T.he is the king Dead. Viva El Ray! That’s the cheer that echoes in the pubs this summer when Bud Light, America’s self-proclaimed “King of Beer” for 22 years, was ousted by Mexican beer Modelo Especial. Don’t think of the losers. Few rebranding efforts have failed as spectacularly as when a Bud Light marketer partnered with a transgender social media star but ended up falling victim to America’s culture wars. On the bright side, it provides an opportunity to examine lesser-known success stories. Constellation Brands, an American company that entered the brewing business just a decade before him, offers a lesson in old-fashioned Mexican-American-style corporate rebellion.
Schumpeter should express interest. Having lived in Mexico for many years, he has spent part of his life with Mexican beer. The Modelo Especial was rarely among them. There is no great prestige south of the border. But in America, the same beer with the same flavor has overtaken its better-known sister brand, Corona Extra. Because, in simple business terms, Constellation got it right, from manufacturing to distribution to retail. Most of all, it captured the growing power of the Latino consumer.
Modelo Especial’s story begins with antitrust laws. It’s not the novel idea that size itself is taboo, but the old idea that buying a competitor can cost you more. It dates back to 2013. AB InBev, the owner of Belgium-based Budweiser, paid $20 billion to take control of Grupo Modelo, Mexico’s largest beer company, but its brands Corona and Modelo Especial are outside the border. It was a rival of Bud Light in the north. The U.S. Department of Justice intervened. to stay competitive AB InBev should sell the entire Modelo company we He entered into a deal with Constellation, then a relatively unknown distributor of $8.1 billion worth of wine and spirits. (AB InBev retained its Grupo Modelo operations in Mexico and the rest of the world. ) Today, Constellation is worth $45 billion, making him one of America’s most respected consumer goods companies.
Consultant Bump Williams, who first noticed Modelo Especial’s home sales significantly outperformed Bud Light’s in dollar terms in the four weeks ending June 3, explained how Constellation grew the brand. described in vivid terms. He calls it “feeding hot hands.” When the company noticed beer’s popularity was booming, it didn’t let the perception that Corona was the frontrunner distract it. It affected the atmosphere of the market.
Its priority was to ensure that supply met demand. That included making big bets against Mexico. When Constellation acquired the brand, they decided to brew south of the border. Since then, the company has quadrupled its production capacity in Mexico at a cost to him of $6.4 billion, which is more than his $4.8 billion he paid the brand in 2013. The momentum is unstoppable. He plans to invest up to $4.5 billion more in the next three fiscal years to increase production capacity by more than 70%. Investing in Mexico was not without setbacks. In 2020, protesters backed by Mexican populist President Andrés Manuel López Obrador blocked Constellation from building a factory near the border, citing concerns about water shortages. A referendum was held to So, with the president’s blessing, the factory moved to Veracruz, on Mexico’s humid east coast.
Distribution in the United States was the next challenge. Initially, Constellation focused on introducing the Modelo Especial to several cities with large Hispanic communities, such as Los Angeles and Chicago. After the brand started there, it spread farther. We increased brand awareness step by step and worked closely with distributors to ensure continued supply. Once in stores, Constellation focused on showcasing his Modelo brand. “They are wine experts and know the value of the display,” says Williams. Pricing was also good. Constellation has raised prices incrementally rather than imposing steep price increases on consumers. For years, Modelo Especial has been America’s fastest-growing beer, according to Scott Scanlon of market research firm Circana. What’s even more impressive is that this beer is a premium his brand, not a low-priced brand, when your wallet can’t afford it, and a full-bodied beer instead of a low-calorie beer when your waistline can’t afford it. It means that
It is attractive to consumers for two reasons. The first is advertising. Unlike Bud Light, there are no gimmicks. It’s the story of ordinary people who overcame hardships. Thanks to that, I was able to pull off the trick of staying authentically Mexican while participating in a major beer league. The second is the market itself. Its core consumers are Latinos, the rising economic power in America. It’s not just the population that’s growing faster than the U.S. average, according to consulting firm McKinsey. So is their purchasing power. If Latinos in America were their country, it would have had the third fastest growing economy in the past decade, behind only China and India.
burning hot hands
This force can also affect other products of Mexican descent. Tequila will likely overtake vodka to become America’s best-selling spirit. Mexican multinational Grupo Bimbo, America’s largest bakery, is a respected consumer goods company as well as Constellation. In a sign of the times, the new film Flamin’ Hot sees a Mexican-American janitor convince PepsiCo-owned Frito-Lay to revive the business by making spicy Cheetos to win over the Hispanic market. I am drawing a story. . (The true origins of this snack are up for debate, but its popularity is undeniable.)
Modelo Especial may lose its crown if Bud Light survives the current crisis. However, the rapid growth of Mexican-American brands suggests they may end up with more permanent leads. It is deplorable for business in general that the cultural divide in America has done so much damage to Bud Light’s reputation. But the consolation is that Modelo Especial’s success suggests that the cultural divide between America and Mexico is narrowing. ■
Read more from global business columnist Schumpeter:
What Tesla and Other Automakers Can Learn from Ford (June 13)
What the TIM Giant Spinoff Revealed About the European Telecom Industry (June 8)
Australia and Canada are one economy, but they have some flaws (June 1)
https://www.economist.com/business/2023/06/20/the-new-king-of-beers-is-a-mexican-american-success-story Beer’s new king is a Mexican-American success story