Bud Light backlash benefits sales of Modelo Especial

USA | Constellation Brands seems to have reaped the benefits of the Bud Light boycott as sales of its Modelo brand boosted results in the most recent quarter, ending 31 May.

Total revenue grew 6 percent to USD 2.51 billion, as revenue from beer gained 11 percent year-on-year to USD 2.1 billion. Beer volume sales were up 7.5 percent. Among its beer labels, Modelo Especial, as well as Corona Extra and Pacifico recorded increased sales. However, sales of Constellation’s wine and spirits unit dropped 10 percent to USD 416 million, as shipments fell 13 percent.

Constellation’s executives said on 30 June that Modelo’s move to best-selling beer in the US happened sooner than expected. After all – and that is the impressive bit - it is a premium brand, rather than a budget one, at a time when wallets are stretched, and a full-bodied beer, rather than a low-calorie one, when waistlines are expanding, The Economist commented.

Modelo may eventually gain a more lasting lead

Bud Light may yet reclaim the title of King of Beer when full-year numbers are tallied up. But in the second half of the year, Constellation expects retailers to make more shelf space available to its products, thanks to the growth of its labels and declines for others.

The number three brewer in the US has played down its success with Modelo. However, it needs to be pointed out that it did everything to promote the brand. When it noticed that Modelo was taking off, it did not let a perception that Corona Extra was the front-runner distract it. Instead, it gave consumers want they wanted, thus throwing its weight behind the mood of the marketplace.

Placing its bets on Mexico

As The Economist said, “Constellation’s priority was to ensure that supply met demand. That involved making a huge bet on Mexico. When Constellation acquired the Modelo brands from AB-InBev, following an anti-trust ruling, it resolved to brew them south of the border. Since then, it has increased its production capacity in Mexico fourfold, at a cost of USD 6.4 billion - more than the USD 4.8 billion it paid for the brands in 2013. It is not stopping there. It plans to invest up to a further USD 4.5 billion over the next three fiscal years, boosting capacity by more than 70 percent.”

Constellation hopes to have 52 million hl of installed capacity in Mexico by the end of its current financial year.

The Economist concluded: “It is lamentable for business in general that America’s cultural divide has done so much damage to Bud Light’s reputation. But the consolation is that Modelo Especial’s success suggests the cultural divide between America and Mexico is narrowing.”