How a Mexican lager quietly grew into America’s best-selling beer
More beers in America are paired with lime than ever before.
The story of how Modelo Especial, a Mexican lager, surpassed Bud Light as the top-selling beer in America predates the conservative backlash Bud Light faced in April over collaborating with a transgender influencer. The country’s steadily growing Hispanic population is only part of the story.
Rather, the factors that propelled Modelo on its triumphant track for the better part of a decade include an increasing preference among American consumers for imported, more expensive beer; a ten-year-old antitrust agreement; and effective marketing campaigns aimed at attracting young, non-Hispanic consumers to Mexican beer.
“Most people in the beer industry assumed that Modelo would catch up with Bud Light at some point,” said Bart Watson, chief economist for the Brewers Association, a trade group representing more than 6,000 U.S. breweries. “It was a question of when, not if.”
The switch took place at the beginning of June, after Bud Light had been number 1 for about 20 years. In the four-week period ending 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 the consulting firm Bump Williams.
Bud Light’s impeachment followed a conservative-led boycott initiated when Dylan Mulvaney, a transgender influencer, posted a video to Instagram on April 1 promoting a Bud Light contest. The company has since fired two marketing executives and has reported declining sales.
In an earnings call last month, Bill Newlands, the CEO of Constellation Brands, which owns Modelo, told investors that the beer’s rise to the top had “happened more quickly than we expected.” Constellation’s beer division 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 arguably the biggest winner in the US beer market as consumer tastes in alcohol have changed over the past decade.
Americans drink less beer than they used to, and the beer they prefer is more expensive than Bud Light, Mr. Watson up. Craft beers and imported beers, such as Modelo, as well as hard seltzers and canned cocktails, have benefited from that shift at the expense of domestic brands, he added.
Younger drinkers tend to want something new or different, and usually more expensive, than the previous generation, said Nadine Sarwat, an alcoholic beverage analyst at Bernstein Autonomous, a market research firm. That trend has been going on for generations: When lighter beers, such as Bud Light, started to peak in the 1980s and 1990s, they too were more expensive than competitors.
“You don’t like to drink what your parents drink,” Mrs. Sarwat said.
A demographic shift has also contributed to Modelo’s success. Hispanic people made up 19 percent of the U.S. population in 2021, up from 13 percent in 2000, according to the Census Bureau.
In addition, Mexican products have gained “cultural appeal” among non-Hispanic consumers, Ms Sarwat said. And it’s not just beer: The volume of tequila and mezcal — Mexican liquors — sold in the United States increased 273 percent between 2003 and 2022, according to the Distilled Spirits Council.
Mexico exports by far more beer to the United States than any other country. By 2022, it shipped seven times the volume of the second-largest source of U.S. beer imports, the Netherlands.
From 2013 to 2022, imports of Mexican beer will double, according to data from the Beer Institute. Mexico drove the overall growth of U.S. beer imports at the time: imports from everywhere else fell by more than 25 percent.
The greatest growth in Mexican beer sales over the past year has been in states closer to the Canadian border, which typically have lower Hispanic populations, while growth in states closer to Mexico has lagged, according to a Nielsen IQ analysis of on-site sales.
However, Modelo has had more success than other Mexican beers sold in the United States, including Tecate and Dos Equis.
“That’s proof that just having a Mexican beer brand isn’t enough,” said Ms. Sarwat.
Anheuser-Busch InBev, the maker of Bud Light, started seeing the writing on the wall a decade ago.
In 2012, the company attempted to acquire Grupo Modelo, which brews Modelo and Corona. The Justice Department under President Barack Obama sued in early 2013 to block that deal, arguing that keeping Modelo beers independent of Anheuser-Busch and MillerCoors, the two major U.S. 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 sought the deal because it was concerned about Modelo’s rise to power. The parties reached a settlement in 2013, allowing the acquisition to go ahead as long as another company, which turned out to be Constellation, controlled Grupo Modelo’s US operations.
“The result in the marketplace was that as an independent owner, Constellation had every reason to really promote Corona and the other Modelo brands,” said Mr. Baer, now a visiting fellow at the Brookings Institution. “And that’s exactly what happened.”
When asked for comment, the Anheuser-Busch spokesperson pointed to the fact that Bud Light sold more beer by volume in the United States than Modelo, which owes its sales lead in part to its higher price.
In the decade since Constellation has owned Modelo, it has worked painstakingly to refine the beer’s identity.
Promoting Modelo has been a balancing act between preserving the authenticity of its Hispanic base and inviting new consumers in, said Jim Sabia, head of Constellation’s beer division. In 2016, Modelo rolled out its first English-language ad campaign, featuring a “fighting spirit” Marketing campaign.
Since then, Constellation has tried to position Modelo as a game day beer. In 2017, it became the sponsor of the Ultimate Fighting Championship, a deal it has extended and which is in the “low eight figuresannually, according to Sports Business Journal. That identity differs from Modelo’s sister brand, Corona, which has promoted Constellation as a beer to sip with friends on the beach.
“It takes a lot of time to really find the essence of these brands,” said Mr. Sabia, “and when we finally get it, we stick with it.”