How Modelo Beat Bud Light After A Decade Of Transformations

More beers in America are paired with lime than ever before.

The story of how Modelo Especial, a Mexican beer, surpassed Bud Light as America's best-selling beer predates the conservative backlash Bud Light faced in April over its collaboration with transgender influencers. The country's growing Hispanic population is also only part of the story.

Conversely, factors that have, for more than a decade, put Modelo on its winning streak include a growing preference among American consumers for more expensive imported beers; decade-old antitrust agreements; and an effective marketing campaign aimed at attracting young, non-Hispanic consumers to Mexican beer.

“Most people in the beer industry think Modelo will overtake Bud Light at some point,” said Bart Watson, chief economist for the Brewers Association, a trade group that represents more than 6,000 American breweries. “That is a question of when, not if.”

The switch came in early June, after Bud Light held the No. 1 for about 20 years. In the four-week period ending July 8, Modelo generated 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.

Bud Light's ouster follows a conservative-led boycott sparked when Dylan Mulvaney, a transgender influencer, posted a video on Instagram on April 1 promoting the Bud Light contest. Since then the company has fired two marketing executives and has reported a decline in 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 “faster than we expected.” The Constellation beer business reported an 11 percent increase in sales and a 7.5 percent increase in shipments for the quarter ending May 31.

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

Americans drink less beer than usual, and the beer they prefer is more expensive than Bud Light, says Mr. Watsons. Craft and imported beers, such as Modelo, as well as hard seltzer and canned cocktails, are benefiting from the shift at the expense of domestic brands, he added.

Younger drinkers tend to want something new or different, and are usually more expensive, than previous generations, said Nadine Sarwat, an alcoholic beverages analyst at Bernstein Autonomous, a market research firm. That trend has carried on for generations: When lighter beers like Bud Light hit the scene in the 1980s and 1990s, they also cost more than competitors.

“You don't like to drink what your parents drink,” said Ms. Sarwat.

The demographic shift also contributed to Modelo's success. Hispanics 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, said Ms. Sarwat. And it's not just beer: The volume of tequila and mezcal — Mexican liquors — sold in the United States increased 273 percent from 2003 to 2022, according to the Distilled Spirits Council.

So far, Mexico exports more beer to the United States than any other country. In 2022, the Netherlands shipped seven times the volume of the second-highest source of US beer imports, the Netherlands.

From 2013 to 2022, the amount of Mexican beer imports doubled, according to data from the Beer Institute. Mexico experienced overall growth in US beer imports during that time: Imports from elsewhere fell by more than 25 percent.

The biggest growth in sales of Mexican beer 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 one Nielsen IQ analysis from selling on the spot.

Modelo, however, has enjoyed greater success than other Mexican beers sold in the United States, including Tecate and Dos Equis.

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

Anheuser-Busch InBev, maker of Bud Light, started seeing the writing on walls a decade ago.

In 2012, the company attempted to acquire Grupo Modelo, which produced Modelo and Corona. The Justice Department under President Barack Obama sued to block the deal in early 2013, arguing that keeping Modelo beer independent from Anheuser-Busch and MillerCoors, 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 had asked for the deal out of concern about Modelo's rise. The parties reached a settlement in 2013, allowing the acquisition to be made as long as another company, which turned out to be Constellation, controlled Grupo Modelo's US operations.

“The result in the market is that Constellation has every incentive as an independent owner to really promote Corona and the other Modelo brands,” said Mr. Baer, ​​who is now a visiting fellow at the Brookings Institution. “And that's exactly what happened.”

Asked for comment, a spokesperson for Anheuser-Busch pointed to the fact that Bud Light sells more beer by volume in the United States than Modelo, which is largely due to its higher price point.

In the decade since Constellation has owned Modelo, it has worked meticulously to perfect the beer's identity.

Promoting Modelo has become a balancing act to maintain its authenticity to 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 worked to position Modelo as a game day beer. In 2017, became the sponsor of the Ultimate Fighting Championship, a deal that has been renewed and it is in “low eight figuresannually, according to the Sports Business Journal. That identity is distinct from 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,” says Sabia, “and when we finally get it, we stick with it.”