If 2019 was the summer of White Claw, then 2024 is shaping up to be the summer of Modelo Especial. Hard seltzer is struggling, craft beer is flat, Bud Light is listing. Mexican imports, on the other hand, are absolutely rolling, and Constellation Brands, Modelo’s parent company in the United States, is sitting pretty. Call it a runaway train, a rocket ship, a ridiculous heater — whatever you call it, Modelo et al. is on one.
Constellation just posted its full-year results for 2023, and its beer division — of which Modelo is the undisputed vanguard, standing on the shoulders of groundbreaking fellow Meximport Corona — delivered bigtime. Like, “13th consecutive year of shipment volume growth” big, as chief executive Bill Newlands told analysts earlier this month. Constellation Beer Division (CBD) hit the upper edge of the firm’s 2023 growth projections (9 percent), and handily beat analysts’ earnings and revenue expectations for the fourth quarter. The company’s Modelo’s line-extensions are landing, its margins are holding, and its lead is growing. Depending on how you slice the sales data, Modelo Especial is already the best-selling beer brand in the United States.
Which has your humble Hop Take columnist wondering: What could possibly reverse this brand’s remarkable ascent to the heights of the United States’ beer pantheon?
The upshot is, not much. Modelo is surfing a wave decades in the making, and its corporate handlers have done a decent job not oversteering it into the shoals. But the American beer industry is full of surprises these days, and Especial ain’t so especial as to be exempt. Here are the biggest near-term pitfalls I see for the mighty Modelo.
Modelo overextends its brand.
Likelihood: I could see it
I know I just said the brand’s line extensions are landing. They are, for the most part, but there are also a bunch of them: Especial and Negra, obviously, but also Chelada, Oro, and Spiked Aguas Frescas. The latter two were introduced just last year. Oro’s continued success is particularly important to the parent brand, and it has a particularly tough competitor: Its sleek package and 90-calorie profile must answer Michelob Ultra, Anheuser-Busch InBev’s post-Bud Light heir apparent. It’s not unheard of for a macro flagship to have half a dozen siblings, but with each additional sub-brand comes new SKUs, new marketing stories, and new flavor expectations that must be met without seeming too similar or too different from Especial (or each other.) Flood the zone and drinkers get confused; play it too safe, and the flagship’s flanks get exposed. Can the firm that biffed it on Ballast Point and subsequently cut and run from the rest of its craft brewing ambitions maintain a disciplined brand strategy as it grows the Modelo brand family? I think so? Hmm.
Constellation struggles with scale.
Likelihood: Believable
Constellation is the third-biggest macrobrewer in the country, but unlike ABI and Molson Coors (No. 1 and No. 2, respectively), it didn’t start out as one. The company was a mid-market maker and importer of wine and spirits for much of its history before the U.S. Department of Justice forced ABI to divest Grupo Modelo’s U.S. business as a condition of the former firm’s 2013 acquisition of the latter. ABI was so sure Constellation was clueless to the finer points of the beer business that the spinoff deal included a brewmaster, because the King of Beers “didn’t want amateurs [to] destroy our reputation.” Obviously, that didn’t happen, but the fact remains that Constellation lacks its rivals’ combined centuries of institutional beer-business knowledge. To solidify Modelo’s position as America’s consensus No. 1 beer, the firm must continue the growth without quality- control gaffes, brewery construction delays, labor unrest… you name it. This stuff ain’t easy, and it gets harder as a brewer gets bigger. Just ask MC or ABI!
Reyes fumbles the ball.
Likelihood: Slim
Was it fate that the nuevo Rey de las Cervezas would be delivered to U.S. retailers on trucks that say “REYES” on the side? The country’s biggest beer distributor (and its sixth-biggest private company) is Constellation’s muscle in the middle tier, and it is integral to its continued success, particularly in the unquenchable California and Texas markets. The feeling is by all accounts simpatico: “If we weren’t selling Constellation, I’m not sure we’d want to be in the beer business,” scion Jimmy Reyes told fellow distributors at the firm’s wholesaler conference in 2023. Reyes is deep-pocketed, powerful, and sophisticated, and I have no reason to believe Modelo isn’t in good hands. But the distributor is also growing, and that has come with the occasional misstep. After acquiring a major Lone Star State wholesaler in 2022, Reyes struggled at times to meet demand, resulting at one point in 2023 in unfilled beer orders so noticeable in culturally influential, persistently thirsty Austin that they made the local news. No bueno.
‘Migrant crisis’ racism poisons the zeitgeist — or closes the border.
Likelihood: Far-fetched
Did you know that 78 percent of Americans say immigration at the U.S.-Mexico border is either a “major problem” or a “crisis,” according to a January 2024 survey from Pew Research? Did you know that Fox News ratcheted up its mentions of the border/migrants/immigration over 650 percent between July 2023 and February 2024, according to The Washington Post? Do you think those two things are related in some way? While you think about that, think about this: Modelo is imported from Mexico, and that heritage is core to its brand identity in the U.S. market. As this year winds toward the presidential election in November, GOP candidate Donald Trump will increase the stream of vile, racist shit he says about immigrants. Right-wing party organs will amplify it, and corporate outlets will then “both sides” it into the mainstream. Framing the election as a referendum on a so-called “Mexican border crisis” is probably favorable for Trump, but it’s almost certainly not favorable for a beer brand with an existential reliance on smooth, consistent trade with, and broad cultural affinity for, Mexico and its people. Seems unlikely that American political unrest could hamstring Modelo’s soaring fortunes stateside. Then again, a movie called “Civil War” is currently No. 1 at the U.S. box office, so let’s just mark this here for posterity.
Anheuser-Busch InBev somehow finagles the brand back.
Likelihood: Virtually unthinkable
Alright, I’m not a lawyer, so this is probably impossible for a dozen procedural and technical reasons. Not to mention, the whole reason Constellation wound up with the U.S. rights to Modelo et al. in the first place was because ABI needed U.S. antitrust regulators to approve its acquisition of the eponymous Mexican conglomerate; the antitrust establishment has only gotten more aggressive in the intervening years. (See also: the Federal Trade Commission’s suit to block the $24.6-billion Kroger-Albertsons merger.) But the last time these two firms tangled in court, it was one of the funniest things to happen to the beer business in years, and like… don’t we deserve a little treat? Can you imagine the courtroom chicanery, corporate red-assery, and beer-market bedlam it would take for ABI to somehow reclaim Modelo’s U.S. rights from Constellation?! Yeah, me neither. But a beer columnist can dream, can’t he?!
🤯 Hop-ocalypse Now
Man, the craft brewing industry is top-heavy these days. The Brewers Association’s 2023 production report just dropped earlier this week, and brewery roll-ups are sitting pretty. Of the top 10 BA-defined craft breweries, five of ‘em are multi-brand outfits in one capacity or another: Duvel Moortgat USA (No. 4; with Boulevard, Ommegang, Firestone-Walker), Gambrinus (No. 5; Shiner, Trumer), Tilray Brands (No. 6; 10 brands if you count Shock Top), Artisanal Brewing Ventures (No. 7; Victory, Southern Tier, Six Point), and Monster Brewing (No. 9; six brands). I make no moral judgment on this, and you shouldn’t either, but it sure paints a picture about the model it takes to compete at the upper reaches of the “small and independent” market, doesn’t it?
📈 Ups…
Four ABI brands’ cans will soon bear “U.S. Farmed” labels certifying 95 percent of ingredients by weight besides water came from American farms… Congrats to all the big gainers in the BA’s just-dropped Top 50 ranking… Iowa breweries Backpocket and SingleSpeed are now the Parallel Brewery Collective… Venerable Seattle outfit Fremont Brewing sold a “controlling interest” to the same parent company of Pike Brewing…
📉 …and downs
Washington’s attorney general is trying to defend his authority to block the Kroger-Albertsons merger as the grocers angle for dismissal… BA-defined craft beer volumes declined 1 percent in 2023, while total beer was down 5 percent in the same period… Bud Light’s brand loyalty with consumers is still struggling…
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