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How Modelo beat Bud Light to become America’s most popular beer

Modelo in, Bud Light out.

People hold Modelo cans
Modelo is the most popular beer in retail sales in the US.
Noam Galai/Getty Images for NYCWFF
Emily Stewart covered business and economics for Vox and wrote the newsletter The Big Squeeze, examining the ways ordinary people are being squeezed under capitalism. Before joining Vox, she worked for TheStreet.

The song of the summer is Australian, and the beer of the summer is Mexican.

Modelo Especial is now the top-selling beer in the United States, having taken the crown from the beleaguered Bud Light. Modelo surpassed Bud in sales through retail stores in both May and June of this year.

For those not paying close attention to the beer industry, Modelo, which is owned by Constellation Brands, becoming America’s favorite beer may seem a bit surprising. It shouldn’t be — the brand’s growth is part of some ongoing shifts in the sector overall.

The recent backlash against Bud Light over its marketing deal with a transgender influencer (and general anger at the beers going woke) may have sped things up a little bit, but experts say this was likely to happen sooner or later, regardless. Well before the Bud Light boycott, the brand had been experiencing multi-year declines. Meanwhile, Modelo was posting consistent growth. Eventually, it was able to catch up to and surpass Bud Light in store retail sales.

“This was an inevitable thing to happen. Modelo was going to become the No. 1 beer in the country, full stop,” said Bryan Roth, an analyst for Feel Goods Company, a beverage brands studio, and editor of its newsletter, Sightlines+. “This was a story already written, and Bud Light just happened to have this controversy come up this year, which hastened getting to this chapter of the story.”

Now, there’s a new king — or, rather, rey — of beers.

Demographics is destiny, but for beer

A decade ago, Modelo wasn’t even a top-10 beer, but it has climbed up the ranks. In 2018, Modelo was America’s seventh-top beer in chain retail by dollars. By the beginning of this year, it was second.

A combination of factors have propelled Modelo forward in recent years, said Garrett Nelson, vice-president and senior equity analyst at CFRA Research, in an email, including “the growing popularity of imported beer brands, demographic changes, Constellation’s capacity growth to meet the demand, and most recently, the demise of Bud Light.”

As more Latino and Hispanic drinkers have reached legal drinking age, their preferences have shifted the overall mix of beer that’s selling in the United States. The country’s growing Hispanic population has boosted Modelo’s growth.

“The Modelo brand over-indexes to un-acculturated Hispanic consumers,” said Vivien Azer, a senior research analyst at Cowen, noting that in 2016 the company said 3 points of its revenue algorithm just comes from growth of the Hispanic population in the US. The Wall Street Journal points out that 70 percent of Modelo’s consumers were Hispanic in its 2019 fiscal year.

It’s also taken off with non-Hispanic consumers, which Constellation told WSJ now represent 45 percent of its base. The website Good Beer Hunting points out that more non-Hispanic households purchase Modelo than Hispanic households, but Hispanics consume more Modelo by volume than non-Hispanics.

Modelo is the top brand in California and in the Chicago, Dallas, and Baltimore metropolitan areas. Mexican import beers, specifically, have done well in recent years, while imports from other countries have not. As the New York Times notes, Mexican beer imports to the US doubled from 2013 to 2022, while imports from everywhere else declined.

“For whatever reason, American drinkers really associate Mexican import lagers with beach season, with sort of affordable luxury, with an attractive, active lifestyle, so they get a little bit of a halo there,” said Dave Infante, a beer columnist for VinePair and the publisher of the drinks newsletter Fingers. “There’s some powerful, broad, multi-decade-long trends that are wind at the back of a brand like Modelo, and Constellation has, for the most part, done a good job of making sure they don’t [mess] it up and let it continue to cook and mount in popularity.”

Corona, which is owned by Grupo Modelo, was bigger in the US for much longer and has less novelty with drinkers in the US, Infante said. Modelo also plays better in cans, which consumers prefer when they’re picking up from a store.

Modelo does have a higher price point than beers such as Bud Light, and its success is part of a broader trend of consumers trading up for more expensive brands and a sort of premiumization in the alcohol space emphasizing quality.

Young drinkers are on the hunt for something new, too, which some seem to have found in Modelo. “You hear people say a lot in this industry that no one wants to drink the same beer as their dad did,” Infante said. “It’s cliché because it’s broadly true.”

This one stings for AB InBev

The path to Modelo landing in Constellation Brands’ lap runs through Anheuser-Busch InBev, the company that owns Bud Light.

In 2012, AB InBev decided it wanted to acquire Grupo Modelo, which makes Modelo and Corona, among other brands, in a $20 billion deal. The Department of Justice moved to block the merger, saying it would harm competition and potentially lead to higher prices. Eventually, the parties reached an agreement to let the acquisition go through. It required AB InBev to offload its Modelo business in the US to someone else. That’s how Constellation Brands, a relatively small wine and spirits company at the time, took the reins.

It’s hard to play out counterfactuals, but Modelo’s growth may not have happened had it remained in the AB InBev portfolio instead of landing in Constellation’s, Roth said. “This was a company that was known for wine and spirits, Arbor Mists and wine coolers and Svedka vodka. And when they got access to the Mexican beer imports with Corona and Modelo, that put something in their portfolio that they hadn’t had before but also gave them the opportunity to focus on something unique in the American beer space and put attention on in a way that others couldn’t,” he said.

Under the AB InBev umbrella, Modelo and Corona just would have been two other beers. At Constellation, they’re something special.

Modelo started running English-language ads in 2015. The brand inked a deal to become the official beer of the UFC in 2017, replacing Bud Light, and it spread its wings from there. “These were brands, Modelo especially, that got a lot of attention from Constellation Brands — it had the financial might behind it to make these partnerships and promotions happen,” Roth said.

If you are Bud Light, you are not having a nice time right now

Modelo’s gain isn’t really Bud Light’s loss, per se. The different prices likely mean other beers have picked up a little more steam as a result of Bud’s struggles. “It actually seems to be the case that it’s Miller Light, Coors Light, Pabst, and Yuengling that are picking up share from the Bud Light boycott,” Azer said.

Things are not looking great at Bud Light at the moment or for AB InBev more broadly, even if they’re not dire.

The fallout from the controversy over Bud Light’s marketing partnership with transgender influencer Dylan Mulvaney has had long-lasting ripple effects. In its most recent earnings report, the company said its sales and profits fell in the US in the second quarter. It was a result of lost market share and having to spend more on marketing and supporting distributors inadvertently impacted by the Bud Light boycott. AB InBev’s earnings did beat expectations, though, and the company said it did a survey of consumers in the quarter showing 80 percent of people are favorable or neutral on Bud Light the brand.

Bud Light was on the decline long before the Dylan Mulvaney dust-up, and the company has problems beyond that. Infante said that efforts to make Bud Light Next, a zero-carb beer, a thing over the past year have flopped. “It’s basically a non-factor in the company’s overall portfolio,” he said. It’s an issue that likely adds some salt to distributors’ current wounds.

AB InBev, which recently announced corporate layoffs, does seem to want to steer clear of anything potentially controversial at the moment. “People want to enjoy their beer without the debate,” Michel Doukeris, the chief executive of Anheuser-Busch, said on the company’s earnings call. AB InBev is going to be focusing on marketing its beers through sports leagues and organizations that back military families and farmers, he noted, apparently leaning into arenas it hopes will be viewed as non-problematic.

“Before the controversy, Bud Light had 14 percent of beer sold in chain retail, and they are now hovering just over 10 percent, so they’ve lost, effectively, 4 percent share of all beer sold by volume,” Roth said. It’s now plateaued, which signals both that the worst is likely over and that it will be a challenge to gain back any ground they’ve given up. “Can they pick up what they’ve lost?” Roth said. “With a certain section of customers, the answer is clearly no.”

Azer said that even Bud Light’s offer of a $15 rebate on purchases around the Fourth of July fell flat. “Consumers that have opted to leave the Bud Light franchise have likely left the franchise permanently,” she said.

In an email to Vox, an Anheuser-Busch spokesperson said its portfolio continues to be the leader of the beer category as the No. 1 brewer and pointed to the strength of the company’s on-premise draft sales, meaning at a bar or restaurant, for both Michelob Ultra and Bud Light. They said, year-to-date, Bud Light remains the top beer brand in the country for on-premise tracking in dollars and volume.

The future of beer is maybe nobody gets to be king of beer

It’s hard to know where the beer industry is headed next, whether it be Modelo or Bud Light or the entire sector.

Roth said he thinks it’s possible and even likely that Michelob Ultra, which is made by AB InBev and seen as a sort of healthier beer option, soon takes the No. 2 spot in beers, which would push Bud Light to third. Beer sales more broadly in the US are on the decline anyway. Beer companies need to find new ways to market their brands to different consumers and run the risk of stepping on a bear trap in doing so. That’s sort of how Bud Light wound up in its current predicament in the first place.

Infante thinks the era of one beer being able to be all things to all people is over, at least for now — companies have to stay in a lane and can’t really cast a wide net. “We won’t see another Bud Light-type product, I don’t think, again in this category for another couple decades-cycle at least,” he said. “If that type of all-market product is ever going to return, it will in the future, but it won’t for the moment.”

In the meantime, bottoms up.

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