How Modelo Beat Bud Light After a Decade of Transformation

More beers in America are being 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 that Bud Light faced in April over a collaboration with a transgender influencer. The country’s steadily growing Hispanic population is only part of the story, too.

Rather, the factors that, for the better part of a decade, put Modelo on its triumphant track include an increasing preference among American consumers for imported, more expensive beer; a decade-old antitrust deal; and effective marketing campaigns aimed at attracting young, non-Hispanic consumers to the Mexican beer.

“Most people in the beer industry have assumed Modelo was going to overtake Bud Light at some point,” said Bart Watson, chief economist for the Brewers Association, a trade group representing over 6,000 American breweries. “It was a question of when, not if.”

The switch occurred at the start of June, after Bud Light had held the No. 1 spot for about 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 with Bud Light’s 6.8 percent, according to Nielsen IQ data analyzed by the consulting firm Bump Williams.

Bud Light’s ouster followed a conservative-led boycott that was set off when Dylan Mulvaney, a transgender influencer, posted a video on Instagram on April 1 promoting a Bud Light contest. The company has since dismissed two marketing executives and has reported plunging sales.

In an earnings call last month, Bill Newlands, the chief executive of Constellation Brands, which owns Modelo, told investors that the beer’s rise to the top had happened “sooner than we anticipated.” Constellation’s beer business reported an 11 percent sales increase and a 7.5 percent increase in shipments for the quarter that ended May 31.

Constellation, which also owns the Mexican beers Corona and Pacifico, is perhaps the biggest winner in the American beer market, as consumer tastes in alcohol have shifted over the past decade.

Americans are drinking less beer than they used to, and the beer that they’ve grown to prefer is more expensive than Bud Light, Mr. Watson noted. Craft beers and imports, like 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 company. That trend has been going on for generations: When lighter beers like Bud Light began having their moment in the 1980s and 1990s, they, too, were more expensive than competitors.

“You don’t like to drink what your parents drink,” Ms. 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.

Along with that, 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 from 2003 to 2022, according to the Distilled Spirits Council.

Mexico exports more beer to the United States than any other country by far. In 2022, it shipped in seven times the volume of the second-highest source of U.S. beer imports, the Netherlands.

From 2013 to 2022, the amount of Mexican beer imports doubled, according to data from the Beer Institute. Mexico carried the overall growth in U.S. beer imports during that time: Imports from everywhere else dropped more than 25 percent.

The biggest growth in Mexican beer sales over the past year has been in states closer to the Canadian border, which tend to have lower Hispanic populations, while growth in states closer to Mexico has lagged, according to one Nielsen IQ analysis of on-premise sales.

Modelo, however, has enjoyed greater success than other Mexican beers that sell in the United States, including Tecate and Dos Equis.

“That is proof that just having a Mexican beer brand isn’t enough,” Ms. Sarwat said.

Anheuser-Busch InBev, the maker of Bud Light, began to see the writing on the wall a decade ago.

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

Bill Baer, who led the agency’s antitrust division at the time, said Anheuser-Busch had sought the deal because it had been worried about Modelo’s rise. The parties reached a settlement in 2013, allowing the acquisition to go through as long as another company, which turned out to be Constellation, controlled Grupo Modelo’s U.S. operations.

“The result in the market was Constellation had every incentive as an independent owner to really promote the hell out of Corona and the other Modelo brands,” said Mr. Baer, now a visiting fellow at the Brookings Institution. “And that’s exactly what has happened.”

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 owes its sales lead in part to its higher price point.

In the decade since Constellation has owned Modelo, it has worked meticulously to refine the beer’s identity.

Promoting Modelo has been a balancing act of maintaining its authenticity to its Hispanic base while inviting new consumers, said Jim Sabia, head of Constellation’s beer division. In 2016, Modelo rolled out its first English-language advertising push, with a “fighting spirit” marketing campaign.

Since then, Constellation has sought to position Modelo as a game-day beer. In 2017, it became the sponsor of the Ultimate Fighting Championship, a deal that it has renewed and that is in the “low eight figures” annually, according to Sports Business Journal. That identity is distinct from Modelo’s sister brand, Corona, which Constellation has promoted as a beer to sip on the beach with friends.

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