How Modelo beat the spotlight after a decade of transformation

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

The story of how Modelo Especial, the Mexican lager, overtook Bud Light as America’s best-selling beer predates the conservative backlash Bud Light faced in April over a collaboration with a transgender influencer. The steady increase in the country’s Hispanic population is only part of the story, too.

Instead, the factors that have put Modelo for the better part of a decade on its victorious trajectory include a growing preference among American consumers for more expensive, imported beers; a decade-long antitrust deal; and effective marketing campaigns aimed at attracting young, non-Hispanic consumers to Mexican beer.

“Most in the brewing industry assumed that Modelo would beat 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. “It was a matter of when, not if.”

The switch happened at the beginning of June, after Bud Light had held the top spot for nearly 20 years. 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 Bud Light’s 6.8 percent, according to Nielsen IQ data analyzed by consulting firm Bump Williams.

Bud Light was ousted after a Conservative-led boycott that began when Dylan Mulvaney, a transgender influencer, posted a video to Instagram on April 1 promoting the Bud Light contest. The company has since fired two marketing executives and reported declining sales.

On an earnings call last month, Bill Newlands, CEO of Constellation Brands, which owns Modelo, told investors that beer’s rise to the top happened “sooner than we expected.” Constellation Brewery 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 Corona and Pacifico Mexican beers, is perhaps the biggest winner in the US beer market, as consumers’ tastes in alcohol have changed over the past decade.

Mr. Watson pointed out that Americans drink less beer than they used to, and the beer they prefer is more expensive than Bud Lite. He added that craft beers and imports, such as Modelo, as well as hard sodas and canned cocktails, have benefited from the shift at the expense of local brands.

Younger drinkers tend to want something new or different, usually more expensive than the previous generation, said Nadine Tharawat, alcohol analyst at market research firm Bernstein Autonomous. This trend has been going on for generations: When lighter beers like Bud Light started having their time in the ’80s and ’90s, they were also more expensive than competitors.

“You don’t like to drink what your parents drink,” Mrs. Tharwat said.

The demographic shift also contributed to Modelo’s success. Hispanics made up 19 percent of the US population in 2021, up from 13 percent in 2000, according to the Census Bureau.

Besides, Mexican products have gained “cultural appeal” among non-Hispanic consumers, Fortunes said. And it’s not just beer: the volume of tequila and mezcal — Mexican liquor — sold in the United States increased 273 percent from 2003 to 2022, According to the Distilled Spirits Council.

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

From 2013 to 2022, Mexican beer imports doubled in size, according to data from the Beer Institute. Mexico achieved the overall growth in US beer imports over that period: imports from elsewhere fell by more than 25 percent.

The largest growth in Mexican beer sales over the past year was in states closest to the Canadian border, which tend to have lower Hispanic populations, while growth in states near Mexico lagged, according to One from a Nielsen IQ analysis From sales at the company’s headquarters.

However, Modelo has enjoyed more success than other Mexican beers selling in the United States, including Tecate and Dos Equis.

“This is proof that just owning a Mexican beer brand is not enough,” said Tharwat.

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

In 2012, the company sought to acquire Grupo Modelo, which manufactures Modelo and Corona. President Barack Obama’s Department of Justice sued to block that deal in early 2013, arguing that keeping Modelo beer independent from Anheuser-Busch and MillerCoors, the two major US breweries, was critical to maintaining a fair market.

Bill Baer, ​​who led the agency’s antitrust division at the time, said Anheuser-Busch requested the deal because it was concerned about Modelo’s rise. The two parties reached a settlement in 2013, allowing the takeover as long as another company, which turned Constellation, controlled Grupo Modelo’s US operations.

“The upshot in the marketplace was that Constellation had every incentive as an independent owner to really promote getting out of 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, an Anheuser-Busch spokesperson pointed to the fact that Bud Light sold more beer by volume in the United States than Modelo, which owed its sales leadership in part to its higher price.

In the decade since I’ve owned Constellation Modelo, I’ve meticulously refined the beer’s identity.

Constellation’s head of beer, Jim Sabia, said promoting Modelo was a balancing act to maintain authenticity to its Hispanic base while inviting new consumers. In 2016, Modelo launched its first English-language advertising batch, with “fighting spiritMarketing Campaign.

Since then, Constellation has sought to position Modelo as its game day beer. In 2017, it became the sponsor of the Ultimate Fighting Championship, a deal it renewed and is within “Low eight figuresannually, according to the Sports Business Journal. This identity differs from Modelo’s sister brand, Corona, which Constellation promoted as a beer to drink on the beach with friends.

“It takes a long time to really find the essence of these brands, and when we finally get it, we stick with it,” said Mr. Sabia.