurred in states closer to the Canadian border, which have lower Hispanic populations, while growth has been slower in states closer to Mexico, according to a Nielsen IQ analysis On-premises sales.
However, Modelo has had more success than other Mexican beers sold in the United States, including Tecate and Dos Equis.
“It’s proof that just having a Mexican beer brand isn’t enough,” Ms. Sarwat said.
Anheuser-Busch InBev, 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 Justice Department under President Barack Obama sued in early 2013 to block that deal, arguing that keeping Modelo Beer independent of the two major US beer companies, Anheuser-Busch and MillerCoors, was important to maintaining a fair market.
Bill Baer, who headed the agency’s antitrust division at the time, said Anheuser-Busch sought the deal because he was concerned about the rise of models. In 2013 the parties reached an agreement allowing the acquisition to continue as long as another company, Constellation, controlled Grupo Modelo’s US operations.
“The result in the market was that Constellation, as an independent owner, really had every incentive to promote the Corona and other Modelo brands,” said Mr. Baer, now a visiting fellow at the Brookings Institution. “And that’s exactly what happened.”
When asked for comment, a spokesperson for Anheuser-Busch pointed to the fact that Bud Light sold more beer by volume than Modelo in the United States, attributing its higher price to sales.
In the decade that Constellation has owned Modelo, it has worked carefully to refine the beer’s identity.
Promoting Modelo has been a balancing act of inviting new consumers while maintaining the authenticity of its Hispanic base, said Jim Sabia, head of Constellation’s beer division. In 2016, Modelo launched its first English-language advertisement, “fighting spiritMarketing campaign.
Since then, the Constellation has sought to position Modelo as the game-day bearer. In 2017, it became a sponsor of the Ultimate Fighting Championship, a deal it has renewed and that “lower eight digitsAccording to Sports Business Journal, annually. This identity is distinct from Modelo’s sister brand, Corona, which Constellation has promoted 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 find it, we hold onto it.”